Managerial Accounting Exam 4

uses of quality cost information

1. Help managers see the financial significance of defects 2. Help managers identify the relative importance of the quality problems 3. Help managers see whether their quality costs are poorly distributed a. uses of quality cost information b. limitations of quality cost information

limitations of quality cost information

1. Simply measuring and reporting quality cost problems does not solve quality problems 2. Results usually lag behind quality improvement programs 3. The most important quality cost, lost sales, is often omitted from quality cost reports a. uses of quality cost information b. limitations of quality cost information

decrease by $6,000 (Since 60% of the fixed expenses are traceable, the company will avoid $84,000 (or $140,000 × 0.60) of fixed expenses while losing $90,000 of contribution margin, which decreases the company's net income by $6,000 (or $84,000 − $90,000))

A company has three product lines, one of which reflects the following results: Sales: $215,000 Variable expenses: $125,000 Contribution margin: $90,000 Fixed expenses: $140,000 Net loss: $(50,000) If this product line is eliminated, 60% of the fixed expenses are traceable fixed expenses, which can be eliminated, and the other 40% are common fixed expenses that cannot be avoided. If management decides to eliminate this product line, the company's net income will _____________ a. increase by $50,000 b. decrease by $90,000 c. decrease by $6,000 d. increase by $6,000

Unavoidable (The depreciation expense on previously purchased machinery that has no other use or resale value is a sunk cost that cannot be avoided regardless of the decision made)

A company with various segments (referred to as "divisions") is considering whether to drop its Orange County division. For the cost described below, indicate whether the cost is avoidable or unavoidable. Depreciation expense on previously purchased machinery that is used in the Orange County division; the machinery will have no other use or resale value if the division is dropped

Unavoidable (The general administrative expenses that are allocated to the division cannot be avoided if the division is dropped)

A company with various segments (referred to as "divisions") is considering whether to drop its Orange County division. For the cost described below, indicate whether the cost is avoidable or unavoidable. General administrative expenses allocated to the Orange County division on the basis of sales dollars

Avoidable (Rent paid for the building that houses only the division can be avoided if the division is dropped)

A company with various segments (referred to as "divisions") is considering whether to drop its Orange County division. For the cost described below, indicate whether the cost is avoidable or unavoidable. Rent paid for the building that houses only the Orange County division

Unavoidable (The rent paid to lease the private jet cannot be avoided if the division is dropped)

A company with various segments (referred to as "divisions") is considering whether to drop its Orange County division. For the cost described below, indicate whether the cost is avoidable or unavoidable. The amount of rent paid to lease a private jet for use by the company's management that is allocated to the Orange County division

Avoidable (Because the division's employees will be discharged, the wages paid to them is an avoidable cost if the division is dropped.)

A company with various segments (referred to as "divisions") is considering whether to drop its Orange County division. For the cost described below, indicate whether the cost is avoidable or unavoidable. Wages paid to the Orange County division employees who work directly for this division and will be discharged if the division is dropped

Make or buy

A decision to carry out one of the activities in the value chain internally, rather than to buy externally from a supplier is called a _____________ decision a. make or buy b. special order c. sell or process further d. keep or drop

differential cost

A future cost that differs between any two alternatives is known as a. differential cost b. differential revenue c. incremental cost d. avoidable cost

quality cost report

A report that details prevention, appraisal, internal failure, and external failure costs is called a _____________ a. risk report b. quality cost report c. control report

joint costs incurred before the split-off point (Joint costs already incurred up to the split-off point are always irrelevant in decisions concerning what to do from the split-off point forward. This is because once the split-off point is reached, the joint costs have already been incurred and nothing can be done to avoid them)

All of the following are relevant to the sell or process further decision except ____________ a. costs incurred beyond the split-off point b. revenues at the split-off point c. joint costs incurred before the split-off point d. revenues beyond the split-off point

incremental cost

An ______________ is an increase in cost between two alternatives a. differential cost b. differential revenue c. incremental cost d. avoidable cost

Financial

Based on the measure, indicate what it would most likely be classified with: Average fuel cost per sales dollar a. Learning and Growth b. Internal Business Process c. Customer d. Financial

Learning and Growth

Based on the measure, indicate what it would most likely be classified with: Average mentorship hours per employee a. Learning and Growth b. Internal Business Process c. Customer d. Financial

Learning and Growth

Based on the measure, indicate what it would most likely be classified with: Average number of workplace accidents per employee a. Learning and Growth b. Internal Business Process c. Customer d. Financial

Learning and Growth

Based on the measure, indicate what it would most likely be classified with: Average training hours per employee a. Learning and Growth b. Internal Business Process c. Customer d. Financial

Customer

Based on the measure, indicate what it would most likely be classified with: Customer defection rate a. Learning and Growth b. Internal Business Process c. Customer d. Financial

Internal Business Process

Based on the measure, indicate what it would most likely be classified with: Delivery cycle time a. Learning and Growth b. Internal Business Process c. Customer d. Financial

Learning and Growth

Based on the measure, indicate what it would most likely be classified with: Employee absenteeism rate a. Learning and Growth b. Internal Business Process c. Customer d. Financial

Internal Business Process

Based on the measure, indicate what it would most likely be classified with: Lost sales due to out-of-stock merchandies a. Learning and Growth b. Internal Business Process c. Customer d. Financial

Customer

Based on the measure, indicate what it would most likely be classified with: Number of customer referrals a. Learning and Growth b. Internal Business Process c. Customer d. Financial

Learning and Growth

Based on the measure, indicate what it would most likely be classified with: Number of job applicants from under-represented groups a. Learning and Growth b. Internal Business Process c. Customer d. Financial

Internal Business Process

Based on the measure, indicate what it would most likely be classified with: Number of modular product designs a. Learning and Growth b. Internal Business Process c. Customer d. Financial

Customer

Based on the measure, indicate what it would most likely be classified with: Percent of customers that strongly agree with the statement "Your company has a superior commitment to product safety" a. Learning and Growth b. Internal Business Process c. Customer d. Financial

Customer

Based on the measure, indicate what it would most likely be classified with: Percent of customers that strongly agree with the statement "Your employees treated me courteously" a. Learning and Growth b. Internal Business Process c. Customer d. Financial

Internal Business Process

Based on the measure, indicate what it would most likely be classified with: Pounds of waste produced a. Learning and Growth b. Internal Business Process c. Customer d. Financial

Financial

Based on the measure, indicate what it would most likely be classified with: Residual income a. Learning and Growth b. Internal Business Process c. Customer d. Financial

Financial

Based on the measure, indicate what it would most likely be classified with: Return on assets a. Learning and Growth b. Internal Business Process c. Customer d. Financial

Financial

Based on the measure, indicate what it would most likely be classified with: Sales from new customer a. Learning and Growth b. Internal Business Process c. Customer d. Financial

external failure cost

Classify the cost associated with each activity to one of the following categories: Cost of field servicing a. Prevention Cost b. Appraisal Cost c. Internal Failure Cost d. External Failure Cost

Appraisal cost

Classify the cost associated with each activity to one of the following categories: Depreciation of test equipment a. Prevention Cost b. Appraisal Cost c. Internal Failure Cost d. External Failure Cost

Internal failure cost

Classify the cost associated with each activity to one of the following categories: Disposal of production defects a. Prevention Cost b. Appraisal Cost c. Internal Failure Cost d. External Failure Cost

Internal failure cost

Classify the cost associated with each activity to one of the following categories: Downtime caused by defects a. Prevention Cost b. Appraisal Cost c. Internal Failure Cost d. External Failure Cost

Appraisal cost

Classify the cost associated with each activity to one of the following categories: Field testing at customer site a. Prevention Cost b. Appraisal Cost c. Internal Failure Cost d. External Failure Cost

Appraisal cost

Classify the cost associated with each activity to one of the following categories: Inspection of goods a. Prevention Cost b. Appraisal Cost c. Internal Failure Cost d. External Failure Cost

Internal failure cost

Classify the cost associated with each activity to one of the following categories: Net cost of scrap a. Prevention Cost b. Appraisal Cost c. Internal Failure Cost d. External Failure Cost

External failure cost

Classify the cost associated with each activity to one of the following categories: Product recalls a. Prevention Cost b. Appraisal Cost c. Internal Failure Cost d. External Failure Cost

Appraisal Cost

Classify the cost associated with each activity to one of the following categories: Product testing a. Prevention Cost b. Appraisal Cost c. Internal Failure Cost d. External Failure Cost

Prevention Cost

Classify the cost associated with each activity to one of the following categories: Quality circles a. Prevention Cost b. Appraisal Cost c. Internal Failure Cost d. External Failure Cost

Prevention cost

Classify the cost associated with each activity to one of the following categories: Quality engineering a. Prevention Cost b. Appraisal Cost c. Internal Failure Cost d. External Failure Cost

Prevention cost

Classify the cost associated with each activity to one of the following categories: Quality training a. Prevention Cost b. Appraisal Cost c. Internal Failure Cost d. External Failure Cost

External failure cost

Classify the cost associated with each activity to one of the following categories: Returns and allowances arising from poor quality a. Prevention Cost b. Appraisal Cost c. Internal Failure Cost d. External Failure Cost

Internal failure cost

Classify the cost associated with each activity to one of the following categories: Rework labor and overhead a. Prevention Cost b. Appraisal Cost c. Internal Failure Cost d. External Failure Cost

Prevention cost

Classify the cost associated with each activity to one of the following categories: Statistical process control a. Prevention Cost b. Appraisal Cost c. Internal Failure Cost d. External Failure Cost

Prevention cost

Classify the cost associated with each activity to one of the following categories: Systems development a. Prevention Cost b. Appraisal Cost c. Internal Failure Cost d. External Failure Cost

Prevention cost

Classify the cost associated with each activity to one of the following categories: Technical support to suppliers a. Prevention Cost b. Appraisal Cost c. Internal Failure Cost d. External Failure Cost

External failure cost

Classify the cost associated with each activity to one of the following categories: Warranty repairs a. Prevention Cost b. Appraisal Cost c. Internal Failure Cost d. External Failure Cost

External failure cost

Classify the cost associated with each activity to one of the following categories: Warranty replacements a. Prevention Cost b. Appraisal Cost c. Internal Failure Cost d. External Failure Cost

quality costs

Cost incurred to prevent defects or that result from defects in products are known as __________________. Most companies are working hard to reduce this

differential revenue

Future revenue that differs between any two alternatives is known as a. differential cost b. differential revenue c. incremental cost d. avoidable cost

relevant cost (the finder's fee is incurred only if the private jet is bought. because this cost varies between alternatives, is is a relevant cost)

High Roller Incorporated is trying to decide whether to buy a private jet or to lease one. The finder's fee is incurred only if the private jet is bought. The finder's fee is what type of cost for this decision? a. sunk cost b. unavoidable cost c. relevant cost d. irrelevant cost

external failure costs

Incurred as a result of defective products being delivered to customers a. prevention costs b. appraisal costs c. internal failure costs d. external failure costs

internal failure costs

Incurred as a result of identifying defects before they are shipped a. prevention costs b. appraisal costs c. internal failure costs d. external failure costs

appraisal costs

Incurred during quality control processes to ensure compliance with quality standards a. prevention costs b. appraisal costs c. internal failure costs d. external failure costs

0.76 (Efficiency rate = Actual run rate ÷ Ideal run rateEfficiency rate = 9.12 units per minute ÷ 12 units per minute Efficiency rate = 0.76)

Jefferson Company's demand for its only product exceeds its manufacturing capacity. The company provided the following information for the machine whose limited capacity is prohibiting the company from producing and selling additional units. Actual run time this week: 6,478 minutes Machine time available per week: 8,200 minutes Actual run rate this week: 9.12 units per minute Ideal run rate: 12.00 units per minute Defect-free output this week: 8,662 units Total output this week (including defects): 12,200 units Compute the efficiency rate (round to 2 decimal places)

0.426 (OEE = Utilization rate × Efficiency rate × Quality rateOEE = 0.79 × 0.76 × 0.71 OEE = 0.426 (rounded))

Jefferson Company's demand for its only product exceeds its manufacturing capacity. The company provided the following information for the machine whose limited capacity is prohibiting the company from producing and selling additional units. Actual run time this week: 6,478 minutes Machine time available per week: 8,200 minutes Actual run rate this week: 9.12 units per minute Ideal run rate: 12.00 units per minute Defect-free output this week: 8,662 units Total output this week (including defects): 12,200 units Compute the overall equipment effectiveness (OEE) (do not round intermediate calculations. round final answer to 3 decimal places)

0.71 (Quality rate = Defect-free output ÷ Total outputQuality rate = 8,662 units ÷ 12,200 units Quality rate = 0.71)

Jefferson Company's demand for its only product exceeds its manufacturing capacity. The company provided the following information for the machine whose limited capacity is prohibiting the company from producing and selling additional units. Actual run time this week: 6,478 minutes Machine time available per week: 8,200 minutes Actual run rate this week: 9.12 units per minute Ideal run rate: 12.00 units per minute Defect-free output this week: 8,662 units Total output this week (including defects): 12,200 units Compute the quality rate (round to 2 decimal places)

0.79 (Utilization rate = Actual run time ÷ Machine time availableUtilization rate = 6,478 minutes ÷ 8,200 minutes Utilization rate = 0.79)

Jefferson Company's demand for its only product exceeds its manufacturing capacity. The company provided the following information for the machine whose limited capacity is prohibiting the company from producing and selling additional units. Actual run time this week: 6,478 minutes Machine time available per week: 8,200 minutes Actual run rate this week: 9.12 units per minute Ideal run rate: 12.00 units per minute Defect-free output this week: 8,662 units Total output this week (including defects): 12,200 units Compute the utilization rate (round to 2 decimal places)

23.3 days (Delivery cycle time = Wait time + Throughput time= 15.3 days + 8.0 days= 23.3 days)

Management of Mittel Company would like to reduce the amount of time between when a customer places an order and when the order is shipped. For the first quarter of operations during the current yet the follow data was reported: Inspection time: 0.3 days Wait time (from order to start of production): 15.3 days Process time: 3.2 days Move time: 0.7 days Queue time: 3.8 days Compute the delivery cycle time (Round your immediate calculations and final answer to 1 decimal place)

40% (MCE = Process time (AKA Value-added-time) / Throughput time = 3.2 days / 8.0 days = 0.40)

Management of Mittel Company would like to reduce the amount of time between when a customer places an order and when the order is shipped. For the first quarter of operations during the current yet the follow data was reported: Inspection time: 0.3 days Wait time (from order to start of production): 15.3 days Process time: 3.2 days Move time: 0.7 days Queue time: 3.8 days Compute the manufacturing cycle efficiency (MCE) for the quarter (Round your percentage answer to nearest whole percent)

8.0 days (Throughput time = Process time + Inspection time + Move time + Queue time= 3.2 days + 0.3 days + 0.7 days + 3.8 days= 8.0 days)

Management of Mittel Company would like to reduce the amount of time between when a customer places an order and when the order is shipped. For the first quarter of operations during the current yet the follow data was reported: Inspection time: 0.3 days Wait time (from order to start of production): 15.3 days Process time: 3.2 days Move time: 0.7 days Queue time: 3.8 days Compute the throughput time (Round answer to 1 decimal place)

76.2% (New manufacturing cycle efficiency = process time / (process time + move time + inspection time) = 3.2 / (3.2 + 0.7 + 0.3) = 76.2%)

Management of Mittel Company would like to reduce the amount of time between when a customer places an order and when the order is shipped. For the first quarter of operations during the current yet the follow data was reported: Inspection time: 0.3 days Wait time (from order to start of production): 15.3 days Process time: 3.2 days Move time: 0.7 days Queue time: 3.8 days If by using Lean Production all queue time during production is eliminated, what will be the new MCE? (do not round intermediate calculations. Round your percentage answer to 1 decimal place)

60% (If the MCE is 40%, then 40% of the throughput time was spent in value-added activities. Consequently, the other 60% of the throughput time was spent in non-value-added activities. OR Non-value-added = (throughput time - process time) / throughput time = (8-3.2)/8=60%)

Management of Mittel Company would like to reduce the amount of time between when a customer places an order and when the order is shipped. For the first quarter of operations during the current yet the follow data was reported: Inspection time: 0.3 days Wait time (from order to start of production): 15.3 days Process time: 3.2 days Move time: 0.7 days Queue time: 3.8 days What percentage of the throughput time was spent in non-value-added activities (Round your percentage answer to nearest whole percent)

$120,000 (Total relevant cost of producing the units internally will be the costs that can be avoided by opting to purchase the products externally. Nakatomi can avoid the variable costs of $12 per unit ($120,000 for 10,000 units))

Nakatomi Corporation produces 10,000 units of Product A at a cost of $20 per unit. A detailed breakdown of the cost is below: Variable costs: $12 per unit Allocated manufacturing overhead costs: $3 per unit Allocated general administrative costs: $5 per unit Total: $20 per unit Outside supplier's offer: $17 per unit What are the total relevant cost of producing the units internally? a. $150,000 b. $120,000 c. $200,000 d. $170,000

0.40 (First find throughput time = process time (6) + inspection time (0.6) + move time (0.4) + queue time (8) = 15 days Then, find MCE = process time (AKA value-added time) / throughput time = 6/15 = 0.40)

Ortell Corporation is interested in cutting the amount of time between when a customer places an order and when the order is completed. Details for the first quarter of the year are provided here Wait time: 12 days Inspection time: 0.6 days Process time: 6 days Move time: 0.4 days Queue time: 8 days What is the manufacturing cycle efficiency (MCE)? a. 0.60 b. 4.00 c. 0.40 d. 0.30

$42 (Total incremental cost = 30 + 5 + (10 x 70%) = $42)

Prairie, Incorporated produces a single product. It has an annual capacity of 10,000 units, but currently uses only 80% of it. Each unit is sold for $50 and requires direct material worth $30 and direct labor worth $5. Manufacturing overhead cost is $10 per unit of which 70% is variable. What is Prairie's total incremental cost incurred to produce each unit? a. $30 b. $42 c. $35 d. $45

600 units (Labor time is the constrained resource. The contribution margin per unit of constrained resource for product B is $3 per minute (or $6 ÷ 2 minutes). Similarly, the contribution margin per unit of constrained resource for product A is $2 per minute (or $8 ÷ 4 minutes). Since product B has a higher contribution margin per unit of constrained resource than product A, the company should produce all the units it can sell of product B before producing units of product A. Since the company has 3,000 minutes of labor time available, the first 1,200 minutes (or the demand for product B of 600 units × 2 minutes per unit) should be used to produce product B. Note: The remaining 1,800 minutes (or 3,000 available minutes − the 1,200 minutes used to produce product B) can then be used to produce 450 units of product A (or 1,800 minutes ÷ 4 minutes per unit))

Roberto, Incorporated manufactures products A and B. Both products have a contribution margin ratio of 40%. Product A: Selling price per unit: $20 Variable cost per unit: $12 Contribution margin per unit: $8 Labor time: 4 minutes Product B: Selling price per unit: $15 Variable cost per unit: $9 Contribution margin per unit: $6 Labor time: 2 minutes Assume that labor time is the constrained resource and only a total of 3,000 minutes is available. Product A has a total demand of 500 units and product B has a total demand of 600 units. Considering the constraint, how many units of product B should be produced to maximize profits? a. 500 units b. 450 units c. 550 units d. 600 units

$3 per minute (The contribution margin per unit of product B is $6 and the total labor time required to produce each unit is 2 minutes. Therefore, the contribution margin per unit of constrained resource for product B is $3 per minute (or $6 ÷ 2 minutes))

Roberto, Incorporated manufactures products A and B. Both products have a contribution margin ratio of 40%. What is the contribution margin per unit of the constrained resource for product B, if labor time is the constrained resource? Product B: Selling price per unit: $15 Variable cost per unit: $9 Contribution margin per unit: $6 Labor time: 2 minutes a. $2 per minute b. $3 per minute c. $6 per minute d. $8 per minute

$3,000 profit (Incremental revenues = Sales value after further processing of $25,000 − Sales value at split-off point of $15,000 = $10,000 Net profit if the product is processed further = Incremental revenues of $10,000 − Incremental costs of $7,000 = $3,000)

Superware, Incorporated produces multiple products out of a common input. Geratin is one such product, which has a sales value of $15,000 at the split-off point. Joint costs allocated to Geratin are $12,000. Sales value of Geratin increases to $25,000 after further processing, adn this processing will cost $7,000. What is the net profit or loss if Superware processes the product further? a. ($3,000) loss b. $3,000 profit c. $20,000 profit d. $18,000 profit

prevention costs

Support activities whose purpose is to reduce the number of defects a. prevention costs b. appraisal costs c. internal failure costs d. external failure costs

True

T/F: The key to effective decision making is differential analysis -- focusing on the future costs and benefits that differ between the alternatives. Everything else is irrelevant and should be ignored

vertical integration

The involvement by a company in more than one of the activities in the entire value chain from development through production, distribution, sales, and after-sales services called ____________

opportunity cost (Opportunity cost is the potential benefit that is given up when one alternative is selected over another)

The potential benefit that is given up when one alternative is selected over another is called _______________ a. relevant cost b. avoidable cost c. differential cost d. opportunity cost

12 days (Throughput time = Process time + inspection time + move time + queue time 5 days + 0.6 days + 0.4 days + 6 days = 12 days)

Vertis Corporation is interested in cutting the amount of time between when a customer places an order and when the order is completed. Details from the first quarter of the year are provided here. Wait time: 14 days Inspection time: 0.6 days Process time: 5 days Move time: 0.4 days Queue time: 6 days What is the throughput time? a. 26 days b. 6 days c. 12 days d. 5 days

Whether the differential benefits exceed the differential costs (in business decisions, a financial advantage exists if pursing an alternative passes the cost/benefit test. The financial advantage exists if the differential benefits (future cash inflows) exceeds its differential costs (its future cash outflows))

What of the following forms the basis for a financial advantage when making a business decision? a. whether opportunity costs are present b. whether irrelevant costs and benefits arise c. whether the differential benefits exceed the differential costs d. whether alternatives exist

tightening the constraint (When a manager increases the capacity of the bottleneck, it is called relaxing (or elevating) the constraint. The capacity of a bottleneck can be effectively increased in a number of ways, including, but not limited to, the following: investing to improve the capacity of the bottleneck and reducing the number of defective units produced through the bottleneck)

When a company cannot fully satisfy demand because of a constraint, which of the following describes an action that should NOT be taken? a. relaxing the constraint b. tightening the constraint c. investing to improve the capacity of the bottleneck d. reducing the number of defective units produced through the bottleneck

volume trade-off decisions

When a company does not have enough capacity to produce all of the products and sales volume demanded by their customers, this leads to _____________ a. keep or drop decisions b. volume trade-off decisions c. sell or process further decisions d. make or buy decisiosn

Improving business processes is necessary to improve customer satisfaction, The company's employees need to continuously learn in order to improve internal business processes

Which of the following statements about the categories of measures commonly included in a balance scorecard are correct? Choose all that apply. a. Financial results must be improved in order to improve customer satisfaction b. Improving business processes is necessary to improve customer satisfaction c. Internal business processes need to be improved before the company's employees are able to learn and grow d. The company's employees need to continuously learn in order to improve internal business processes

it should include only the measurable financial ratios (in a balanced scorecard, financial performance measures are integrated with non-financial measures and the main emphasis is on continuous improvement)

Which of the following statements about the construction of a balanced scorecard is NOT true? a. each measure should contain a parenthetical + or - to indicate if the goal is to increase or decrease the measure b. it should be constructed such that it continually tests the theories underlying management's strategy c. it should include only the measurable financial ratios d. it should be constructed such that is lays out a theory of how the company can take concrete actions to attain its desired outcomes

considering only the relevant costs gives results a different answer than that obtained when all costs are considered (One approach considers only the relevant costs, while the other approach considers all costs, both those that were relevant and those that were not. We obtain the same answer using both the approaches. Mixing irrelevant costs with relevant costs might cause confusion and distract attention from critical information; as a result, considering only relevant costs is the better approach.)

Which of the following statements about using different approaches to analyze alternatives is NOT true? a. considering only the relevant costs gives results a different answer than that obtained when all costs are considered b. differential analysis focuses on the future costs and benefits that differ between any two alternatives c. mixing irrelevant costs with relevant costs may cause confusion and distract attention from the information that is critical d. costs and revenues that do not differ between alternatives are irrelevant to decision making

avoiding minor work stoppages (the efficiency rate is maximized by avoiding minor work stoppages and by retaining and properly training operators to run and regularly maintain the machine)

Which of the following would increase the efficiency rate? a. avoiding machine breakdowns b. avoiding minor work stoppages c. reducing the number of defective units produced as a percent of the total output d. minimizing average setup times

internal and external failure costs

Which type of costs are incurred because poor quality of conformance has occurred? a. appraisal costs b. prevention costs c. internal and external failure costs

prevention costs and appraisal costs

Which type of costs are incurred in an effort to keep poor quality of conformance from occurring? a. internal failure costs b. prevention costs and appraisal costs c. external failure costs

prevention

________________ costs are incurred to keep defects from occurring a. prevention b. internal failure c. appraisal d. external failure

product recalls (external failure costs result when a defective product is delivered to a customer. these include warranty repairs and replacements, product recalls, liability arising from legal action against a company, and lost sales arising from a reputation for poor quality)

________________ is an example of an external failure cost a. product recalls b. net cost of spoilage c. disposal of defective products d. downtime caused by quality problems

appraisal costs (aka inspection costs, are incurred to identify defective products before the products are shipped to customers)

_________________ are sometimes called inspection costs a. prevention costs b. internal failure costs c. appraisal costs d. external failure costs

conformance quality

_________________ is a measure of whether or not a product meets its design specifications and is free of defects that degrade its appearance or diminish its performance a. product quality b. design quality c. conformance quality

net cost of scrap (internal failure costs result from identifying defects before they are shipped to customers. these costs include scrap, rejected products, reworking of defective units, and downtime caused by quality problems)

_________________ is an example of an internal failure cost a. net cost of scrap b. cost of warranty repairs c. liability arising from defective products d. maintenance of test equipment

delivery cycle time

__________________ is the elapsed time from receipt of a customer order to when the completed goods are shipped to the customer a. throughput time b. process time c. manufacturing cycle efficiency d. delivery cycle time

avoidable cost

an ___________ is a cost that can be eliminated by choosing one alternative over another a. differential cost b. differential revenue c. incremental cost d. avoidable cost

sunk costs

costs that have been incurred and cannot be eliminated regardless of the alternative chosen are ____________ a. sunk costs b. unavoidable costs c. relevant costs d. irrelevant costs

throughput time (manufacturing cycle time)

process time + inspection time + move time + queue time a. process time b. inspection time c. move time d. queue time e. throughput time f. delivery cycle time g. manufacturing cycle efficiency

manufacturing cycle efficiency

process time divided by throughput time. Relates the value-added time to the throughput time a. process time b. inspection time c. move time d. queue time e. throughput time f. delivery cycle time g. manufacturing cycle efficiency

queue time

the amount of time a product spends waiting to be worked on, moved, inspected, or shipped a. process time b. inspection time c. move time d. queue time e. throughput time f. delivery cycle time g. manufacturing cycle efficiency

inspection time

the amount of time spent ensuring that the product is defective a. process time b. inspection time c. move time d. queue time e. throughput time f. delivery cycle time g. manufacturing cycle efficiency

process time

the amount of time work is actually done on the product a. process time b. inspection time c. move time d. queue time e. throughput time f. delivery cycle time g. manufacturing cycle efficiency

move time

the time required to move materials or partially completed products from workstation to workstation a. process time b. inspection time c. move time d. queue time e. throughput time f. delivery cycle time g. manufacturing cycle efficiency

delivery cycle time

wait time + throughput time a. process time b. inspection time c. move time d. queue time e. throughput time f. delivery cycle time g. manufacturing cycle efficiency

special order

which of the following types of decisions involves deciding whether to accept or reject an order that is outside the scope of normal sales? a. make or buy b. special order c. sell or process further d. keep or drop