Question 1

Managers who practice total quality management

Accepted Answer

Managers who practice total quality management invest more resources at the front end of the value chain in research and development and design to produce a superior product. This approach focuses on preventing defects and errors from occurring in the first place, rather than relying on inspection and repair after production.

Question 2

The costs incurred when poor quality goods or services are detected and corrected before delivery to customers are called ________ costs.

Accepted Answer

Internal failure costs are those incurred to fix problems that are detected before the product or service is delivered to the customer.

Question 3

Which of the following is an example of a cost item that should be classified as an internal failure cost?

Accepted Answer

Rework costs are a result of internal failures, meaning errors or defects that were caught before the product was delivered to the customer. Other examples of internal failure costs include scrap costs, repair costs, and downtime costs.

Question 4

The cost of training quality control supervisors who are responsible for overseeing the inspection of units would be classified as a(n)________ cost.

Accepted Answer

The cost of training quality control supervisors who are responsible for overseeing the inspection of units is a cost of appraisal. This is because these supervisors are responsible for conducting inspections and ensuring that units meet the required quality standards, which is a form of appraisal activity.

Question 5

Costs incurred in detecting poor quality goods or services are what type of costs?

Accepted Answer

Appraisal costs refer to the costs associated with activities aimed at detecting poor quality goods or services.

Question 6

On a Cost of Quality report, which of the following cost items should be classified as an external failure cost?

Accepted Answer

Customer returns of defective products are considered external failure costs because they occur after the product has been delivered to the customer and result in dissatisfaction or loss of goodwill with the customer.

Question 7

The costs incurred when poor quality goods or services are detected and corrected after delivery to customers are called ________ costs.

Accepted Answer

External failure costs are those incurred to fix problems that are detected after the product or service has been delivered to the customer.

Question 8

If a company were to increase its appraisal costs by inspecting more units as the units are are in production (during production), the company's external failure costs would most likely

Accepted Answer

Increasing appraisal costs by inspecting more units during production typically leads to the early detection and correction of defects, which in turn reduces the likelihood of defective products reaching the customer. This decrease in defective products reaching the customer would lead to a decrease in external failure costs, such as warranty claims and returns.

Question 9

What type of costs are incurred to avoid poor quality goods or services in the first place?

Accepted Answer

Prevention costs are incurred to avoid poor quality goods or services in the first place. These costs include the costs of designing quality into the product or service, training employees on quality principles, developing quality control processes, and testing materials and equipment. By investing in prevention costs, companies can reduce the likelihood of defects or errors, which can ultimately save money by avoiding the need for expensive appraisal and correction costs.

Question 10

If a company were to increase its appraisal costs by inspecting more units as the units are completed, the company's external failure costs would most likely

Accepted Answer

Increasing appraisal costs by inspecting more units typically leads to the identification and correction of defects before products reach the customer, thereby reducing external failure costs such as returns, repairs, and warranty claims.

Question 11

Which of the following is an example of a cost item that should be classified as an external failure cost?

Accepted Answer

Warranty claims are an external failure cost as they occur after the product has been sold and delivered to the customer, and the customer experiences a problem or defect with the product.

Question 12

If a company were to decrease its prevention costs by eliminating employee training, the company's external failure costs would most likely

Accepted Answer

Eliminating employee training would likely result in a higher rate of errors or quality issues, which would increase the likelihood of external failure costs such as customer complaints, returns, and repairs. Therefore, reducing prevention costs without careful consideration of the impact on quality could ultimately lead to increased external failure costs.

Question 13

The cost of warranty work is an example of what type of cost?

Accepted Answer

External failure costs are expenses that occur after a defective product is delivered to the customer, including costs associated with warranty work, returns, and repairs.

Question 14

The cost of fixing defective units found during the quality inspections would be classified as what type of cost?

Accepted Answer

The cost of fixing defective units that are found during quality inspections would be classified as an internal failure cost. This is because the defect was not caught before the product was produced and shipped out, resulting in a failure of the product and incurring costs to fix or replace it.

Question 15

The cost of downtime caused by quality problems with the raw materials would be classified as what type of cost?

Accepted Answer

Internal failure cost refers to the cost incurred due to defects that are caught before the product is shipped, such as reworking or repairing faulty units. The cost of downtime caused by quality problems with the raw materials would fall under this category.

Question 16

The cost of inspection at various stages of production is an example of a(n)

Accepted Answer

The cost of inspection is considered an appraisal cost, which is the cost of evaluating products or services to ensure they meet established standards and specifications. This is different from prevention costs, which are incurred to prevent defects from occurring in the first place, and internal and external failure costs, which are incurred as a result of defects or problems that are not caught and corrected during the production process.

Question 17

The cost of testing incoming raw materials from a supplier would be classified as a(n)________ cost.

Accepted Answer

The answer of The cost of testing incoming raw materials...

Question 18

All of the following statements regarding total quality management are true except

Accepted Answer

TQM aims to reduce rework and warranty work, therefore it would not increase the time spent on these activities.

Question 19

Which of the following is one of the four cost categories typically found on a Cost of Quality report?

Accepted Answer

Prevention costs are one of the four typical cost categories found on a Cost of Quality report. The other three categories are appraisal costs, internal failure costs, and external failure costs. Development costs and marketing costs are not typically included in a Cost of Quality report, and while inventory failure costs can be categorized as internal failure costs, they are not one of the main four categories.

Question 20

The cost of maintaining quality control testing equipment would be classified as a(n)________ cost.

Accepted Answer

Quality control testing equipment is used in the process of appraising or assessing the quality of products or services. Therefore, the cost of maintaining this equipment is classified as appraisal cost. Prevention cost refers to the cost incurred to prevent defects in products, while internal failure cost and external failure cost represent the cost of correcting defects before and after delivery to customers, respectively.

Quiz 4: Activity-Based Costing, Lean Operations, and the Costs of Quality