Financial and Non-Financial Measures of Performance: Quality Management/Balance Scorecard/Benchmarking Flashcards
Quality engineering, quality training, quality circles, quality data gathering analysis, etc. are all examples of what type of cost?
Prevention cost. The cost of prevention is the cost of any quality activity designed to help do the job right the first time.
Testing and inspection of incoming materials and in-process goods, maintenance, depreciation, and supplies testing are all examples of what type of costs?
Appraisal cost. The cost of quality control including testing and inspection. It involves any activity designed to appraise, test, or check for defective products.
Scrap, spoilage, rework, reinspection, retesting, breakdown maintenance, testing and disposal of products are all examples of what type of costs?
Internal failure cost. The costs incurred when substandard products are produced but discovered BEFORE shipment to the customer.
Cost of field servicing and handling/responding to customer complaints, warranty repairs, and replacements, product recalls, defective product liabilities, statistical quality procedures, returns and allowance, and lost sales are all examples of what types of costs?
External failure costs. The cost incurred for products that do not meet requirements of the customer and have reached the customer. Costs AFTER items shipped.
What is a key difference between internal and external failure costs?
An internal failure cost is incurred when a product that does not conform to its design specifications is detected BEFORE shipment to customers. Costs incurred AFTER items have been shipped are external failure costs.
Why is rework an example of an internal failure cost?
The cost to rework items that do not meet design specifications is incurred BEFORE the items are shipped, and therefore, qualify as internal failure costs.
Responding to customer complaints is an example of an external failure, why?
These occur after product has been shipped
Why are statistical quality control procedures both preventative and appraisal costs?
Statistical quality control programs are designed to distinguish between in-control and out-of-control operations, and thus, to signal when to investigate the operation, determine the problem, and solve the problem. These programs are partially preventive in nature because they often provide signals of developing problems that have not yet reached the point where remedial action is cost-effective. These programs also play an appraisal role in identifying units that fail to conform to design specifications.
This methodology is the only well-recognized quality program used to minimize defects while reducing costs, what is it?
Six Sigma (Standard deviations)
This type of costing uses direct materials, direct labor, and only variable manufacturing costs for internal purposes on the income statement and treats fixed manufacturing costs as product costs, variable costing does not specifically address the issue of defective products.
Variable costing (Also known as direct costing)
This type of analysis is a common tool that is often defined as pro forma or what-if analysis, but it does not specifically address the issue of defective products.
Sensitivity analysis
This inventory system lowers the level of inventory maintained by the firm. Rather than maintain a large amount of inventory as a buffer for stockouts, this system purchases inventory only when necessary. The inventory is to arrive just in time for its use in production or sales.
Just in time inventory system (JIS)
What is the formula for inventory turnover?
COGS/Average Inventory (Beg+End/2)
What is the formula for inventory percentage?
Ending inventory balance/total assets
A JIT system lowers __________ and increases __________. (Answers: Inventory turnover and inventory percentage)
- Lowers inventory %
2. Increases inventory turnover. Meaning you’re able to move inventory in and out quickly.
Cost of inspecting products on the production line by quality inspectors. This is an example of what type of cost?
Appraisal cost
Labor cost of product designers whose task is to design components that will not break under extreme temperature conditions. This is an example of what type of cost?
Prevention cost
Cost of reworking defective parts detected by the quality assurance group. This is what type of cost?
Internal failure cost
Costs of parts return by customers. This is what type of cost?
External failure cost
Spoilage is an example of what type of cost?
Internal failure cost
Costs incurred in detecting individual units of product that do not conform to specifications are? These costs are associated with quality control and include testing and inspection.
Appraisal costs
Liability claims are examples of what costs?
External costs
Typical product-costing systems synchronize the recording of accounting-system entries with the physical sequence of purchases and production. The alternative (which is normally used in high-speed automated environments) of delaying journal entries until after the physical sequences have occurred is referred to as?
Backflush costing
Direct or variable costing is a method of inventory costing in which all variable product costs are treated as ________ costs and fixed manufacturing overhead is treated as a ______ cost.
- Inventoriable
2. Period
This costing system is usually applied to batches of similar products where each batch of product is a variation of a single design and requires a sequence of selected operations/activities. This costing system would track work in process inventory.
Operating costing
