| 1. (TCO 11) The four cost categories in a cost of quality program are (Points : 5) |
product design, process design, internal success, and external success.
prevention, appraisal, internal failure, and external failure.
design, conformance, control, and process.
design, process specification, on-time delivery, and customer satisfaction. |
| Question 2.2. (TCO 11) _____ is a formal means of distinguishing between random and nonrandom variation in an operating process. (Points : 5) |
Statistical process control (SPC)
A Pareto diagram
A cause-and-effect diagram
A fishbone diagram |
| Question 3.3. (TCO 11) Which of the following is NOT one of the steps in managing bottlenecks under the theory of constraints? (Points : 5) |
Identify the bottleneck resource by searching for resources with large quantities of inventory waiting to be worked on.
Increase the efficiency and capacity of the nonbottleneck resources.
Subordinate all nonbottleneck operations to the bottleneck operation.
Increase the efficiency and capacity of the bottleneck operation. |
| Question 4.4. (TCO 11) Scrap is an example of (Points : 5) |
external failure costs.
internal failure costs.
prevention costs.
appraisal costs. |
| Question 5.5. (TCO 11) Regal Products has a budget of $900,000 in 20X3 for prevention costs. If it decides to automate a portion of its prevention activities, it will save $60,000 in variable costs. The new method will require $18,000 in training costs and $120,000 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 $30,000. 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 that all units produced are sold and there are no ending inventories. How much will internal failure costs change if the internal product failures are reduced by 50% with the new procedures? (Points : 5) |
$500,000 decrease
$750,000 decrease
$33,750 decrease
$67,500 decrease |
| Question 6.6. (TCO 12) Which of the following categories of costs are important when managing inventories of goods for sale, according to the authors of the text? (Points : 5) |
Purchasing, ordering, supply, spoilage, and opportunity
Purchasing, stockout carrying, ordering, and quality
Buying, holding, invoicing, opportunity, and investment
Supply, obsolescence, holding, stockout, and transportation-in |
| Question 7.7. (TCO 12) The costs associated with storage are an example of which cost category? (Points : 5) |
Carrying costs
Ordering costs
Quality costs
Labor costs |
| Question 8.8. (TCO 12) Which of the following is an assumption of the economic-order-quantity decision model? (Points : 5) |
There will be timely labor costs.
The quantity ordered can vary at each reorder point.
No stockouts occur.
Demand ordering costs and carrying costs fluctuate. |
| Question 9.9. (TCO 12) When using a vendor-managed inventory system to enhance the features of supply-chain management, a challenging issue is (Points : 5) |
problems of communication and trust.
the sharing of accurate, timely, and relevant information about sales forecasts.
potentially incompatible information systems.
All of the above |
| Question 10.10. (TCO 12) Liberty Celebrations, Inc., manufactures a line of flags. The annual demand for its flag display is estimated to be 100,000 units. The annual cost of carrying one unit in inventory is $1.60, and the cost to initiate a production run is $50. There are no flag displays on hand but Liberty had scheduled 60 equal production runs of the display sets for the coming year, the first of which is to be run immediately. Liberty Celebrations has 250 business days per year. Assume that sales occur uniformly throughout the year and that production is instantaneous. The estimated total setup cost for the flag displays for the coming year is (Points : 5) |
$2,000.
$3,000.
$8,000.
$12,500. |
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