Question :
20) The Custom Shirt House concerned about its declining sales, : 1217058
20) The Custom Shirt House is concerned about its declining sales, especially the reduction in the number of customers. For the last two years, its shirts have won industry awards for high quality and trend-setting styles. At the latest executive managers’ meeting, everyone was blaming everyone else for the decline. After much discussion and presenting some fact-finding information, it was determined that sales relationships were the cause of most of the problems.
Required:
What may be some of the causes and how can the causes be detected if product quality is not an issue?
21) Baby Care Products has just completed a very successful program of improving quality in its manufacturing operations. The next step is to improve the operations of its administrative functions, starting with the accounting information system. As the manager of the accounting operations, you are requested to begin a quality improvement program.
Required:
What are some possibilities of finding out about the current status of quality in the accounting system?
22) Three tools used to detect quality problems include control charts, Pareto charts, and cause and effect diagrams. Briefly explain each of these tools.
Objective 19.3
1) Regarding the means by which relevant costs and benefits are evaluated when evaluating quality improvement, the key question is:
A) which alternative solution will make the customer happiest
B) how total costs and total revenues will change under each alternative solution
C) will the employees of the company be able to implement the change
D) how long will it take for the improvement program to be fully functional
Answer the following questions using the information below:
Tri-State Manufacturing expects to spend $800,000 in 2012 in appraisal costs if it does not change its incoming materials inspection method. If it decides to implement a new receiving method, it will save $80,000 in fixed appraisal costs and variable costs of $0.40 per unit of finished product. The new method involves $120,000 in training costs and an additional $160,000 in annual equipment rental. It takes two units of material for each finished product.
Internal failure costs average $160 per failed unit of finished goods. During 2011, 5% of all completed items had to be reworked. External failure costs average $400 per failed unit. The company’s average external failures are 1% of units sold. The company carries no ending inventories, because all jobs are on a per order basis and a just-in-time inventory ordering method is used.
2) What is the net effect on appraisal costs for 2012, assuming the new receiving method is implemented and that 800,000 material units are received?
A) $120,000 increase
B) $120,000 decrease
C) $400,000 decrease
D) $400,000 increase
3) How much will internal failure costs change, assuming 800,000 units of materials are received and that the new receiving method reduces the amount of UNACCEPTABLE product units in the manufacturing process by 10%?
A) $40,000 increase
B) $50,000 decrease
C) $160,000 decrease
D) $320,000 decrease
C) Internal failure costs [(800,000/4) × 0.05 × $160$1,600,000
10% reduction from new method× 0.10
Savings$ 160,000
Answer the following questions using the information below:
LaCrosse Products has a budget of $900,000 in 2012 for prevention costs. If it decides to automate a portion of its prevention activities, it will save $80,000 in variable costs. The new method will require $40,000 in training costs and $100,000 in annual equipment costs. Management is willing to adjust the budget for an amount up to the cost of the new equipment. The budgeted production level is 150,000 units.
Appraisal costs for the year are budgeted at $600,000. The new prevention procedures will save appraisal costs of $50,000. Internal failure costs average $15 per failed unit of finished goods. The internal failure rate is expected to be 3% of all completed items. The proposed changes will cut the internal failure rate by one-third. Internal failure units are destroyed. External failure costs average $54 per failed unit. The company’s average external failures average 3% of units sold. The new proposal will reduce this rate by 50%. Assume all units produced are sold and there are no ending inventories.
4) What is the net change in the budget of prevention costs if the procedures are automated in 2012? Will management agree with the changes?
A) $60,000 decrease, yes
B) $60,000 increase, yes
C) $140,000 increase, no
D) $80,000 decrease, yes
B) New costs:Training$40,000
New equipment140,000$100,000
Savings
Variable costs (80,000)
Net increase in budget $ 60,000
