Posted: April 12th, 2016

Compute the partial operational measures for each input for both 2009 and 2010. What can be said about productivity improvement?

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

20. _______________ is a predetermined amount of defective product that a company permits to be sold.
a. Acceptable quality level
b. Taguchi quality loss function
c. Zero defects
d. Kaizen

21. The productivity ratio used as a partial operational productivity measure is calculated as follows:
a. Output/Input
b. Input/Output
c. Input/Costs
d. Input/Sales

22. _______________ is an assessment of productive efficiency for all inputs combined.
a. Price recovery component
b. Profile measurement
c. Profit-linked productivity measurement
d. Total productivity measurement

Information about Jones Corporation is as follows:
2009 2010
Output (units) 120,000 130,000

Input quantities:
Materials (pounds) 37,500 40,000

Input prices:
Materials (per pound) $4 $6

23. What is the partial operational productivity measure for materials for 2009?
a. 0.3125
b. 0.6250
c. 3.2000
d. 3.2500

24. What is the partial operational productivity measure for materials for 2010?
a. 3.2000
b. 3.2500
c. 0.3077
d. 0.3125

Information about Cheng Corporation is as follows:
2009 2010
Output (units) 14,000 15,000
Selling price per unit $16 $16

Input quantities:
Materials (pounds) 1,750 1,900
Labor (hours) 1,400 1,525

Input prices:
Materials (per pound) $3 $4
Labor (per hour) $6 $7

25. By how much did profits change as a result of changes in productivity related to materials?
a. $600 decrease
b. $600 increase
c. $100 decrease
d. $100 increase

SECTION II ()

1. Prior to installing a JIT system, Johnson Company used machine hours to assign maintenance costs to its three products of 4-inch, 6-inch, and 8-inch plastic pipe.

The maintenance costs totaled $540,000 per year. The machine hours used by each product and the quantity produced of each product are as follows:
Machine Hours Quantity Produced
4-inch 10,000 3,750 rolls
6-inch 14,000 4,000 rolls
8-inch 21,000 5,000 rolls

After installing JIT, three manufacturing cells were created, and the cell workers were trained to perform maintenance. Maintenance costs for the three cells still totaled $540,000; however, these costs are now traceable to each cell.
Cell, 4-inch $ 90,000
Cell, 6-inch 160,000
Cell, 8-inch 290,000

Required:
a. Compute the maintenance cost per roll for each type of pipe before JIT is installed.
b. Compute the maintenance cost per roll for each type of pipe after JIT is installed.
c. Explain why the JIT maintenance cost per roll is more accurate than the cost per roll using the traditional approach.

2. Gibson, Inc., has developed ideal standards for four activities: labor, materials, inspection, and receiving.

Information is as follows:

Activity Activity Driver SQ AQ SP
Labor Hours 500 550 $ 32
Materials Pounds 2,000 2,500 48
Inspection Inspection hours 0 375 22
Receiving Orders 60 75 800

The actual prices paid per unit of each activity driver were equal to the standard prices.

Required:

Complete the following cost report.

Activity Value-Added Non-value-Added Actual

Labor $_____________ $_____________ $____________

Materials _____________ _____________ ____________

Inspection _____________ _____________ ____________

Receiving _____________ _____________ ____________

Totals $_____________ $_____________ $____________

3 Marshek Industries has the theoretical capability to produce 119,000 units per month but currently produces 102,000 units. The conversion cost for the month is $3,750,000. There are 8,500 production hours available within the plant per month. In addition to processing time, to produce a unit takes 15 minutes of move time and 10 minutes of wait time.

Required:
1. Compute the theoretical and actual velocities per hour
2. Compute the theoretical and actual cycle times (minutes per unit produced)
3. Compute the MCE

4. At the beginning of the year, John Corporation 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:

2007 2008 2009 2010
Reilability engineering 8,000 10,000 15,000 25,000
Quality training 1,000 2,000 5,000 8,000
Packaging inspections 2,000 3,000 5,000 5,000
Product Acceptance 12,000 10,000 8,000 3,000
Rework 30,000 25,000 18,000 12,000
Reinspection 75,000 65,000 48,000 29,000
Customer complaints 100,000 85,000 62,000 51,000
Warranty and Repair 70,000 50,000 40,000 25,000

Required:
a. Prepare a multiple-year trend report for overall costs of quality
b. Prepare a multiple-year trend report for each category of quality costs

5. At the end of 2009, Wilson Company implemented a new labor process and redesigned its product with the expectation that input usage efficiency would increase. Now, at the end of 2010, the president of the company wants an assessment of the changes on the company’s productivity. The data needed for the assessment are as follows:
2009 2010
Output 20,000 24,000
Output prices $20 $20
Materials (lbs.) 16,000 16,800
Materials unit price $6 $8
Labor (hrs.) 10,000 9,600
Labor rate per hour $10 $10
Power (kwh) 4,000 6,000
Price per kwh $2 $3

Required:
a. Compute the partial operational measures for each input for both 2009 and 2010. What can be said about productivity improvement?
b. Prepare an income statement for each year and calculate the total change in profits.
c. Calculate the profit-linked productivity measure for 2010. What can be said about the productivity program?
d. Calculate the price-recovery component. What does this tell you?