A number of activities that are part of a company's quality control system are listed below: Required: 1. Classify the costs associated with each of these activities into one of the following categories: prevention cost, appraisal cost, internal failure cost, or external failure cost. Prevention Appraisal Cost Internal Failure External Failure Cost Activities Cost Cost a. Product testing b. Product recalls c. Rework labor and overhead d. Quality circles e. Downtime caused by defects f. Cost of field servicing g. Inspection of goods h. Quality engineering i Warranty repairs į Statistical process control k. Net cost of scrap L Depreciation of test equipment m. Returns and allowances arising from poor quality n. Disposal of production defects Technical support to suppliers 0. p. Systems development q Warranty replacements r. Field testing at customer site s. Quality training

A number of activities that are part of a company's quality control system are listed below: Required: 1. Classify the costs associated with each of these activities into one of the following categories: prevention cost, appraisal cost, internal failure cost, or external failure cost. Prevention Appraisal Cost Internal Failure External Failure Cost Activities Cost Cost a. Product testing b. Product recalls c. Rework labor and overhead d. Quality circles e. Downtime caused by defects f. Cost of field servicing g. Inspection of goods h. Quality engineering i Warranty repairs į Statistical process control k. Net cost of scrap L Depreciation of test equipment m. Returns and allowances arising from poor quality n. Disposal of production defects Technical support to suppliers 0. p. Systems development q Warranty replacements r. Field testing at customer site s. Quality training

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter2: Basic Cost Management Concepts

Section: Chapter Questions

Problem 31P: The actions listed next are associated with either an activity-based operational control system or a...

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The actions listed next are associated with either an activity-based operational control system or a traditional operational control system: a. Budgeted costs for the maintenance department are compared with the actual costs of the maintenance department. b. The maintenance department manager receives a bonus for beating budget. c. The costs of resources are traced to activities and then to products. d. The purchasing department is set up as a responsibility center. e. Activities are identified and listed. f. Activities are categorized as adding or not adding value to the organization. g. A standard for a products material usage cost is set and compared against the products actual materials usage cost. h. The cost of performing an activity is tracked over time. i. The distance between moves is identified as the cause of materials handling cost. j. A purchasing agent is rewarded for buying parts below the standard price set by the company. k. The cost of the materials handling activity is reduced dramatically by redesigning the plant layout. l. An investigation is undertaken to find out why the actual labor cost for the production of 1,000 units is greater than the labor standard allowed. m. The percentage of defective units is calculated and tracked over time. n. Engineering has been given the charge to find a way to reduce setup time by 75 percent. o. The manager of the receiving department lays off two receiving clerks so that the fourth-quarter budget can be met. Required: Classify the preceding actions as belonging to either an activity-based operational control system or a traditional control system. Explain why you classified each action as you did.
Which of the following is a prevention cost? a. Inspection of materials. b. Continuing supplier verification. c. Prototype inspection. d. Recalls.
Explain why the Accounting Department should be responsible for producing quality cost reports.
Lean manufacturing is characterized by all but one of the following: a. Employee empowerment b. Total quality management c. Inventories of goods awaiting further processing or consumption d. Elimination of waste
Classify the following cost drivers as structural, executional, or operational. a. Number of plants b. Number of moves c. Degree of employee involvement d. Capacity utilization e. Number of product lines f. Number of distribution channels g. Engineering hours h. Direct labor hours i. Scope j. Product configuration k. Quality management approach l. Number of receiving orders m. Number of defective units n. Employee experience o. Types of process technologies p. Number of purchase orders q. Type and efficiency of layout r. Scale s. Number of functional departments t. Number of planning meetings
The following items are associated with a traditional cost accounting information system, an activity-based cost accounting information system, or both (that is, some elements are common to the two systems): a. Usage of direct materials b. Direct materials cost assigned to products using direct tracing c. Direct labor cost incurrence d. Direct labor cost assigned to products using direct tracing e. Setup cost incurrence f. Setup cost assigned using number of setups as the activity driver g. Setup cost assigned using direct labor hours as the activity driver h. Cost accounting personnel i. Submission of a bid, using product cost plus 25 percent j. Purchasing cost incurrence k. Purchasing cost assigned to products using direct labor hours as the activity driver l. Purchasing cost assigned to products using number of orders as the activity driver m. Materials handling cost incurrence n. Materials handling cost assigned using the number of moves as the activity driver o. Materials handling cost assigned using direct labor hours as the activity driver p. Computer q. Costing out of products r. Decision to continue making a part rather than buying it s. Printer t. Customer service cost incurred u. Customer service cost assigned to products using number of complaints as the activity driver v. Report detailing individual product costs w. Commission cost x. Commission cost assigned to products using units sold as the activity driver y. Plant depreciation z. Plant depreciation assigned to products using direct labor hours Required: 1. For each cost system, classify the relevant items into one of the following categories: a. Interrelated parts b. Processes c. Objectives d. Inputs e. Outputs f. User actions 2. Explain the choices that differ between the two systems. Which system will provide the best support for the user actions? Explain. 3. Draw an operational model that illustrates each cost accounting systemwith the items that belong to the system used as examples for each component of the model. 4. Based on the operational models, comment on the relative costs and benefits of the two systems. Which system should be chosen?
Which of the following quality costs is an internal failure cost? a. Inspection of reworked units b. Lost sales because of products failing to meet specifications c. Replacing a defective product d. Training production line workers in new quality procedures
A quality control program that depends on multiple team members for removing waste and diminishing defects within products is _________________. kaizen total quality management Lean Six Sigma a balanced scorecard
Why does a company use a standard costing system? A. to identify variances from actual cost that assist them in maintaining profits B. to identify nonperformers in the workplace C. to identify what vendors are unreliable D. to identify defective materials
Which would be classified as an external failure cost on a quality cost report?a. Reentering data because of keying errorsb. Customer returns due to quality problemsc. Test and inspection of in-process goodsd. Rework labor and overhead.
Which of the following best describes the activities of the production function?a. maintenance, inventory control, and production planningb. production planning, quality control, manufac-turing, and cost accountingc. quality control, production planning, manufac-turing, and payrolld. maintenance, production planning, storage, andquality controle. manufacturing, quality control, and maintenance
Classify the following items as per Total Quality Cost: Reporting & recording of defects: Storing and disposing waste: Procedure verification:Appraisal Costs Training to employees: Warranty repairs: