B6-1 Flashcards
Quality programs that demand compliance with the most rigorous standards apply the concept of:
a.
Goalpost conformance.
b.
Nonconforming costs.
c.
Absolute conformance.
d.
Conforming costs.
Choice “c” is correct. Absolute conformance is the most rigorous standard of quality because it represents a perfect, or ideal, level of compliance.
Choice “a” is incorrect. Goalpost conformance assumes a range of acceptable results. Because it represents achievement of compliance within an established range of tolerable error, goalpost conformance is considered less rigorous than absolute conformance.
Choice “d” is incorrect. Conforming costs are those preventative and appraisal costs invested to detect and prevent errors and do not represent quality standards.
Choice “b” is incorrect. Nonconforming costs are those internal and external failures associated with correcting quality errors associated with non-compliance and do not represent quality standards.
Companies that adopt just-in-time purchasing systems often experience:
a.
Less need for linkage with a vendor’s computerized order entry system.
b.
A reduction in the number of suppliers.
c.
A greater need for inspection of goods as the goods arrive.
d.
Fewer deliveries from suppliers.
Choice “b” is correct. Just-in-time purchasing systems usually results in a reduction in the number of suppliers. Because a company that adopts J-I-T is very dependent on supplier performance, usually fewer suppliers are used and a very close working relationship is developed with existing suppliers.
Choice “d” is incorrect. Just-in-time requires more deliveries from suppliers.
Choice “c” is incorrect. Usually there is more reliance on quality control by the supplier. Finding defective goods as they arrive is too late; a stock-out could cause production to shut down.
Choice “a” is incorrect. There is much more need for linkage with the vendor’s order entry system with J-I-T because the company is dependent on timely deliveries from the vendo
Which of the following is not an external failure cost?
a.
Tooling changes.
b.
Warranty costs.
c.
Liability claims.
d.
Lost customers.
Choice “a” is correct. Tooling changes is an example of an internal failure cost.
Choices “d”, “b”, and “c” are incorrect. Lost customers, warranty costs, and liability claims are examples of external failure costs.
Which changes in costs are most conducive to switching from a traditional inventory ordering system to a just-in-time ordering system?
~Cost per purchase order
~Inventory unit carrying costs
a.
Decreasing
Increasing
b.
Increasing
Decreasing
c.
Increasing
Increasing
d.
Decreasing
Decreasing
Choice “a” is correct. A just-in-time system is used to lower inventory levels and results in more purchase orders of fewer units each. If carrying costs are increasing, JIT would be beneficial. Costs per purchase order that are decreasing would also be conducive to JIT.
Changes in costs related to adoption of JIT represent a sophisticated version of an old theme in accounting: What happens to fixed costs as volume either increases or decreases?
Carrying costs should decrease in total; however, they will do so only as a result of ordering more frequently and maintaining fewer items in stock. Ordering more frequently will spread the costs of the purchasing department over more orders, thereby decreasing the cost per PO. Maintaining fewer items in inventory or holding items for a shorter period of time will actually increase the inventory unit carrying costs.
Choices “c”, “d”, and “b” are incorrect based on the above explanation.
Which of the following is an example of prevention costs?
a.
Tooling changes.
b.
Lost customers.
c.
Testing.
d.
Redesign of processes.
Choice “d” is correct. Redesign of processes is an example of prevention costs.
Choice “b” is incorrect. Lost customers are an example of external failure cost.
Choice “c” is incorrect. Testing is an example of appraisal costs.
Choice “a” is incorrect. Tooling changes is an example of internal failure cost.
All of the following would generally be included in a cost of quality report, except:
a.
Supplier evaluations.
b.
Warranty claims.
c.
Design engineering.
d.
Lost contribution margin.
Choice “d” is correct. Lost contribution margin (an opportunity cost) would generally not be included in a cost of quality report.
Choices “b”, “c”, and “a” are incorrect. Included in a cost of quality report would be:
b.
Warranty claims (an external failure cost).
c.
Design engineering (a prevention cost).
a.
Supplier evaluations (a prevention cost).
Rework costs should be regarded as a cost of quality in a manufacturing company’s quality control program when they are:
I.
Caused by the customer.
II.
Caused by internal failure.
a.
Neither I nor II.
b.
I only.
c.
Both I and II.
d.
II only.
Choice “d” is correct. Rework cost is a cost of quality caused by internal failure. Cost of quality includes conformance costs (the costs of prevention and appraisal activities before product shipment) and nonconformance costs (the costs of internal and external failures that require either return of the product or rework of the product).
Choice “b” is incorrect. Rework caused by a customer error is not a cost of quality.
Choices “c” and “a” are incorrect. Rework caused by internal failure is a cost of quality, but rework caused by a customer is not a cost of quality.
The cost of scrap, rework, and tooling changes in a product quality cost system are categorized as a(n):
a.
Training cost.
b.
Internal failure cost.
c.
External failure cost.
d.
Prevention cost.
Choice “b” is correct. Cost of scrap, rework, and tooling changes are a result of internal failure.
Choice “c” is incorrect. Tooling changes may occur as a result of an external failure, but scrap and rework costs will rarely result.
Choice “a” is incorrect. Training costs are a part of prevention.
Choice “d” is incorrect. Prevention aims to minimize or eliminate failures, which may result in scrap, rework and tooling costs.
Which of the following costs are inversely related to each other?
a.
Employee training costs and inspection expenses.
b.
Preventative maintenance costs and rework costs.
c.
Warranty costs and liability claims.
d.
Inspection expenses and redesign of product expenses.
Choice “b” is correct. Preventative maintenance costs are conforming costs, which are inversely related to nonconforming costs such as rework costs.
Choice “a” is incorrect. Both employee training costs and inspection expenses are conforming costs. They are not inversely related.
Choice “c” is incorrect. Both warranty costs and liability claims are nonconforming costs. They are not inversely related.
Choice “d” is incorrect. Both Inspection expenses and redesign of product expenses are conforming costs. They are not inversely related.
Which of the following techniques effectively measures improvements in product quality as a result of internal failure costs?
a.
Tracking the number of products reworked.
b.
Tracking warranty expenses over time.
c.
Inspection of in-process goods.
d.
Recording the number of products returned over time.
Choice “a” is correct. Measures of internal failure costs, a subset of nonconformance costs, include tracking the number of products reworked. Rework of products assumes errors are caught and corrected before delivery. Reduction of rework is an indication of improved efficiency and product quality.
Choice “c” is incorrect. Inspection of in-process goods is an appraisal cost, not an internal failure cost. It is a subset of conformance costs.
Choice “d” is incorrect. Product returns create nonconformance costs, but these are external failure costs, not internal failure costs.
Choice “b” is incorrect. Although warranty expense is a nonconformance cost, it is an external failure cost, not an internal failure cost.
Product-quality-related costs are part of a total quality control program. A product-quality-related cost incurred in detecting individual products that do not conform to specifications is an example of a(n):
a.
External failure cost.
b.
Appraisal cost.
c.
Prevention cost.
d.
Internal failure cost.
Choice “b” is correct. Appraisal costs would detect individual products that do not conform to specifications. Examples of appraisal costs include:
Statistical quality checks
Inspections
Testing
Maintenance of lab
Choice “c” is incorrect. Prevention costs would prevent defective products.
Choice “d” is incorrect. Internal failure costs are the costs of fixing defective products, not detecting them.
Choice “a” is incorrect. External failure costs result when defective goods are not detected and are sold to a customer.
Which of the following uses analysis of production processes to ensure that resource uses stay within target costs?
a.
Value Chain Analysis.
b.
Activity-based Costing.
c.
Kaizen.
d.
Just-in-time.
Choice “c” is correct. Kaizen, or continuous improvement, occurs at the manufacturing stage where the ongoing search for cost reductions takes the form of analysis of production processes to ensure that resource uses stay within target costs.
Choice “b” is incorrect. Activity-based costing focuses on costs for each activity in a process, but does not strive to stay within a targeted cost.
Choice “a” is incorrect. Value chain analysis is concerned with the additional value a product gains by passing through all the activities of the production chain. It is not focused on ensuring costs stay within a targeted range.
Choice “d” is incorrect. Just-in-time management emphasizes efficiency by scheduling the deployment of resources just-in-time to meet customer or production requirements.
A manufacturer that wants to improve its staging process compares its procedures against the check-in process for a major airline. Which of the following tools is the manufacturer using?
a.
Benchmarking.
b.
Economic value-added.
c.
Total quality management.
d.
Statistical process control.
Choice “a” is correct. Benchmarking is a process where a company compares itself to peers to measure performance and to understand where improvements can be made in its processes.
Choice “c” is incorrect. Total quality management (TQM) is a commitment to customer-focused performance that places an emphasis on both continuous improvement and on quality.
Choice “d” is incorrect. Statistical process control (SPC) is a means of quality control which uses statistics in order to control and monitor a process.
Choice “b” is incorrect. Economic value-added (EVA) is a measure of economic profit where a company’s income after taxes (and other adjustments) is compared to its required return.
A manufacturer that wants to improve its staging process compares its procedures against the check-in process for a major airline. Which of the following tools is the manufacturer using?
a.
Benchmarking.
b.
Economic value-added.
c.
Total quality management.
d.
Statistical process control.
Choice “a” is correct. Benchmarking is a process where a company compares itself to peers to measure performance and to understand where improvements can be made in its processes.
Choice “c” is incorrect. Total quality management (TQM) is a commitment to customer-focused performance that places an emphasis on both continuous improvement and on quality.
Choice “d” is incorrect. Statistical process control (SPC) is a means of quality control which uses statistics in order to control and monitor a process.
Choice “b” is incorrect. Economic value-added (EVA) is a measure of economic profit where a company’s income after taxes (and other adjustments) is compared to its required return.
Which of the following represents an organizational commitment to customer-focused performance that emphasizes both quality and continuous improvement?
a.
Total Quality Management.
b.
Activity-based Costing.
c.
Just-in-time.
d.
Lean Management.
Choice “a” is correct. Total quality management (TQM) represents an organizational commitment to customer-focused performance that emphasizes both quality and continuous improvement.
Choice “d” is incorrect. Lean manufacturing or lean production emphasizes the use of only those resources required to meet the requirements of customers. It is somewhat like activity-based approaches, as it seeks to invest resources only in value-added activities.
Choice “c” is incorrect. Just-in-time management anticipates achievement of efficiency by scheduling the deployment of resources just-in-time to meet customer or production requirements.
Choice “b” is incorrect. Activity-based costing focuses on the cost of activities and seeks to only invest resources in value added activity.
