1. The Taguchi Quality Loss Function (QLF) demonstrates that as
the quality measure of a product declines, the loss due to quality
defects:
A. Increases as a quadratic function.
B. Increases as a linear function.
C. Increases as an exponential function.
D. Decrease as a quadratic function.
E. Increase as a step function.
2. The quality cost of prevention:
A. Includes the cost of detecting poor-quality outputs.
B. Refers only to zero-defect programs.
C. Is considered an "upstream" cost.
D. Is a component of the cost of non-conformance.
E. Decreases "upstream costs."
3. Which of the following is not an expected result of improved
quality of operations?
A. Decreased inventory turnover.
B. Higher product/service selling prices.
C. Faster throughput time.
D. Lower total manufacturing cost.
4. ISO 14000:
A. Provides a set of quality standards that relate to environmental
management.
B. Is required under current International Financial Reporting
Standards (IFRS).
C. Is a requirement for receipt of the Baldrige Quality Award in the
U.S.
D. Provides general standards for quality assurance by companies
and organizations.
5. Typically, as prevention and appraisal costs increase, other costs
of quality:
A. Are not affected.
B. Change, but the direction cannot be predicted.
C. Increase proportionately.
D. Decrease.
E. Decrease proportionally.
6. Regardless of the differences in format, a common feature that
should be present in any
Cost-of-Quality (COQ) Report is that the report:
A. Promotes the management and control of quality-related costs.
B. Classifies costs by product line.
C. Classifies costs by cost center or profit center.
D. Classifies costs by behavior (e.g., fixed versus variable).
E. Classifies costs by the external value stream.
7. A common characteristic among control charts, histograms,
Pareto diagrams, and
cause-and-effect diagrams is that they are:
A. Easy to design and prepare.
B. Based on the same scale.
C. Visual representations of quality-related problems.
D. Statistically-based.
E. All useful tools for preventing quality problems from occurring.
8. The set of international quality-related standards, adopted in
1987 and revised in both 1994 and in 2000, is referred to as:
A. ISO 14000.
B. International Financial Reporting Standard No. 14000.
C. International Financial Reporting Standard No. 9000.
D. ISO 9000.
E. SEC Release 20-F.
9. Studies have shown that improvements in quality can lead to:
A. A higher total cost as additional costs are spent to improve
quality.
B. Lower productivity because of the need to meet a higher quality
standard.
C. Increases in throughput time.
D. Increases in productivity (i.e., lower manufacturing costs).
E. Increased warranty costs.
10. Conformance to a quality specification expressed as a specified
range around a target is:
A. End-zone conformance.
B. Target conformance.
C. Goalpost conformance.
D. Absolute quality conformance.
E. Zero-defect conformance.
11. Conformance to a quality standard that requires all products or
services to meet exactly the
target value with no variation allowed is:
A. Control-chart conformance.
B. Target conformance.
C. Goalpost conformance.
D. Absolute quality conformance.
E. Benchmark quality conformance.
12. A proper role for accounting in terms of managing and
controlling quality is all of the following except:
A. Providing management with relevant financial information for
decisions related to
quality-oriented initiatives.
B. Providing management with relevant nonfinancial information for
decisions related to
quality-related initiatives.
C. Specifying quality-related goals and objectives for the
organization.
D. Indentifying operational constraints.
E. Participating in the development of Six Sigma quality-related
goals.
13. The term performance quality refers to:
A. The difference between customer expectations (for attributes,
services, functionality, etc.)
and product design.
B. The gap between product design specifications and actual
performance of the product.
C. Customer satisfaction with the total experience of a product or
service.
D. The gap between actual performance of a product and customer
expectations.
E. Costs related to meeting customer demands and expectations.
14. Which of the following statements regarding the meaning of
"quality" is true?
A. Total quality can be decomposed into two broad components:
features and performance.
B. "Features," as used in the discussion of quality, refers to actual
functionality of a product.
C. Another name for product features is performance quality.
D. Cost-of-Quality (COQ) reporting is most helpful in managing
design quality.
E. Quality of design is defined as the difference between design
specifications and customer
desires.
15. Which of the following is not a characteristic of the general
framework for managing and controlling quality depicted in Chapter
17?
A. Customer expectations.
B. Taguchi loss functions.
C. Six sigma quality expectations.
D. Diagnostic control system.
E. Standard cost variance analysis, based on flexible budgets.
16. Management accountants can help support the quality initiatives
of management by supplying decision-makers with relevant
financial information regarding these initiatives. Which of the
following statements is true regarding costs that are relevant for
decision-making
within this context?
A. Relevant costs are variable costs.
B. Relevant costs are fixed costs.
C. Relevant costs include out-of-pocket but not opportunity costs
because the latter are not
recorded by accounting systems.
D. Relevant costs are future costs that differ across the decision
alternatives.
E. Relevant costs would not include estimated losses due to
reduced market share.
17. All of the following approaches can be used to set quality-related
performance expectations except:
A. Taguchi quality loss function (QLF) analysis.
B. Six sigma.
C. Goalpost conformance.
D. Absolute conformance.
E. Ideal Performance.
18. The term six sigma refers to:
A. The control limits established in a Pareto-analysis chart.
B. A quality-performance standard that requires all products and
services to meet the target
value exactly, with no variation.
C. A business process-improvement approach that seeks to find
and eliminate causes of defects
and errors.
D. The quality expectation embodied in a robust-quality
performance standard.
E. The quality requirement specified for ISO 9000 certification.
19. Which one of the following is not a category of the Cost of
Quality (COQ) reporting model?
A. Value-stream cost.
B. External failure cost.
C. Internal failure cost.
D. Detection cost.
E. Prevention cost.
20. Costs incurred to keep quality defects from occurring are
classified as:
A. Customer-failure costs.
B. Appraisal costs.
C. Internal failure costs.
D. Prevention costs.
E. Detection costs.
21. Costs incurred in conjunction with the measurement and
analysis of data to ascertain conformity of products and services to
specification are properly classified as:
A. External failure costs.
B. Appraisal costs.
C. Internal failure costs.
D. Prevention costs.
E. Value-added costs.
22. Costs incurred as a result of poor quality found through
appraisal prior to delivery of the product to the customer are:
A. External failure costs.
B. Appraisal costs.
C. Internal failure costs.
D. Prevention costs.
E. Conformity costs.
23. In a Cost of Quality (COQ) framework, warranty costs are
considered:
A. Prevention costs.
B. Retention costs.
C. Appraisal costs.
D. Internal failure costs.
E. External failure costs.
24. In a Cost of Quality (COQ) framework, rework costs incurred
before shipment of product
are considered:
A. Prevention costs.
B. Retention costs.
C. Appraisal costs.
D. Internal failure costs.
E. External failure costs.
25. In a Cost of Quality (COQ) reporting framework, scrap costs
because of quality failure would be classified as:
A. Prevention costs.
B. Salvage costs.
C. Appraisal costs.
D. Internal failure costs.
E. External failure costs.
26. In a Cost of Quality (COQ) report, costs to acquire and install
training equipment would be classified as:
A. Prevention costs.
B. Retention costs.
C. Appraisal costs.
D. Internal failure costs.
E. External failure costs.
27. In a Cost of Quality (COQ) report, sales returns and allowances
due to quality deficiency
would be classified as:
A. Prevention costs.
B. Salvage costs.
C. Appraisal costs.
D. Internal failure costs.
E. External failure costs.
28. Test equipment maintenance costs would be classified as:
A. Prevention costs.
B. Retention costs.
C. Appraisal costs.
D. Internal failure costs.
E. External failure costs.
29. In a typical Cost of Quality (COQ) report, instructor fees for
quality training would be classified as:
A. Prevention costs.
B. Retention costs.
C. Appraisal costs.
D. Internal failure costs.
E. External failure costs.
30. For Cost of Quality (COQ) reporting purposes, contribution
margin of canceled sales orders due to quality deficiency would be
classified as:
A. Prevention costs.
B. Appraisal costs.
C. Internal failure costs.
D. External failure costs.
E. A lost sale, not a quality cost.
31. For Cost of Quality (COQ) reporting purposes, materials
inspection costs would be classified as:
A. Prevention costs.
B. Retention costs.
C. Appraisal costs.
D. Internal failure costs.
E. External failure costs.
32. Inspection costs for reworked units would be classified, for COQ
reporting purposes, as:
A. Prevention costs.
B. Retention costs.
C. Appraisal costs.
D. Internal failure costs.
E. External failure costs.
33. The "cost of conformance" includes:
A. Prevention costs and appraisal costs.
B. Internal failure costs and external failure costs.
C. Prevention costs and internal failure costs.
D. Appraisal costs and internal failure costs.
E. Prevention costs and external failure costs.
34. The "cost of nonconformance" includes:
A. Prevention costs and appraisal costs.
B. Internal failure costs and external failure costs.
C. Prevention costs and internal failure costs.
D. Appraisal costs, internal failure costs, and external failure costs.
E. Prevention costs and external failure costs.
35. All of the following are examples of internal nonfinancial quality
indicators except:
A. Number of customer complaints.
B. Process yield (i.e., ratio of good outputs to total output).
C. Productivity (i.e., ratio of acceptable output to resource inputs).
D. Plant safety record (e.g., days since last major accident).
E. Throughput.
36. Cycle time efficiency is:
A. Defined as the ratio of time spent on value-added activities to the
sum of time spent on value-added plus non-value-added activities.
B. Also referred to as process efficiency.
C. Defined as the ratio of throughput to resources used.
D. The ratio of throughput to the amount of product in backlog
status.
37. Which of the following is not an external nonfinancial measure
of quality?
A. Number of defective parts produced.
B. Number of defective units shipped to customers.
C. Number of customer complaints.
D. Delivery delays (e.g., difference between scheduled and actual
delivery date).
E. Percentage of products that experience early or excessive
failure.
38. Which of the following statements about nonfinancial indicators
of quality is not true?
A. They can be useful predictors of future financial performance.
B. Generally speaking, they are more costly to generate than
financial measures of quality.
C. They are more timely than financial data.
D. They are readily interpretable by operating personnel.
E. They help to identify precise quality-related problems.
39. A graph that depicts successive observations of an operation
taken at constant intervals is a(n):
A. Control chart.
B. Pareto diagram.
C. Histogram.
D. Ishikawa diagram.
E. Cause-and-effect diagram.
40. A graphical representation of the variation in a given set of data
is a(n):
A. Control chart.
B. Pareto diagram.
C. Histogram.
D. Ishikawa diagram.
E. Cause-and-effect diagram.
41. A graphical representation of frequency of occurrence of the
factors contributing to an indicated quality problem, ordered from
the most to the least frequent is a(n):
A. Control chart.
B. Pareto diagram.
C. Histogram.
D. Ishikawa diagram.
E. Cause-and-effect diagram.
42. A graphical method that organizes a chain of causes and effects
to sort out root causes and identify relationships between causes or
variables is a(n):
A. Control chart.
B. Pareto diagram.
C. Histogram.
D. Fish-bone (i.e., Ishikawa) diagram.
E. Brainstorm report.
43. Which of the following is a tool that indicates how frequently
each type of quality defect occurs?
A. Control chart.
B. Pareto diagram.
C. Cause and effect diagram.
D. Fishbone diagrams.
E. Ishikawa diagram.
44. A tool that identifies potential causes of failures or defects is a:
A. Control chart.
B. Pareto diagram.
C. Fishbone (i.e., Ishikawa) diagram.
D. Run chart.
E. Six Sigma report.
45. A ______________ shows trends in a quality measure over
time.
A. Pareto diagram.
B. Fishbone (i.e., Ishikawa) diagram.
C. Cost-of-Quality (COQ) report.
D. Run chart.
E. Taguchi Loss Function (TLF)
46. Which of the following statements about product quality is not
true?
A. In almost all cases detecting and fixing quality problems before
delivering to customers are far less expensive than dealing with
quality failures in the field after delivery has been made to
the customers.
B. In general, designing quality into products is far less expensive
than trying to detect quality problems during production.
C. Quality failure costs should include the possible opportunity cost
of lost future sales.
D. The most expensive cost to the firm for a quality failure in the
field is the cost of emergency service to fix the problem or replace
the product.
E. The cost of fixing quality problems after delivery to the customer
is likely to exceed both the cost of designing quality into the product
and the cost of detecting quality defects during production.
47. Within a COQ system, product liability resulting from a legal
action is a(n):
A. Internal failure cost.
B. External failure cost.
C. Legal cost.
D. Administrative expense.
E. Manufacturing overhead cost.
48. The four categories of cost associated with a COQ system are:
A. External failure, internal failure, prevention, and carrying.
B. External failure, internal failure, prevention, and appraisal.
C. External failure, internal failure, training, and appraisal.
D. Warranty, product liability, training, and appraisal.
E. Warranty, product liability, prevention, and appraisal.
49. In a COQ reporting framework, the cost of scrap, rework, and
tooling changes are categorized as a(n):
A. External failure cost.
B. Internal failure cost.
C. Manufacturing overhead cost.
D. Avoidable cost.
E. Appraisal cost.
50. All of the following costs are generally included in a Cost-ofQuality (COQ) report except:
A. Warranty claims.
B. Forgone contribution margin on lost sales.
C. The cost of sales calls.
D. Design re-engineering costs.
E. The cost of implementing a statistical process control (SPC)
system.
51. Verizon Manufacturing Company spent $400,000 in 2009 to
inspect incoming components. Of the $400,000, $240,000 is fixed
appraisal costs. The variable inspection cost is $0.20 per
component. It takes two components for each finished product.
Internal failure costs average $80 per failed unit of finished goods.
In 2009, five percent of all completed items had to be reworked.
External failure costs average $200 per failed unit. The company's
average external failures are one percent of units sold. The
company manufactures all units as ordered and carries no materials
inventories. Seeking to decrease its total cost of quality (COQ),
Verizon contracted Quality-is-Free Consultants, Inc. (QIFC) to study
ways to improve product quality and to reduce costs. Upon
completion of the study, QIFC recommended automatic inspection
equipment that requires $60,000 annual cost for training and
$150,000 for equipment rental and maintenance. The new
equipment will eliminate $40,000 of the fixed appraisal costs,
reduce the amount of unacceptable product units in the
manufacturing process by 10 percent, and cut product failures by
half. The company paid the consulting firm $100,000 in early
January 2010 for the project. Verizon expects no changes in its
operating level in the foreseeable future. The $100,000 payment to
the consulting firm for COQ reporting purposes is best classified as
a(n):
A. Prevention cost.
B. Appraisal cost.
C. Internal failure cost.
D. External failure cost.
E. Administrative cost.
52. Verizon Manufacturing Company spent $400,000 in 2009 to
inspect incoming components. Of the $400,000, $240,000 is fixed
appraisal costs. The variable inspection cost is $0.20 per
component. It takes two components for each finished product.
Internal failure costs average $80 per failed unit of finished goods.
In 2009, five percent of all completed items had to be reworked.
External failure costs average $200 per failed unit. The company's
average external failures are one percent of units sold. The
company manufactures all units as ordered and carries no materials
inventories. Seeking to decrease its total cost of quality (COQ)
Verizon contracted Quality-is-Free Consultants, Inc. (QIFC) to study
ways to improve product quality and to reduce costs. Upon
completion of the study, QIFC recommended automatic inspection
equipment that requires $60,000 annual cost for training and
$150,000 for equipment rental and maintenance. The new
equipment will eliminate $40,000 of the fixed appraisal costs,
reduce the amount of unacceptable product units in the
manufacturing process by 10 percent, and cut product failures by
half. The company paid the consulting firm $100,000 in early
January 2010 for the project. Verizon expects no changes in its
operating level in the foreseeable future. What
is the current total Cost of Quality (COQ)?
A. $400,000.
B. $1,600,000.
C. $2,400,000.
D. $2,800,000.
E. $5,200,000.
53. Verizon Manufacturing Company spent $400,000 in 2009 to
inspect incoming components. Of the $400,000, $240,000 is fixed
appraisal costs. The variable inspection cost is $0.20 per
component. It takes two components for each finished product.
Internal failure costs average $80 per failed unit of finished goods.
In 2009, five percent of all completed items had to be reworked.
External failure costs average $200 per failed unit. The company's
average external failures are one percent of units sold. The
company manufactures all units as ordered and carries no materials
inventories. Seeking to decrease its total cost of quality (COQ)
Verizon contracted Quality-is-Free Consultants, Inc. (QIFC) to study
ways to improve product quality and to reduce costs. Upon
completion of the study, QIFC recommended automatic inspection
equipment that requires $60,000 annual cost for training and
$150,000 for equipment rental and maintenance. The new
equipment will eliminate $40,000 of the fixed appraisal costs,
reduce the amount of unacceptable product units in the
manufacturing process by 10 percent, and cut product failures by
half. The company paid the consulting firm $100,000 in early
January 2010 for the project. Verizon expects no changes in its
operating level in the foreseeable future. What effect does the new
equipment have on appraisal costs?
A. $10,000 increase.
B. $20,000 decrease.
C. $170,000 increase.
D. $220,000 increase.
E. No change.
54. Verizon Manufacturing Company spent $400,000 in 2009 to
inspect incoming components.
Of the $400,000, $240,000 is fixed appraisal costs. The variable
inspection cost is $0.20 per
component. It takes two components for each finished product.
Internal failure costs average
$80 per failed unit of finished goods. In 2009, five percent of all
completed items had to be reworked. External failure costs average
$200 per failed unit. The company's average external failures are
one percent of units sold. The company manufactures all units as
ordered and carries no materials inventories. Seeking to decrease
its total cost of quality (COQ) Verizon contracted Quality-is-Free
Consultants, Inc. (QIFC) to study ways to improve product quality
and to reduce costs. Upon completion of the study, QIFC
recommended automatic inspection equipment that requires
$60,000 annual cost for training and $150,000 for equipment rental
and maintenance. The new equipment will eliminate $40,000 of the
fixed appraisal costs, reduce the amount of unacceptable product
units in the manufacturing process by 10 percent, and cut product
failures by half. The company paid the consulting firm $100,000 in
early January 2010 for the project. Verizon expects no changes in
its operating level in the foreseeable future. How much are internal
failure costs projected to change?
A. $20,000 decrease.
B. $45,000 decrease.
C. $80,000 decrease.
D. $160,000 decrease.
E. $320,000 decrease.
55. Verizon Manufacturing Company spent $400,000 in 2009 to
inspect incoming components. Of the $400,000, $240,000 is fixed
appraisal costs. The variable inspection cost is $0.20 per
component. It takes two components for each finished product.
Internal failure costs average $80 per failed unit of finished goods.
In 2009, five percent of all completed items had to be reworked.
External failure costs average $200 per failed unit. The company's
average external failures are one percent of units sold. The
company manufactures all units as ordered and carries no materials
inventories. Seeking to decrease its total cost of quality (COQ)
Verizon contracted Quality-is-Free Consultants, Inc. (QIFC) to study
ways to improve product quality and to reduce costs. Upon
completion of the study, QIFC recommended automatic inspection
equipment that requires $60,000 annual cost for training and
$150,000 for equipment rental and maintenance. The new
equipment will eliminate $40,000 of the fixed appraisal costs,
reduce the amount of unacceptable product units in the
manufacturing process by 10 percent, and cut product failures by
half. The company paid the consulting firm $100,000 in early
January 2010 for the project. Verizon expects no changes in its
operating level in the foreseeable future. How much do you expect
total external failure costs to change?
A. $10,000 increase.
B. $200,000 decrease.
C. $320,000 decrease.
D. $400,000 decrease.
E. $800,000 decreas