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21 x12 ABC D Product Quality and Productivity Total Quality
Management
Fundamentals of Accounting/Business Management (University of Perpetual Help
System DALTA)
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Cost Accounting Systems
(D. Product Quality and Productivity/ Total Quality Management)
C. basis for financial reporting
D. common denominator with commercial firms
D. Product Quality and Productivity/ Total Quality Management
THEORY
Productivity Measures
1. A primary objective in measuring productivity is to improve
operations either by using fewer inputs to produce the same output,
or to produce:
A. more effectively
C. more outputs with the same
inputs
B. with fewer constraints
D. more outputs with more inputs
6. Productivity increases if:
A. less output is produced with more input.
B. the same output is produced with more input.
C. the same output is produced with fewer inputs.
D. laborers put in more effort.
2. Which of the following assesses the productivity efficiency for all
inputs combined in order to value change in productivity?
A. partial productivity measurement C. profit-linked productivity
measurement
B. profile productivity measurement D. total
productivity
measurement
7. A partial productivity measure has several limitations, including
that:
A. it ignores any productivity effect caused by other manufacturing
factor quantity changes.
B. it ignores any effect that changes in the production factor have
on productivity.
C. it ignores and effect that changes in operating characteristics of
the firm may have on the productivity of the input resource.
D. all of the above answers are correct.
3. Changes in the productivity of different types of resources are NOT
always:
A. measurable and observable
B. in the same direction or at an equal pace
C. unique and differentiated
D. simultaneous and positive
8. An advantage of partial measures of productivity is that it:
A. allows managers to focus on the use of a particular input.
B. is a complex measure that is difficult to interpret by everyone
in the organization.
C. looks at the effect of multiple inputs.
D. is a perfect measure of performance.
4. How can productivity be improved?
A. using less input to produce the same output
B. using the same input to produce more output
C. improve input trade-off efficiency by using a less costly mix of
inputs
D. all of the above
Total quality management
9. Characteristics of total quality management include:
A. focusing on customer satisfaction
B. striving on continuous improvement
C. involvement of the entire work force
D. All of the above are characteristics of TQM
5. One major problem in measuring productivity in not-for-profit
organizations is the absence of revenue as the:
A. common measure for inputs
B. common measure for outputs
10.Which of the following is not an important principle of TQM?
A. The organization should focus on improving goods from the
consumer's viewpoint
B. Everyone in the organization is required to participate
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Cost Accounting Systems
(D. Product Quality and Productivity/ Total Quality Management)
C. There should be a system of planning, controlling, and decision
making
D. Complacency is the norm
B . to permit defects as long as they do not exceed a certain level
C. to have zero defect
D. both b and c
11.Total quality management directs management attention to the
relationship between the internal production/service process and
the:
A. CEO of the competition
C. activity analysis
B. ultimate customer
D. control charts
Cost of Quality Report
17.Regardless of the differences in form and control, a common feature
that should be present in any Cost of Quality Report is that the
report:
A. promotes total quality management (TQM)
B. stratifies costs by product line
C. stratifies costs by plant
D. stratifies costs by division
12.Continuous improvement is synonymous with:
A. process benchmarking
C. management by objectives
B. total quality management
D. management by exception
Value Engineering
18.Value engineering can result in
A. product redesign
C. modifications
in
process
methods
B. changes in materials specifications
D.
all of the above
13.Which of the following describes the zero defects view?
A. it permits a predetermined level of defective units to be
produced
B. it is the level where the number of defects allowed minimizes
total cost.
C. it is the level where there are no defects.
D. all of the above.
Value chain
19.Which of the following is the correct sequence
A. design, research and development,
marketing, customer service, distribution
B. research and development, design,
marketing, distribution, customer service
C. research and development, design,
marketing, customer service, distribution
D. supply, research and development,
marketing, distribution, customer service
Statistical process control
14.A technique by which companies analyze fluctuations in a process is
called:
A. statistical process control
C. benchmarking
B. a quality audit
D. Pareto analysis
Process benchmarking
15.Focusing on how best in class companies achieve their results is
referred to as:
A. reverse engineering
C. process benchmarking
B. results benchmarking
D. competitive benchmarking
of the value chain?
production, supply,
supply,
production,
supply,
production,
design,
production,
Process value analysis
20.A tool that focuses on manufacturing processes and seeks to reduce
or optimize the activities performed within the process is
A. process value analysis
C. caveat analysis
B. re-engineering
D. benchmarking
Total quality control
16.The goal of total quality control is
A. to have less defective material than good material
21.A tool that compares how tasks are performed internally with the
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Cost Accounting Systems
(D. Product Quality and Productivity/ Total Quality Management)
best practices of industry leaders is
A. process value analysis
C. caveat analysis
B. re-engineering
D. benchmarking
Appraisal cost
28.The quality costs that are incurred to determine whether particular
units of product meet quality standards are
A. appraisal costs.
C. internal failure costs.
B. external failure costs.
D. prevention costs.
22.Attempting to determine why activities are performed and how well
they are performed is a goal of
A. process value analysis
B. both traditional and activity-based costing systems
C. computer-integrated manufacturing systems
D. just-in-time manufacturing
Internal failure cost
29.The cost of downtime on machines while rework is being performed
is a(n)
C. internal failure cost.
A. appraisal cost.
B. external failure cost.
D. prevention cost.
Process Re-engineering
23.An approach to developing new ways to perform existing activities
is called
A. process value analysis
C. caveat analysis
B. re-engineering
D. benchmarking
30.The costs of reworking defective units to make them saleable are
classified as
A. appraisal costs
C. internal failure costs
B. external failure costs
D. prevention costs
24.A danger in Process Reengineering is that:
A. non-value-9added activities may be eliminated.
B. some resources may no longer be required.
C. employee morale may suffer.
D. all of the above.
External failure cost
31.Which of the following represents an external failure cost?
A. reprocessing a defective product before shipment
B. replacing a defective product after shipment
C. hiring for quality
D. inspecting products during production
Quality Costs
Prevention cost
25.Costs incurred to improve product quality by precluding product
defects are known as:
A. internal failure costs
C. appraisal costs
B. external failure costs
D. prevention cost
26.Worker training is a(n)
A. appraisal cost.
B. external failure cost.
32.Sales returns and allowances due to a quality deficiency is an
example of:
A. external failure costs
C. internal failure costs
B. appraisal costs
D. prevention cost
Analysis
33.If a company has high failure costs, the best course of action to
reduce total quality costs would be to increase
A. prevention costs
C. the cost of non-compliance
B. the costs associated with compliance D.
appraisal costs
C. internal failure cost.
D. prevention cost.
27.An example of a control cost is:
A. supplier evaluation and selection C. cost of recalling products
B. scrap
D. all of the above
Value-added & non-value added costs
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Cost Accounting Systems
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3
Non-value added costs
34.The costs caused by inefficiency in prevention activities are:
A. nonvalued-added costs
B. value-added costs
C. neither nonvalued-added or value-added costs
D. both nonvalued-added or value-added costs
PROBLEMS
Productivity Ratios
1
. 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 productivity
ratio is:
A. P10
C. 4 motors per hour
B. P12.50
D. 2.5 motors per hour
Productivity-linked increase in gross profit
2
. At the end of 2006, Duabi Corporation implemented a new labor process and
redesigned its product with the expectation that input usage efficiency would
increase. Now, at the end of 2007, the president of the company wants an assessment
of the changes on the company's productivity. The data needed for the assessment are
as follows:
2006
2007
Output
30,000
38,000
Output prices
P12
P12
Materials (lbs.)
10,000
10,400
Materials unit price
P8
P7
Labor hours
14,000
15,000
Labor rate per hour
P6
P7
Power (KwH)
12,000
13,000
Price per KwH
P3
P4
By how much did profits change as a result of productivity changes
in materials?
A. P 13,000 decrease
C. P 23,400 decrease
B. P 15,870 increase
D. P 20,800 increase
.
At the end of 2006, Alban Company implemented a new labor process and
redesigned its product with the expectation that input usage efficiency would
increase. Now, at the end of 2007, the president of the company wants an assessment
of the changes on the company's productivity. The data needed for the assessment are
as follows:
2006
2007
Output
10,000
12,000
Output prices
P10
P10
Change in profits
P10,700
Profit-linked
measurements:
Materials
P4,600
Labor
3,250
Power
(250)
Net
P7,600
How much is the price-recovery component?
A. P 3,100
C. P10,700
B. P( 1,350)
D. P 7,600
Use the following information to answer questions 39 through
41:
Testing
P 60,000
Rework
27,500
Training
45,000
Product liability insurance
35,000
Quality planning
43,000
Customer surveys
15,000
Reinspection and retesting
17,500
Warranty repairs
50,000
Total quality costs
P293,000
Sales for 2005 were P1,000,000
4
. What is the amount of appraisal costs?
A. P60,000
C. P32,500
B. P92,500
D. P75,000
Price-recovery component
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Cost Accounting Systems
(D. Product Quality and Productivity/ Total Quality Management)
5
. What is the amount of external failure costs?
A. P35,000
C. P50,000
B. P85,000
D. P67,500
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
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1
. Answer: B
Labor productivity ratios are operational measure (100,000/20,000 = 5 motors per
hour) or financial measure [(25 * 100,000)/(20,000 * 10) = P12.50).
2
.
3
.
Answer: B
Material productivity ratio, 2006: (30,000 ÷ 10,000)
Actual materials (lbs), 2007
10,400
Required lbs. based on 2006: (38,000 ÷ 3)
12,667
Savings in number of pounds
2,267
Material productivity-linked to profit: (2,267 x P7)
Answer: A
Price recovery component:
Change in Profits:
P10,700
Deduct profit-linked productivity change
Price recovery component
P 3,100
7,600
4
.
Answer: D
Testing
P60,000
Customer surveys
15,000
Total appraisal costs P75,000
5
.
Answer: B
Product liability insuranceP35,000
Warranty repairs
50,000
Total external costs
P85,000
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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3
P15,870