cost accounting test bank chapter 19

Cost Accounting, 15e (Horngren/Datar/Rajan)

Chapter 19 Balanced Scorecard: Quality and Time

Objective 19.1

1) Which of the following is true of ISO 9000?

A) It is a quality management system comprising different process improvement such as six sigma and lean manufacturing.

B) It is mandatory for all listed companies in US to get ISO certified.

C) It helps companies monitor, document, and certify the elements of their production processes that lead to quality.

D) It is a disciplined, data-driven, and statistical approach to improve the quality of products or services by identifying and removing the causes of defects. Answer: C

Diff: 1

Objective: 1

AACSB: Analytical thinking

2) Conformance quality ________.

A) is the first step of a quality management system such as ISO 9000

B) is the performance of a product or service according to design and product specifications C) is making the product according to design, engineering, and manufacturing specifications D) focuses on how a product meets customer needs and wants Answer: B

Diff: 1

Objective: 1

AACSB: Analytical thinking

3) The costs of quality ________.

A) are the costs incurred to enhance large scale production

B) are the costs incurred to prevent the production of a low quality product C) are costs incurred to company due to defective and low quality product

D) include warranty costs, costs of normal spoilage, costs of abnormal spoilage, and scrap costs Answer: B

Diff: 2

Objective: 1

AACSB: Analytical thinking

4) Costs incurred in precluding the production of products that do not conform to specifications are ________.

A) prevention costs B) appraisal costs

C) internal failure costs D) external failure costs Answer: A

Diff: 2

Objective: 1

AACSB: Analytical thinking

1

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5) Appraisal costs ________.

A) are costs incurred to prevent the production of products that do not conform to specifications

B) are costs incurred to detect which of the individual units of products do not conform to specifications C) are costs incurred on defective products before they are shipped to customers

D) are costs incurred on defective products after they have been shipped to customers Answer: B

Diff: 2

Objective: 1

AACSB: Analytical thinking

6) Costs incurred on defective products before being shipped to customers are ________. A) prevention costs B) appraisal costs

C) internal failure costs D) external failure costs Answer: C

Diff: 1

Objective: 1

AACSB: Analytical thinking

7) Design engineering is an example of ________. A) prevention costs B) appraisal costs

C) internal failure costs D) external failure costs Answer: A

Diff: 2

Objective: 1

AACSB: Analytical thinking

8) Spoilage is an example of ________. A) prevention costs B) appraisal costs

C) internal failure costs D) external failure costs Answer: C

Diff: 2

Objective: 1

AACSB: Analytical thinking

9) A liability claim is an example of ________. A) prevention costs B) appraisal costs

C) internal failure costs D) external failure costs Answer: D

Diff: 2

Objective: 1

AACSB: Application of knowledge

2

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10) Process engineering is an example of ________. A) prevention costs B) appraisal costs

C) internal failure costs D) external failure costs Answer: A

Diff: 2

Objective: 1

AACSB: Application of knowledge

11) Product testing is an example of ________. A) prevention costs B) appraisal costs

C) internal failure costs D) external failure costs Answer: B

Diff: 2

Objective: 1

AACSB: Application of knowledge

Answer the following questions using the information below:

Monticello Corp manufactures expensive tables. Its varnishing department is fully automated and

requires substantial inspection to keep the machines operating properly. An improperly varnished table is very expensive to correct. Inspection hours for the 5,000 tables varnished in September totaled 1,500 hours by 8 employees. Eight quarts of varnish were used, on average, for each table. The standard amount of varnish per table is nine quarts. The cost of inspection for September was equal to the budgeted amount of $40,000.

12) The $40,000 represents a(n) ________. A) activity cost pool

B) possible cost allocation base C) internal failure cost

D) work-in-process control Answer: A

Diff: 2

Objective: 1

AACSB: Application of knowledge

13) What is the inspection cost per unit? A) $30.40 B) $8.00 C) $9.00 D) $4,750 Answer: B

Explanation: B) Rate per unit = $40,000/5,000 units = $8.00 per unit

Diff: 3

Objective: 1

AACSB: Application of knowledge

3

Copyright ? 2015 Pearson Education, Inc.

14) Which of the following is considered a cost of quality? A) external failure costs B) opportunity costs C) sunk costs

D) contingent liabilities Answer: A

Diff: 2

Objective: 1

AACSB: Analytical thinking

15) Which of the following is an opportunity cost? A) lost sales

B) cost of production C) marginal cost D) cost of sales Answer: A

Diff: 2

Objective: 1

AACSB: Application of knowledge

16) Which of the following is a financial measure of quality? A) operating income growth

B) percentage of highly satisfied customers

C) number of defective units shipped to customers as a percentage of total units shipped D) interest costs Answer: A

Diff: 2

Objective: 1

AACSB: Application of knowledge

17) One of the most direct financial measures of quality is the costs of quality. Answer: TRUE

Diff: 1

Objective: 1

AACSB: Analytical thinking

18) ISO 9000 developed by the International Organization for Standardization is a set of five international standards for quality management. Answer: TRUE

Diff: 2

Objective: 1

AACSB: Analytical thinking

19) Quality is defined as the total features and characteristics of a product or a service made or performed according to specifications to satisfy customers at the time of purchase and during use. Answer: TRUE

Diff: 1

Objective: 1

AACSB: Analytical thinking

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20) Conformance quality is the performance of a product or service relative to its design and product specifications. Answer: TRUE

Diff: 1

Objective: 1

AACSB: Analytical thinking

21) In the banking industry, depositing a customer's check into the wrong bank account is an example of quality of design failure. Answer: FALSE

Explanation: This is an example of conformance quality failure.

Diff: 2

Objective: 1

AACSB: Analytical thinking

22) Costs of quality (COQ) reports usually consider opportunity costs. Answer: FALSE

Explanation: Costs of quality (COQ) reports usually do not consider opportunity costs.

Diff: 2

Objective: 1

AACSB: Analytical thinking

23) ISO 9000 are standards designed to encourage organizations to develop environmental management systems to reduce environmental costs. Answer: FALSE

Explanation: ISO 14000 are standards designed to encourage organizations to develop environmental management systems to reduce environmental costs.

Diff: 2

Objective: 1

AACSB: Analytical thinking

24) Costs of Quality (COQ) are classified into four categories: prevention costs, appraisal costs, opportunity costs, and sales costs. Answer: FALSE

Explanation: Costs of Quality (COQ) are classified into four categories: prevention costs, appraisal costs, internal failure costs, and external failure costs.

Diff: 2

Objective: 1

AACSB: Analytical thinking

25) Appraisal costs are costs incurred to preclude the production of products that do not conform to specifications. Answer: FALSE

Explanation: Prevention costs are costs incurred to preclude the production of products that do not conform to specifications.

Diff: 2

Objective: 1

AACSB: Analytical thinking

5

Copyright ? 2015 Pearson Education, Inc.

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