Question 1

Nidek manufactures sport swear. Classify each of the following quality costs as prevention, appraisal, internal failure or external failure.
-Rework direct manufacturing labour and overhead
A) External failure
B) Internal failure
C) Appraisal
D) Prevention

Accepted Answer

Rework direct manufacturing labor and overhead are costs associated with correcting defects before products are shipped to customers, which classifies them as internal failure costs.

Question 2

Nidek manufactures sport swear. Classify each of the following quality costs as prevention, appraisal, internal failure or external failure.
-Testing and inspecting of machinery
A) External failure
B) Internal failure
C) Appraisal
D) Prevention

Accepted Answer

Testing and inspecting of machinery is a preventive measure to ensure that the machinery is functioning properly and to prevent any potential failures.

Question 3

Nidek manufactures sport swear. Classify each of the following quality costs as prevention, appraisal, internal failure or external failure.
-Testing and inspecting of direct materials
A) External failure
B) Internal failure
C) Appraisal
D) Prevention

Accepted Answer

The answer of Nidek manufactures sport swear. Classify each of...

Question 4

Nidek manufactures sport swear. Classify each of the following quality costs as prevention, appraisal, internal failure or external failure.
-Warranty repairs
A) External failure
B) Internal failure
C) Appraisal
D) Prevention

Accepted Answer

Warranty repairs are costs associated with fixing defects after the product has been delivered to the customer, which classifies them as external failure costs. These costs occur because the product failed to meet quality standards or customer expectations after it was sold.

Question 5

The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs.
-Analysis of the cause of defects in production
A) Appraisal
B) External failure
C) Internal failure
D) Prevention

Accepted Answer

The answer of The Door Company manufactures doors. Classify each...

Question 6

The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs.
-Depreciation of test equipment
A) Appraisal
B) External failure
C) Internal failure
D) Prevention

Accepted Answer

Depreciation of test equipment is considered an appraisal cost because it is associated with the evaluation and inspection of products to ensure they meet quality standards.

Question 7

The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs.
-Warranty repairs
A) Appraisal
B) External failure
C) Internal failure
D) Prevention

Accepted Answer

Warranty repairs are considered external failure costs because they occur after the product has been delivered to the customer and failed to meet quality standards.

Question 8

The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs.
-Lost sales arising from a reputation for poor quality
A) Appraisal
B) External failure
C) Internal failure
D) Prevention

Accepted Answer

Lost sales arising from a reputation for poor quality are considered external failure costs because they occur after the product has been delivered to the customer and result from failing to meet quality standards, impacting the company's reputation and sales.

Question 9

The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs.
-Quality circles
A) Appraisal
B) External failure
C) Internal failure
D) Prevention

Accepted Answer

Quality circles are part of prevention costs because they are designed to prevent defects from occurring by allowing employees to contribute ideas on how to improve the product and processes.

Question 10

The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs.
-Rework direct manufacturing labour and overhead
A) Appraisal
B) External failure
C) Internal failure
D) Prevention

Accepted Answer

The answer of The Door Company manufactures doors. Classify each...

Question 11

The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs.
-Net cost of spoilage
A) Appraisal
B) External failure
C) Internal failure
D) Prevention

Accepted Answer

Net cost of spoilage is considered an internal failure cost because it represents the cost associated with defects that are identified before the product reaches the customer.

Question 12

The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs.
-Technical support provided to suppliers
A) Appraisal
B) External failure
C) Internal failure
D) Prevention

Accepted Answer

Technical support provided to suppliers is a prevention cost because it is an activity aimed at preventing defects before they occur by ensuring that the inputs to the production process meet the necessary quality standards.

Question 13

The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs.
-Audits of the effectiveness of the quality system
A) Appraisal
B) External failure
C) Internal failure
D) Prevention

Accepted Answer

Audits of the effectiveness of the quality system are considered appraisal costs because they are activities undertaken to ensure that products or services meet the quality standards before they reach the customer. These include costs associated with evaluating or inspecting materials, processes, and products to ensure quality standards.

Question 14

The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs.
-Plant utilities in the inspection area
A) Appraisal
B) External failure
C) Internal failure
D) Prevention

Accepted Answer

Plant utilities in the inspection area are considered appraisal costs because they are associated with activities to ensure quality or uncover defects, such as the costs of maintaining the conditions necessary for inspection.

Question 15

The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs.
-Reentering data because of keypunch errors
A) Appraisal
B) External failure
C) Internal failure
D) Prevention

Accepted Answer

Reentering data because of keypunch errors is considered an internal failure cost because it is a cost associated with defects that are identified before the product is shipped to the customer.

Question 16

A better database for estimating cost functions has the following characteristics.
A) Fixed costs are allocated as if they are variable costs.
B) Extreme observations are adjusted or removed.
C) Time periods differ for measuring items included in the dependent variable and the cost driver(s).
D) Homogeneous relationships between individual cost items in the dependent variable pool and cost drivers may not be present.
E) There is no causal, economically plausible relationship between individual cost items in a heterogeneous mixed pool and a single cost driver.

Accepted Answer

Extreme observations, which can distort the analysis, should be adjusted or removed to improve the accuracy of cost function estimation. This helps in creating a more reliable database by ensuring that outliers do not skew the results.

Question 17

Brad Henry has just purchased the film studio of a movie company that specializes in action adventures. He found that the company did not try to estimate the cost of making a movie. Instead it just gave the producer a budget and told him/her to make a movie within budget. Mr. Henry does not like the former movie-budget concept and desires to establish a formal cost estimation system.
Required:
What are some of the potential problems that may be encountered in changing from a budget to a cost estimation movie-making system?

Accepted Answer

The answer of Brad Henry has just purchased the film...

Question 18

The ideal database for estimating cost functions has two characteristics:
1. The database should contain numerous reliably measured observations of the cost driver
(the independent variable) and the related costs (the dependent variable).
2. It includes values for the independent variable over a wide range.
Unfortunately, management accountants rarely have the advantage of working with a database that has both characteristics.
Required:
Following are a list of data problems that may be encountered. Select three, then for each selection describe the describe the cause/effect of the problem and provide a remedy.
1. The time period for measuring the dependent variable does not match the period for measuring the independent variable.
2. Fixed costs are allocated as if they were variable.
3. Data are either unavailable for all observations or not uniformly available.
4. Extreme values of observations, or outliers, occur when recording costs.
5. There is no causal, economically plausible relationship between the individual cost items in a heterogeneous mixed pool and a single cost driver.
6. Inflation affects the dependent variable, the independent variable(s), or both.

Accepted Answer

The answer of The ideal database for estimating cost functions...

Question 19

Pam's Stables used two different independent variables (trainer hours and number of horses) in two different equations to evaluate the cost of training horses. The most recent results of the two regressions are as follows: Trainer's hours: R² = 0.56 Number of horses: R² = 0.63 What is the estimated total cost for the coming year if 16,000 trainer hours are incurred and the stable has 400 horses to be trained, based on the best cost driver? A) $99,929.09 B) $350,756.50 C) $335,313.32 D) $84,233.50 E) $47,238.12

Accepted Answer

y = $4,764.50 + ($864.98 × 400) = $350,756.50 based on highest r², which uses of horses as the cost driver

Question 20

Craig's Cola was to manufacture 1,000 cases of cola next week. The accountant provided the following analysis of total manufacturing costs. R² = 0.82 What is the estimated cost of producing the 1,000 cases of cola? A) $200,100 B) $72,032 C) $100,200 D) $9,000 E) $91,812

Accepted Answer

y = $100 + ($200 × 1,000) = $200,100

Quiz 10: Analysis of Cost Behaviour

Nidek manufactures sport swear. Classify each of the following quality costs as prevention, appraisal, internal failure or external failure. -Rework direct manufacturing labour and overhead

Nidek manufactures sport swear. Classify each of the following quality costs as prevention, appraisal, internal failure or external failure. -Testing and inspecting of machinery

Nidek manufactures sport swear. Classify each of the following quality costs as prevention, appraisal, internal failure or external failure. -Testing and inspecting of direct materials

Nidek manufactures sport swear. Classify each of the following quality costs as prevention, appraisal, internal failure or external failure. -Warranty repairs

The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs. -Analysis of the cause of defects in production

The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs. -Depreciation of test equipment

The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs. -Warranty repairs

The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs. -Lost sales arising from a reputation for poor quality

The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs. -Quality circles

The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs. -Rework direct manufacturing labour and overhead

The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs. -Net cost of spoilage

The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs. -Technical support provided to suppliers

The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs. -Audits of the effectiveness of the quality system

The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs. -Plant utilities in the inspection area

The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs. -Reentering data because of keypunch errors

A better database for estimating cost functions has the following characteristics.

Craig's Cola was to manufacture 1,000 cases of cola next week. The accountant provided the following analysis of total manufacturing costs. R2 = 0.82 What is the estimated cost of producing the 1,000 cases of cola?

Craig's Cola was to manufacture 1,000 cases of cola next week. The accountant provided the following analysis of total manufacturing costs. R² = 0.82 What is the estimated cost of producing the 1,000 cases of cola?