Question : SHORT ANSWER. Write the word or phrase that best completes each : 1196151

 

SHORT ANSWER.

Write the word or phrase that best completes each statement or answers the question. 71)

Discuss how a manufacturer of personal computers such as Dell Computer can

benefit from the introduction of a quality improvement program.

 71)

_____________

72)

Nidek manufactures sportswear. Classify each of the following quality costs as prevention, appraisal, internal failure or external failure.

 

a.Disposal of spoiled work in process

b.Downtime due to quality problems

c.Expediting work to meet delivery schedule

d.Field testing

e.Maintaining a complaint department

f.Product liability

g.Quality training

h.Reinspection

i.Rework direct manufacturing labour and overhead

j.Scrap

k.Testing and inspecting of machinery

l.Testing and inspecting of direct materials

m.Utilities in inspection area of plant

n.Warranty repairs 72)

_____________

73)

The two basic aspects of quality are quality of design and conformance quality. Define and give an

example of each.

 73)

_____________

74)

The Door Company manufactures doors. Classify each of the following quality costs as prevention costs,

appraisal costs, internal failure costs, or external failure costs.

 

a.Retesting of reworked products

b.Downtime due to quality problems

c.Analysis of the cause of defects in production

d.Depreciation of test equipment

e.Warranty repairs

f.Lost sales arising from a reputation for poor quality

g.Quality circles

h.Rework direct manufacturing labor and overhead

i.Net cost of spoilage

j.Technical support provided to suppliers

k.Audits of the effectiveness of the quality system

l.Plant utilities in the inspection area

m.Reentering data because of keypunch errors

 

_______________Prevention costs

 

_______________Appraisal costs

 

_______________Internal failure costs

 

_______________External failure costs

 74)

_____________

75)

Cari and Jereme just bought a bed and breakfast inn at a very attractive price. The business had been doing poorly. Before they reopened the inn for business, they attended a seminar on operating a high quality business. Now that they are ready to open the inn they need some advice on quality costs and management.

 

Required:

 

Identify four categories of quality costs. In addition, identify three items that would be classified in each of the categories. 75)

_____________

76)

Define cost of quality (COQ), list the four categories, and provide an example of each. 76)

_____________

77)

Discuss the methods used to identify quality problems. 77)

_____________

78)

Design Products is committed to its quality program. It works with all areas of the company to establish sound quality programs within reasonable budget guidelines. For 20×1 it has budgeted $1,000,000 for prevention costs and $800,000 for appraisal costs. Internal failure has a budget of $100 per failed item, while external failure has a total budget of $600,000.

 

Product Testing has proposed to management a change in the 20×1 budget for a new method of testing products. If management decides to implement the new method, $2 per unit of appraisal costs will be saved, up to a level of 200,000 tests. No additional savings are incurred past the 200,000 level. The new method involves $110,000 in training costs and $60,000 in yearly testing supplies.

 

Traditionally, 3 percent of all completed items have to be reworked. External failure costs average $120 per failed unit. The company’s average external failures are 1 percent of units sold. The company carries no ending inventories.

 

Required:

 

a.What is the adjusted budget for appraisal costs assuming the new method is implemented and 800,000 units are tested during the manufacturing process during 20×1?

b.How much does internal failure costs change assuming 600,000 units are tested under the new method and it reduces the amount of unacceptable units in the manufacturing process by 40 percent?

c.What would be the change in the external failure budget assuming external failures are reduced by 60 percent, assuming the same facts as in part (b)? 78)

_____________

79)

Compare financial and nonfinancial performance, and explain why planning and control systems should consider both. 79)

_____________

80)

A corporation can measure its quality performance by using financial or nonfinancial measures of quality. Discuss the merits of each method and whether the use of one precludes the use of the other. 80)

_____________

71)

A quality improvement program for Dell would result in substantial savings in operating costs and higher revenues. Operating costs would be reduced since fewer funds would be spent checking output and correcting defective products. Higher revenues would result since existing customers would likely increase their orders and the higher quality output would attract additional customers. In addition, a number of competitors will likely be implementing quality programs. Dell must meet the competition to succeed.

 

 

72)

a. Internal failureh. Internal failure

b. Internal failurei. Internal failure

c. Internal failurej. Internal failure

d. Appraisalk. Prevention

e. External failurel. Prevention

f. External failurem. Appraisal

g. Preventionn. External failure 73)

Quality of design measures how closely the characteristics of products or services meet the needs and wants of customers. For example, customers of photocopying machines want copiers that combine copying, faxing, scanning, and electronic printing. If the photocopy machines fail to meet these customer needs, sales will fall.

 

Conformance quality refers to the performance of a product or service according to design and product specifications. For example, if a photocopy machine constantly has paper jams or breaks down, it fails to satisfy conformance quality.

74)

g, j____________Prevention costs

 

d, l, k__________Appraisal costs

 

a, b, c, h, i, m____Internal failure costs

 

e, f, m__________External failure costs

75)

Prevention:

Hiring employees with good references.

Training of owners and employees.

Good security.

Good reservation system.

Purchasing quality furniture.

 

Appraisal:

Verifying accuracy of reservation and registration procedures.

Inspecting rooms, facilities, building and grounds regularly.

Observing activities of employees.

Testing furniture and fixtures.

Taste testing food.

 

Internal failure:

Recleaning rooms and facilities.

Restocking rooms with linens, glasses, etc.

Out of stock supplies.

Reinspection.

Failure to bill on a timely basis.

 

External failure:

Responding to complaints about rooms and food.

Responding to complaints about reservations.

Emergency cleaning of rooms when not ready on time.

Customer refunds because of unsatisfactory conditions.

Opportunity cost of lost revenue resulting from unhappy customers. 76)

The cost of quality (COQ) are costs incurred to prevent or rectify the production of a low-quality product. These costs focus on conformance quality and are incurred in all areas of the value chain. They are broken into four categories:

 

1.Prevention costs: costs incurred in precluding the production of products that do not conform to specifications.

 

2.Appraisal costs: costs incurred in detecting which of the individual units of products do not conform to specifications.

 

3.Internal failure costs: costs incurred when a nonconforming product is detected before it is shipped to customers.

 

4.External failure costs: costs incurred when a nonconforming product is detected after it is shipped to customers. 77)

1.A control chart is a graph of a series of successive observations of a particular step, procedure, or operation taken at regular intervals of time.

 

2.A Pareto diagram indicates how frequently each type of failure (defect) occurs.

 

3.A cause-and-effect diagram helps to identify potential causes of failures or defects. 78)

a.

Current budget$800,000

Additions: Training$110,000

Supplies

60,000170,000

Savings: 200,000 x $2(400,000)

Adjusted budget$570,000

 

b.

Current budget $100 x 0.03 x 600,000 =$1,800,000

Savings rate x

 

 

0.40

 

Net savings (reduction in internal failure costs)$ 720,000

 

c.

Current budget $120 x 0.01 x 600,000 =$720,000

Savings rate x

 

 

0.60

 

Net savings (reduction in external failure budget)$432,000

79)

Some objectives of responsibility centres are financial in nature, such as operations budgets, profit targets and required return on investment. Other objectives are nonfinancial, such as quality, productivity and customer satisfaction. A well-designed management control system functions alike for both financial and nonfinancial objectives to develop and report measures of performance.

Financial performance measures are more readily available than nonfinancial measures, but are no more important to the overall goals of the organization. By considering nonfinancial measures, the organization can improve operational control. Superior financial performance usually follows from superior nonfinancial performance.

80)

Financial measures of quality are quantifiable. The business can calculate the costs of setting up quality control systems, the costs of noncompliance with quality in terms of the internal and external costs (rework, warranty costs, etc.), and estimate the revenues lost as a result of quality problems.

 

Nonfinancial measures of quality are useful indicators of future long-run performance. They are helpful in revealing future needs and preferences of customers and in indicating the specific areas that need improvement.

 

The use of one measure does not preclude the use of the other. Financial measures tend to be short term in nature (what is happening now). Nonfinancial measures tend to be long term and are useful in terms of estimating trends.

 

Financial performance measures are more readily available than nonfinancial measures, but they are no more important to the overall goals of the organization. By considering nonfinancial measures, the organization can improve operational control. Superior financial performance usually follows from superior nonfinancial performance.