Question 1

Uncertainty about when customers will demand a product or service is generally credited as being the primary cause of bottlenecks.

Accepted Answer

The answer of Uncertainty about when customers will demand a...

Question 2

How much will external failure costs change assuming 400,000 units of materials are received and that the product failures with customers are cut in half with the new receiving method?
A) $10,000 increase
B) $200,000 decrease
C) $320,000 decrease
D) $400,000 decrease
E) $500,000 decrease

Accepted Answer

The answer of How much will external failure costs change...

Question 3

How much will appraisal costs change assuming the new prevention methods reduce the amount of material failures during the appraisal phase by 40 percent?
A) $160,000 decrease
B) $40,000 increase
C) $20,000 decrease
D) $8,000 decrease
E) $7,450 decrease

Accepted Answer

There is no information given about the initial cost of appraisal or the total number of material failures during the appraisal phase, so we cannot determine the exact cost savings. However, we know that the cost reduction will be a 40% decrease, and only option C presents a decrease in cost. The other answer choices present an increase in cost or a specific cost reduction value that cannot be calculated without additional information. Therefore, option C is the best choice.

Question 4

What is the net change in the budget of prevention costs if the procedures are automated in the current year?
A) $40,000 decrease
B) $52,000 increase
C) $52,000 decrease
D) $92,000 increase
E) $92,000 decrease

Accepted Answer

The answer of What is the net change in the...

Question 5

Management has offered to allow the prevention changes if all changes take place as anticipated and the amounts netted are less than the cost of the equipment. What is the net impact of all the changes created by the preventive changes?

Accepted Answer

The answer of Management has offered to allow the prevention...

Question 6

What is the net effect on appraisal costs for the current year assuming the new receiving method is implemented and that 400,000 material units are received?
A) $10,000 increase
B) $10,000 decrease
C) $100,000 decrease
D) $110,000 increase
E) $115,000 decrease

Accepted Answer

The answer of What is the net effect on appraisal...

Question 7

Which of the following are not nonfinancial measures for evaluating customer satisfaction?
A) total sales per customer
B) customer response time
C) number of customer complaints per month
D) ratio of defective units to good units shipped to customers
E) timeliness of delivery

Accepted Answer

Total sales per customer is a financial measure, not a nonfinancial measure.

Answer: D
 Ratio of defective units to good units shipped to customers is a quality control metric, not a nonfinancial measure for evaluating customer satisfaction.

Therefore, the options that are not nonfinancial measures for evaluating customer satisfaction are A and D.

Question 8

What is the net change in the budget of prevention costs if the procedures are automated?

Accepted Answer

The answer of What is the net change in the...

Question 9

How much does external failure costs change if all changes are as anticipated with the new prevention procedures?
A) $57,024 decrease
B) $57,600 increase
C) $57,600 decrease
D) $72,000 decrease
E) $72,624 increase

Accepted Answer

The external failure costs would decrease by $57,024 if all changes are as anticipated with the new prevention procedures.

Question 10

How much will internal failure costs change assuming 400,000 units of materials are received and that the new receiving method reduces the amount of unacceptable product units in the manufacturing process by 20 percent?
A) $10,000 increase
B) $50,000 decrease
C) $160,000 decrease
D) $320,000 decrease
E) $500,000 decrease

Accepted Answer

Internal failure costs are costs incurred due to the production of defective units. If the new receiving method reduces the amount of unacceptable product units by 20%, there will be a reduction in the number of defective units that enter the production process, which will reduce the internal failure costs. 
Assuming 400,000 units of materials are received, the reduction in defective units will be 20% of 400,000 which is 80,000 units. 
Thus, if the cost per defective unit is assumed to be $2, the reduction in internal failure cost will be:
80,000 units * $2 = $160,000
Therefore, the internal failure costs will decrease by $160,000. 
Hence, the best choice is C.

Question 11

Customer response time is the time between when a company first markets a new product, and when sales exceed supplies on hand (test inventory).

Accepted Answer

Customer response time is the time between when a customer contacts a company and when the company responds to the customer's inquiry or request. It is not related to sales or inventory levels.

Question 12

How much will internal failure costs change if the internal product failures are reduced by 50 percent with the new procedures?
A) $10,000 decrease
B) $20,000 decrease
C) $250,000 decrease
D) $500,000 decrease
E) $550,000 decrease

Accepted Answer

The answer of How much will internal failure costs change...

Question 13

The Cost of Quality measure has all of the following advantages EXCEPT
A) being a useful measure of comparing different quality improvement projects.
B) serving as a common denominator for evaluating tradeoffs among prevention and failure costs.
C) focusing on how costly poor quality can be.
D) being indicators of long-term performance.
E) setting priorities for achieving maximum cost reduction.

Accepted Answer

Cost of Quality measures are not typically used as indicators of long-term performance; they focus more on immediate cost implications and improvements.

Question 14

How much will internal failure costs change if the internal product failures are reduced by 50% with the new procedures?

Accepted Answer

The answer of How much will internal failure costs change...

Question 15

How much do external failure costs change if all changes are as anticipated with the new prevention procedures? Assume all units produced are sold and there are no ending inventories.

Accepted Answer

The answer of How much do external failure costs change...

Question 16

Regarding the means by which relevant costs and benefits are evaluated when evaluating quality improvement, the key question is:
A) Which alternative solution will make the customer happiest?
B) How will total costs and total revenues change under each alternative solution?
C) Will the employees of the company be able to implement the change?
D) How long will it take for the improvement program to be fully functional?
E) How long will the training period be?

Accepted Answer

When evaluating quality improvement, the key question is how total costs and total revenues will change under each alternative solution. This helps determine if the improvement will be financially beneficial to the company. While customer happiness is important, it is not the only factor that should be considered. The ability of employees to implement the change and the length of the training period are also important, but they are not the primary means by which the costs and benefits are evaluated.

Question 17

Management has offered to allow the prevention changes if all changes take place as anticipated and the amounts netted are less than the cost of the equipment. What is the net impact of all the changes created by the preventive changes?
A) $52,000
B) $(5,024)
C) $(57,024)
D) $(35,024)
E) $(25,024)

Accepted Answer

The answer of Management has offered to allow the prevention...

Question 18

The operational measures of time reveal how quickly customers respond to a company's new products.

Accepted Answer

Operational measures of time typically refer to the efficiency and speed of internal processes, not customer response times.

Question 19

Design Products is committed to its quality program. It works with all areas of the company to establish sound quality programs within reasonable budget guidelines. For the current year, it has budgeted $1,000,000 for prevention costs and $800,000 for appraisal costs. Internal failure has a budget of $100 per failed item, while external failure has a total budget of $600,000.
Product Testing has proposed to management a new method of testing products. If management decides to implement the new method, $2 per unit of appraisal costs will be saved, up to a level of 200,000 tests. No additional savings are incurred past the 200,000 level. The new method involves $110,000 in training costs and $60,000 in yearly testing supplies.
Traditionally, 3 percent of all completed items have to be reworked. External failure costs average $120 per failed unit. The company's average external failures are 1 percent of units sold. The company carries no ending inventories.
Required:
a. What is the adjusted budget for appraisal costs assuming the new method is implemented and 800,000 units are tested during the manufacturing process during the year?
b. How much does internal failure costs change assuming 600,000 units are tested under the new method and it reduces the amount of unacceptable units in the manufacturing process by 40 percent?
c. What would be the change in the external failure budget assuming external failures are reduced by 60 percent, assuming the same facts as in part (b)?

Accepted Answer

The answer of Design Products is committed to its quality...

Question 20

How much will appraisal costs change assuming the new prevention methods reduce material failures by 40% in the appraisal phase?

Accepted Answer

The answer of How much will appraisal costs change assuming...

Quiz 19: Cost Management: Quality, Time, and the Theory of Constraints

Uncertainty about when customers will demand a product or service is generally credited as being the primary cause of bottlenecks.

How much will external failure costs change assuming 400,000 units of materials are received and that the product failures with customers are cut in half with the new receiving method?

How much will appraisal costs change assuming the new prevention methods reduce the amount of material failures during the appraisal phase by 40 percent?

What is the net change in the budget of prevention costs if the procedures are automated in the current year?

Management has offered to allow the prevention changes if all changes take place as anticipated and the amounts netted are less than the cost of the equipment. What is the net impact of all the changes created by the preventive changes?

What is the net effect on appraisal costs for the current year assuming the new receiving method is implemented and that 400,000 material units are received?

Which of the following are not nonfinancial measures for evaluating customer satisfaction?

What is the net change in the budget of prevention costs if the procedures are automated?

How much does external failure costs change if all changes are as anticipated with the new prevention procedures?

How much will internal failure costs change assuming 400,000 units of materials are received and that the new receiving method reduces the amount of unacceptable product units in the manufacturing process by 20 percent?

Customer response time is the time between when a company first markets a new product, and when sales exceed supplies on hand (test inventory).

How much will internal failure costs change if the internal product failures are reduced by 50 percent with the new procedures?

The Cost of Quality measure has all of the following advantages EXCEPT

How much will internal failure costs change if the internal product failures are reduced by 50% with the new procedures?

How much do external failure costs change if all changes are as anticipated with the new prevention procedures? Assume all units produced are sold and there are no ending inventories.

Regarding the means by which relevant costs and benefits are evaluated when evaluating quality improvement, the key question is:

Management has offered to allow the prevention changes if all changes take place as anticipated and the amounts netted are less than the cost of the equipment. What is the net impact of all the changes created by the preventive changes?

The operational measures of time reveal how quickly customers respond to a company's new products.

How much will appraisal costs change assuming the new prevention methods reduce material failures by 40% in the appraisal phase?