Posted: May 3rd, 2016

18. For the current year, prevention costs are what percentage of sales?

7. _______________ focuses on non-value-added activities.
a. Activity sharing
b. Activity elimination
c. Activity selection
d. Activity reduction

8.14. In the Balanced Scorecard system, core objectives and measures
a. are common across all organizations.
b. are common across all scorecard perspectives.
c. are common across departments.
d. None of these are true.

At the beginning of 2010, Peters Company installed a JIT purchasing and manufacturing system. The following information has been gathered about one of the company’s products:

Theoretical annual capacity 2,000
Actual production 1,800
Production hours available 500
Actual conversion cost per hour $7

15. The theoretical velocity per hour is
a. 4.0 units.
b. 3.6 units.
c. 1.1 units.
d. 1.0 units.

16. An example of a prevention cost is
a. field testing.
b. quality audits.
c. reinspection.
d. repair costs.

17. Warranty work is a(n)
a. external failure cost.
b. internal failure cost.
c. appraisal cost.
d. prevention cost.

At the beginning of the year, Andrew Company initiated a quality improvement program. The program was successful in reducing scrap and rework costs. To help assess the impact of the quality improvement program, the following data were collected for the current and preceding years:
Preceding Year Current Year
Sales $2,400,000 $2,400,000
Quality training 30,000 48,000
Material inspections 7,000 8,000
Scrap 48,000 30,000
Rework 60,000 48,000
Product inspection 10,000 12,000
Product warranty 36,000 24,000

18. For the current year, prevention costs are what percentage of sales?
a. 9.00%
b. 8.25%
c. 7.00%
d. 2.00%

19. Which of the following is NOT an example of a decision-making context when using quality cost information?
a. strategic pricing
b. flexible budget analysis
c. cost-volume-profit analysis
d. none of the above
a. non-value-added costs.
b. currently attainable standards.
c. standard price.
d. actual price.

9. Each unit of product requires 16 pounds of material. Due to scrap and rework, each unit has been averaging 18 pounds of material. The material costs $6 per pound.

If the company wants to reduce non-value-added costs by 25 percent next year, the currently attainable standard for material would be
a. 16.00 pounds.
b. 16.80 pounds.
c. 17.50 pounds.
d. 18.00 pounds.

10. Sasha Cat Company sells one of its products for $100 each. Sales volume averages 750 units per year. Recently, its main competitor reduced the price of its product to $80. Sasha Cat Company expects sales to drop dramatically unless it matches the competitor’s price. In addition, the current profit per unit must be maintained. Information about the product (for production of 750) is as follows:

SQ AQ Actual Cost
Materials (pounds) 2,000 2,500 $25,000
Labor (hours) 450 500 12,500
Setups (hours) 0 600 7,500
Material handling (moves) 0 300 3,750
Warranties (number repaired) 0 200 15,000