Cost Accounting Systems
(D. Product Quality and Productivity/ Total Quality Management)
D. laborers put in more effort.
D. Product Quality and Productivity/ Total Quality Management
7. A partial productivity measure has several limitations, including that:
THEORY A. it ignores any productivity effect caused by other manufacturing factor quantity changes.
Productivity Measures B. it ignores any effect that changes in the production factor have on productivity.
1. A primary objective in measuring productivity is to improve operations either by using fewer C. it ignores and effect that changes in operating characteristics of the firm may have on the
inputs to produce the same output, or to produce: productivity of the input resource.
A. more effectively C. more outputs with the same inputs D. all of the above answers are correct.
B. with fewer constraints D. more outputs with more inputs
8. An advantage of partial measures of productivity is that it:
2. Which of the following assesses the productivity efficiency for all inputs combined in order to A. allows managers to focus on the use of a particular input.
value change in productivity? B. is a complex measure that is difficult to interpret by everyone in the organization.
A. partial productivity measurement C. profit-linked productivity measurement C. looks at the effect of multiple inputs.
B. profile productivity measurement D. total productivity measurement D. is a perfect measure of performance.
3. Changes in the productivity of different types of resources are NOT always: Total quality management
A. measurable and observable 9. Characteristics of total quality management include:
B. in the same direction or at an equal pace A. focusing on customer satisfaction
C. unique and differentiated B. striving on continuous improvement
D. simultaneous and positive C. involvement of the entire work force
D. All of the above are characteristics of TQM
4. How can productivity be improved?
A. using less input to produce the same output 10. Which of the following is not an important principle of TQM?
B. using the same input to produce more output A. The organization should focus on improving goods from the consumer's viewpoint
C. improve input trade-off efficiency by using a less costly mix of inputs B. Everyone in the organization is required to participate
D. all of the above C. There should be a system of planning, controlling, and decision making
D. Complacency is the norm
5. One major problem in measuring productivity in not-for-profit organizations is the absence of
revenue as the: 11. Total quality management directs management attention to the relationship between the
A. common measure for inputs internal production/service process and the:
B. common measure for outputs A. CEO of the competition C. activity analysis
C. basis for financial reporting B. ultimate customer D. control charts
D. common denominator with commercial firms
12. Continuous improvement is synonymous with:
6. Productivity increases if: A. process benchmarking C. management by objectives
A. less output is produced with more input. B. total quality management D. management by exception
B. the same output is produced with more input.
C. the same output is produced with fewer inputs. 13. Which of the following describes the zero defects view?
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Cost Accounting Systems
(D. Product Quality and Productivity/ Total Quality Management)
A. it permits a predetermined level of defective units to be produced distribution
B. it is the level where the number of defects allowed minimizes total cost. B. research and development, design, supply, production, marketing, distribution, customer
C. it is the level where there are no defects. service
D. all of the above. C. research and development, design, supply, production, marketing, customer service,
distribution
Statistical process control D. supply, research and development, design, production, marketing, distribution, customer
14. A technique by which companies analyze fluctuations in a process is called: service
A. statistical process control C. benchmarking
B. a quality audit D. Pareto analysis Process value analysis
20. A tool that focuses on manufacturing processes and seeks to reduce or optimize the activities
Process benchmarking performed within the process is
15. Focusing on how best in class companies achieve their results is referred to as: A. process value analysis C. caveat analysis
A. reverse engineering C. process benchmarking B. re-engineering D. benchmarking
B. results benchmarking D. competitive benchmarking
21. A tool that compares how tasks are performed internally with the best practices of industry
Total quality control leaders is
16. The goal of total quality control is A. process value analysis C. caveat analysis
A. to have less defective material than good material B. re-engineering D. benchmarking
B . to permit defects as long as they do not exceed a certain level
C. to have zero defect 22. Attempting to determine why activities are performed and how well they are performed is a
D. both b and c goal of
A. process value analysis
Cost of Quality Report B. both traditional and activity-based costing systems
17. Regardless of the differences in form and control, a common feature that should be present in C. computer-integrated manufacturing systems
any Cost of Quality Report is that the report: D. just-in-time manufacturing
A. promotes total quality management (TQM)
B. stratifies costs by product line Process Re-engineering
C. stratifies costs by plant 23. An approach to developing new ways to perform existing activities is called
D. stratifies costs by division A. process value analysis C. caveat analysis
B. re-engineering D. benchmarking
Value Engineering
18. Value engineering can result in 24. A danger in Process Reengineering is that:
A. product redesign C. modifications in process methods A. non-value-9added activities may be eliminated.
B. changes in materials specifications D. all of the above B. some resources may no longer be required.
C. employee morale may suffer.
Value chain D. all of the above.
19. Which of the following is the correct sequence of the value chain?
A. design, research and development, production, supply, marketing, customer service, Quality Costs
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Cost Accounting Systems
(D. Product Quality and Productivity/ Total Quality Management)
Prevention cost
25. Costs incurred to improve product quality by precluding product defects are known as: Analysis
A. internal failure costs C. appraisal costs 33. If a company has high failure costs, the best course of action to reduce total quality costs
B. external failure costs D. prevention cost would be to increase
A. prevention costs C. the cost of non-compliance
26. Worker training is a(n) B. the costs associated with compliance D. appraisal costs
A. appraisal cost. C. internal failure cost.
B. external failure cost. D. prevention cost. Value-added & non-value added costs
Non-value added costs
27. An example of a control cost is: 34. The costs caused by inefficiency in prevention activities are:
A. supplier evaluation and selection C. cost of recalling products A. nonvalued-added costs
B. scrap D. all of the above B. value-added costs
C. neither nonvalued-added or value-added costs
Appraisal cost D. both nonvalued-added or value-added costs
28. The quality costs that are incurred to determine whether particular units of product meet quality
standards are PROBLEMS
A. appraisal costs. C. internal failure costs. Productivity Ratios
1
B. external failure costs. D. prevention costs. . Jetters Company manufactured 100,000 motors for dehumidifiers and used 20,000 direct labor
hours. The selling price of each motor is P25 and the labor cost is P10 per hour. The labor
Internal failure cost productivity ratio is:
29. The cost of downtime on machines while rework is being performed is a(n) A. P10 C. 4 motors per hour
A. appraisal cost. C. internal failure cost. B. P12.50 D. 2.5 motors per hour
B. external failure cost. D. prevention cost.
Productivity-linked increase in gross profit
2
30. The costs of reworking defective units to make them saleable are classified as . At the end of 2006, Duabi Corporation implemented a new labor process and redesigned its
A. appraisal costs C. internal failure costs product with the expectation that input usage efficiency would increase. Now, at the end of
B. external failure costs D. prevention costs
1
. Answer: B
External failure cost Labor productivity ratios are operational measure (100,000/20,000 = 5 motors per hour) or
31. Which of the following represents an external failure cost? financial measure [(25 * 100,000)/(20,000 * 10) = P12.50).
A. reprocessing a defective product before shipment
B. replacing a defective product after shipment 2
. Answer: B
C. hiring for quality Material productivity ratio, 2006: (30,000 ÷ 10,000) 3
D. inspecting products during production Actual materials (lbs), 2007 10,400
Required lbs. based on 2006: (38,000 ÷ 3) 12,667
32. Sales returns and allowances due to a quality deficiency is an example of: Savings in number of pounds 2,267
A. external failure costs C. internal failure costs Material productivity-linked to profit: (2,267 x P7) P15,870
B. appraisal costs D. prevention cost
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2007, the president of the company wants an assessment of the changes on the company's A. P 3,100 C. P10,700
productivity. The data needed for the assessment are as follows: B. P( 1,350) D. P 7,600
2006 2007
Output 30,000 38,000 Use the following information to answer questions 39 through 41:
Output prices P12 P12 Testing P 60,000
Materials (lbs.) 10,000 10,400 Rework 27,500
Materials unit price P8 P7 Training 45,000
Labor hours 14,000 15,000 Product liability insurance 35,000
Labor rate per hour P6 P7 Quality planning 43,000
Power (KwH) 12,000 13,000 Customer surveys 15,000
Price per KwH P3 P4 Reinspection and retesting 17,500
By how much did profits change as a result of productivity changes in materials? Warranty repairs 50,000
A. P 13,000 decrease C. P 23,400 decrease Total quality costs P293,000
B. P 15,870 increase D. P 20,800 increase
Sales for 2005 were P1,000,000
Price-recovery component
4
3
. At the end of 2006, Alban Company implemented a new labor process and redesigned its . What is the amount of appraisal costs?
product with the expectation that input usage efficiency would increase. Now, at the end of A. P60,000 C. P32,500
2007, the president of the company wants an assessment of the changes on the company's B. P92,500 D. P75,000
productivity. The data needed for the assessment are as follows:
5
2006 2007 . What is the amount of external failure costs?
Output 10,000 12,000 A. P35,000 C. P50,000
Output prices P10 P10 B. P85,000 D. P67,500
Change in profits P10,700
Profit-linked measurements:
Materials P4,600
Labor 3,250
Power (250) 4
. Answer: D
Net P7,600 Testing P60,000
How much is the price-recovery component? Customer surveys 15,000
Total appraisal costs P75,000
3
. Answer: A
5
Price recovery component: . Answer: B
Change in Profits: P10,700 Product liability insurance P35,000
Deduct profit-linked productivity change 7,600 Warranty repairs 50,000
Price recovery component P 3,100 Total external costs P85,000
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6
. If Kurt Company is able to reduce quality costs to 2.5 percent of sales, what will happen to
profits?
A. Decrease by P25,000 C. Decrease by P293,000
B. Increase by P268,000 D. Increase by P25,000
ANSWER EXPLANATIONS
6
. Answer: B
Current quality costs P293,000
Less proposed quality costs: (0.025 x P1M) 25,000
Cost savings (increase in profits) P268,000
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