Question 1

Newman Co.provides training and technical support to its suppliers in order to increase the quality of purchased raw materials.Which type of quality cost would this most likely be?
A) External failure cost
B) Prevention cost
C) Internal failure cost
D) Appraisal (detection)cost

Accepted Answer

The cost of training and technical support to suppliers is a prevention cost, as it is incurred to prevent defects and improve the quality of purchased raw materials.

Question 2

A system of improvement based on a series of gradual and often small improvements is called:
A) throughput.
B) kaizen.
C) manufacturing cycle efficiency.
D) centralisation.

Accepted Answer

A system based on a series of gradual and often small improvements is typically known as kaizen. Throughput refers to the rate at which products move through a system, manufacturing cycle efficiency refers to the amount of time it takes to produce a product, and centralisation refers to the concentration of power and decision-making authority in a centralized location.

Question 3

Which of the following is least likely to be a critical success factor within the internal business perspective of the balanced scorecard?
A) Increasing throughput
B) Increasing productivity
C) Increasing non-value-added time
D) Increasing manufacturing cycle efficiency (MCE)

Accepted Answer

Increasing non-value-added time would not be a critical success factor in the internal business perspective of the balanced scorecard, as it is indicative of inefficiencies and waste in the processes, which would be a negative factor for the business. The other options, increasing throughput, productivity, and manufacturing cycle efficiency are all positive factors that would contribute to the success of the business.

Question 4

Which of the following statements regarding 'quality' is true?
A) Over the past 20 years or so,the demand by customers for quality products and services at an affordable price has drastically changed the way companies do business.
B) Improving quality increases sales through higher customer satisfaction and demand,reduces costs,and increases the long-term profitability of companies.
C) Companies have focused on improving the quality of the products or the services they sell through a variety of initiatives,such as total quality management (TQM),market-driven quality,and strategic quality management.
D) All of these are true.

Accepted Answer

All of the statements are true. The demand for quality products and services at an affordable price has indeed changed the way companies do business. Improving quality has been shown to increase customer satisfaction, which in turn leads to increased sales and long-term profitability, while also reducing costs. Companies have indeed implemented a variety of quality initiatives to improve the quality of their products or services, including TQM, market-driven quality, and strategic quality management.

Question 5

Barksdale Manufacturing Inc.produces its products in batches containing 100 units.Barksdale randomly samples 15 of the units in each batch for quality control.The costs of performing these random sample tests would most likely be which type of quality cost?
A) External failure cost
B) Prevention cost
C) Internal failure cost
D) Appraisal (detection)cost

Accepted Answer

The cost of performing random sample tests is an example of appraisal (detection) cost. This cost is incurred to detect and avoid defective products before they are sold to customers.

Question 6

Which types of quality costs are incurred in the course of inspecting,identifying,and isolating defective products and services before they reach the customer?
A) Appraisal (detection)costs
B) Prevention costs
C) External failure costs
D) Internal failure costs

Accepted Answer

Inspecting, identifying, and isolating defective products and services before they reach the customer is a form of appraisal (detection) cost. This type of cost is incurred to ensure that defective products do not reach the customer, which can lead to external failure costs. Preventive costs are related to preventing defects from occurring in the first place, while internal failure costs are related to defects that are discovered after the product or service has been delivered to the customer.

Question 7

Which of the following statements about prevention costs is true?
A) Prevention costs are generally incurred after problems occur.
B) Design and engineering costs are not properly considered prevention costs.
C) Generally,companies find that the incurrence of prevention costs reduces long-run product failure costs.
D) None of these are true.

Accepted Answer

Prevention costs are incurred to prevent defects or quality problems from occurring in the first place. These costs include activities such as training, inspections, and design and engineering. Companies that invest in prevention activities typically see a decrease in long-run product failure costs, as there are fewer defects and issues to address. Option A is incorrect as prevention costs are incurred before problems occur. Option B is incorrect as design and engineering costs are often considered critical prevention costs as they help ensure quality during the product development process. Option D is incorrect as option C is true.

Question 8

Which types of quality costs are incurred after a defective product is delivered to a customer?
A) Appraisal (detection)costs
B) Prevention costs
C) External failure costs
D) Internal failure costs

Accepted Answer

External failure costs are incurred after a product has been delivered to the customer and a defect is found. These costs include warranties, returns, and repairs, among others.

Question 9

Which types of quality costs are incurred to eliminate quality problems before they occur?
A) Appraisal (detection)costs
B) Prevention costs
C) External failure costs
D) Internal failure costs

Accepted Answer

Prevention costs are incurred to prevent quality problems before they occur. This includes activities like design and development of products, training employees on quality control processes, and implementing quality assurance programs.

Question 10

CLR Inc.is a clothing manufacturer.Recently,CLR made and produced about 2000 shirts.During the production process,some of the shirts did not have the required number of buttons sewed on.CLR has decided to rework the shirts to add the buttons.These rework costs would most likely be classified as which type of quality cost?
A) Internal failure costs
B) Appraisal (detection)costs
C) Prevention costs
D) External failure costs

Accepted Answer

Rework costs are considered internal failure costs, as they are incurred due to defects or errors discovered within the internal production process.

Question 11

Which perspective links the critical success factors of the other perspectives and ensures an environment that supports and allows the objectives of the other perspectives to be achieved?
A) Financial perspective
B) Learning and growth perspective
C) Internal business perspective
D) Customer perspective

Accepted Answer

The learning and growth perspective links the critical success factors of the other perspectives and ensures an environment that supports and allows the objectives of the other perspectives to be achieved by focusing on things like employee training and development, technology infrastructure and organizational culture.

Question 12

FMI is a car manufacturer.Recently,they have had to recall approximately 6000 cars due to potential brake pad malfunction.The costs to inspect and replace the brake pads would most likely be classified as which type of quality cost?
A) Appraisal (detection)costs
B) External failure costs
C) Internal failure costs
D) Prevention costs

Accepted Answer

The answer of FMI is a car manufacturer.Recently,they have had...

Question 13

Which types of quality costs are incurred once the product is produced and then found to be defective before being sold to customers?
A) Appraisal (detection)costs
B) Prevention costs
C) External failure costs
D) Internal failure costs

Accepted Answer

Internal failure costs are incurred once the product is produced and found to be defective before being sold to customers. These costs include costs related to reworking, scrap, and warranty claims.

Question 14

Which of the following is generally not one of the classifications of quality costs?
A) Appraisal (detection)costs
B) Prevention costs
C) Internal control costs
D) External failure costs

Accepted Answer

Internal control costs are not typically included as a classification of quality costs. The four commonly recognized classifications of quality costs are appraisal (detection) costs, prevention costs, internal failure costs, and external failure costs.

Question 15

Which of the following statements regarding 'quality' is false?
A) Quality is often defined as meeting or exceeding customers' expectations.
B) Quality requires that a product be reliable and durable and that these features be provided at a competitive price.
C) Studies have found that companies that spend less on quality costs have higher operating income than those companies who spend more on quality costs.
D) Improving quality often falls under the customer perspective of the balanced scorecard.

Accepted Answer

Studies have found that companies that spend more on quality costs have higher operating income than those companies who spend less on quality costs. This is because investing in quality can lead to higher customer satisfaction, lower defect rates, and ultimately, lower costs in the long run. Therefore, statement C is false.

Question 16

Which of the following statements about kaizen is false?
A) Employee empowerment will allow kaizen to occur more easily.
B) It requires active participation by all of a company's employees.
C) It takes the view that all employees are responsible for continuous improvement.
D) It consists of major changes that require large investments on the part of the company.

Accepted Answer

Kaizen is a philosophy that focuses on continuous improvement by making small, incremental changes. It does not involve major changes that require large investments from the company. Instead, it involves all employees taking responsibility for identifying areas for improvement and making small changes to improve processes and efficiency. Empowering employees and ensuring active participation from all employees is essential for successful kaizen implementation.

Question 17

Which of the following is least likely to be a critical success factor within the financial perspective of the balanced scorecard?
A) Increasing ROI
B) Decreasing operating costs
C) Decreasing residual income
D) Increasing segment margin

Accepted Answer

Decreasing residual income is not a critical success factor within the financial perspective of the balanced scorecard. This is because residual income is a measure of a company's profit that exceeds its cost of capital, and decreasing it may not necessarily impact the company's overall financial success. Instead, increasing ROI, decreasing operating costs, and increasing segment margin are all important factors in achieving financial success.

Question 18

Which of the following statements about quality costs is true?
A) Both external and internal failure costs can be reduced (theoretically to zero)by paying more attention to quality issues early in the value chain.
B) Increasing expenditures related to prevention and appraisal can result in significant overall cost savings in the long run.
C) It may be prudent to increase expenditures in one or more areas in order to decrease other costs.
D) All of these are true.

Accepted Answer

All of these statements about quality costs are true. By paying more attention to quality issues early in the value chain, both external and internal failure costs can be reduced. Increasing expenditures related to prevention and appraisal can result in significant cost savings in the long run. In some cases, it may be necessary to increase expenditures in one area to decrease costs in another area. Therefore, all of the statements given are true.

Question 19

Increasing information systems capabilities would be a critical success factor found in which perspective of the balanced scorecard?
A) Internal business
B) Customer
C) Financial
D) Learning and growth

Accepted Answer

Increasing information systems capabilities falls under the Learning and growth perspective of the balanced scorecard as it relates to improving the organization's ability to learn, innovate and adapt to changes in the market and in technology.

Question 20

Which of the following statements about quality costs is true?
A) Even in theory,external failure costs can never be reduced to zero.
B) The less a company spends on prevention costs,the less they will have to spend on internal failure costs in the future.
C) If a company produces and sells a defective product,external failure costs are likely to exceed all the other types of quality costs.
D) A low level of internal failure costs usually indicates that more attention needs to be paid to prevention and appraisal costs.

Accepted Answer

External failure costs refer to costs incurred outside of the company due to a defective product, such as warranty repairs or legal fees. These costs can be very high if customers are injured or there is a product recall. Therefore, producing and selling a defective product can result in higher external failure costs than any other type of quality cost.

Quiz 14: Decentralisation and Modern Performance Management Systems the Balanced Scorecard

Newman Co.provides training and technical support to its suppliers in order to increase the quality of purchased raw materials.Which type of quality cost would this most likely be?

A system of improvement based on a series of gradual and often small improvements is called:

Which of the following is least likely to be a critical success factor within the internal business perspective of the balanced scorecard?

Which of the following statements regarding 'quality' is true?

Barksdale Manufacturing Inc.produces its products in batches containing 100 units.Barksdale randomly samples 15 of the units in each batch for quality control.The costs of performing these random sample tests would most likely be which type of quality cost?

Which types of quality costs are incurred in the course of inspecting,identifying,and isolating defective products and services before they reach the customer?

Which of the following statements about prevention costs is true?

Which types of quality costs are incurred after a defective product is delivered to a customer?

Which types of quality costs are incurred to eliminate quality problems before they occur?

Which perspective links the critical success factors of the other perspectives and ensures an environment that supports and allows the objectives of the other perspectives to be achieved?

FMI is a car manufacturer.Recently,they have had to recall approximately 6000 cars due to potential brake pad malfunction.The costs to inspect and replace the brake pads would most likely be classified as which type of quality cost?

Which types of quality costs are incurred once the product is produced and then found to be defective before being sold to customers?

Which of the following is generally not one of the classifications of quality costs?

Which of the following statements regarding 'quality' is false?

Which of the following statements about kaizen is false?

Which of the following is least likely to be a critical success factor within the financial perspective of the balanced scorecard?

Which of the following statements about quality costs is true?

Increasing information systems capabilities would be a critical success factor found in which perspective of the balanced scorecard?

Which of the following statements about quality costs is true?