64) Scallon Products reports the following information about resources. At the beginning of the
year, Scallon estimated it would spend $8,000 for energy and $12,000 for repairs.
Cost Driver
Rate Volume
Resources used:
Energy $ 0.80 /MH 11,350 MH
Repairs $ 24 /job 600 jobs
Resources supplied:
Energy $ 10,500
Repairs $ 18,000
The unused resource capacity for energy for Scallon Products is:
A) $8,000.
B) $1,080.
C) $1,420.
D) $2,500.
65) Scallon Products reports the following information about resources. At the beginning of the
year, Scallon estimated it would spend $8,000 for energy and $12,000 for repairs.
Cost Driver
Rate Volume
Resources used:
Energy $ 0.80 /MH 11,350 MH
Repairs $ 24 /job 600 jobs
Resources supplied:
Energy $ 10,500
Repairs $ 18,000
The unused resource capacity for repairs for Scallon Products is:
A) $2,400.
B) $12,000.
C) $6,000.
D) $3,600.
66) The amount of production possible under normal working conditions, including planned
downtime and scheduled vacations, is called:
A) actual capacity.
B) normal capacity.
C) practical capacity.
D) theoretical capacity.
67) Which of the following statements is(are) true?
(A) Theoretical capacity is the long-run expected volume based on reasonably attainable working
conditions.
(B) The cost of excess capacity is allocated to individual cost objects using the cost driver rate.
A) Only A is true.
B) Only B is true.
C) Both of these are true.
D) Neither of these is true.
68) Which of the following statement is(are) true?
(A) Unused capacity costs incurred for the benefit of a company’s customers (e.g., meet seasonal
demands) should be assigned to the customers that require (use) the excess capacity.
(B) In general, managerial decisions affecting capacity-related costs and activities also affect
volume-related, batch-related, and product-related cost and activities.
A) Only A is true.
B) Only B is true.
C) Both of these are true.
D) Neither of these is true.
69) A company has high winter demand and low summer demand for its services. The cost of the
unused summer capacity should be allocated:
A) to an account called Idle Capacity.
B) evenly to all customers.
C) only to the winter customers.
D) only to the summer customers.
70) Which of the following is not an explanation of why a company would operate at less than
theoretical capacity?
A) Scheduled maintenance of equipment.
B) Breakdowns in equipment.
C) Customer demand is less than anticipated.
D) Customer demand is more than anticipated.
71) The degree to which a good or service meets specifications is called:
A) conformance to specifications.
B) customer quality demands.
C) a conformance cost.
D) a compliance cost.
72) Which of the following statements regarding quality costs is(are) false?
(A) In a cost of quality system, internal and external failure costs are called conformance costs.
(B) Prevention costs are costs incurred to detect individual units of product that do not conform
to its specifications.
A) Only A is false.
B) Only B is false.
C) Both of these are false.
D) Neither of these is false.
73) Which of the following is not an example of a prevention cost?
A) Training employees to improve quality.
B) Designing products to reduce production problems.
C) Correcting product defects before they are sold.
D) Inspecting the production process as it occurs.
74) Which of the following is an example of a prevention cost?
A) Machine inspection.
B) Warranty repairs.
C) Field testing.
D) Marketing costs.
75) Which of the following is an example of an internal failure cost?
A) Training employees to improve quality.
B) Designing products to reduce production problems.
C) Correcting product defects before they are sold.
D) Inspecting the production process as it occurs.
76) Which of the following is not an example of an external failure cost?
A) Accepting company liability resulting from product failure.
B) Experiencing decreasing sales as a result of poor-quality products.
C) Repairing or replacing defective products after they’ve been sold.
D) Testing products in use at the customer’s site.
77) Which of the following statements regarding the trade-off between conformance and
nonconformance costs is(are) false?
(A) The optimal level for a company’s quality control program occurs when its conformance
costs equal its nonconformance costs.
(B) There is an inverse relationship between the costs spent on nonconformance costs and the
level of quality achieved.
A) Only A is false.
B) Only B is false.
C) Both of these are false.
D) Neither of these is false.
78) Which of the following items is included in almost all quality control systems?
A) Quality-related waiting time.
B) Quality planning and analysis.
C) Excess or obsolete inventory.
D) Quality-related overtime.
79) Water Industries’ quality control report for August contains the following items:
Gathering, analysis, and reporting quality data $ 1,000
Inspecting raw materials received from vendors 2,000
Testing and inspecting finished products 3,000
Visiting customer sites to test product 4,000
Designing product to reduce production problems 5,000
Repairing and/or replacing products under warranty 6,000
Maintaining the equipment used to gather quality data 7,000
Cost (net) of materials wasted during production 8,000
What would be the total of the prevention costs on the August quality control report for Water
Industries?
A) $5,000.
B) $7,000.
C) $11,000.
D) $15,000.
80) Water Industries’ quality control report for August contains the following items:
Gathering, analysis, and reporting quality data $ 1,000
Inspecting raw materials received from vendors 2,000
Testing and inspecting finished products 3,000
Visiting customer sites to test product 4,000
Designing product to reduce production problems 5,000
Repairing and/or replacing products under warranty 6,000
Maintaining equipment used to gather production quality data 7,000
Cost (net) of materials wasted during production 8,000
What would be the total of the appraisal costs on the August quality control report for Water
Industries?
A) $7,000.
B) $11,000.
C) $12,000.
D) $15,000.
81) Water Industries’ quality control report for August contains the following items:
Gathering, analysis, and reporting quality data $ 1,000
Inspecting raw materials received from vendors 2,000
Testing and inspecting finished products 3,000
Visiting customer sites to test product 4,000
Designing product to reduce production problems 5,000
Repairing and/or replacing products under warranty 6,000
Maintaining equipment used to gather production quality data 7,000
Cost (net) of materials wasted during production 8,000
What would be the total of the internal failure costs on the August quality control report for
Water Industries?
A) $8,000.
B) $13,000.
C) $14,000.
D) $16,000.
82) Water Industries’ quality control report for August contains the following items:
Gathering, analysis, and reporting quality data $ 1,000
Inspecting raw materials received from vendors 2,000
Testing and inspecting finished products 3,000
Visiting customer sites to test product 4,000
Designing product to reduce production problems 5,000
Repairing and/or replacing products under warranty 6,000
Maintaining equipment used to gather production quality data 7,000
Cost (net) of materials wasted during production 8,000
What would be the total of the external failure costs on the August quality control report for
Water Industries?
A) $4,000.
B) $6,000.
C) $7,000.
D) $14,000.
83) Water Industries’ quality control report for August contains the following items:
Gathering, analysis, and reporting quality data $ 1,000
Inspecting raw materials received from vendors 2,000
Testing and inspecting finished products 3,000
Visiting customer sites to test product 4,000
Designing product to reduce production problems 5,000
Repairing and/or replacing products under warranty 6,000
Maintaining equipment used to gather production quality data 7,000
Cost (net) of materials wasted during production 8,000
What would be the total of the conformance costs on the August quality control report for Water
Industries?
A) $22,000.
B) $20,000.
C) $15,000.
D) $13,000.
84) Water Industries’ quality control report for August contains the following items:
Gathering, analysis, and reporting quality data $ 1,000
Inspecting raw materials received from vendors 2,000
Testing and inspecting finished products 3,000
Visiting customer sites to test product 4,000
Designing product to reduce production problems 5,000
Repairing and/or replacing products under warranty 6,000
Maintaining equipment used to gather production quality data 7,000
Cost (net) of materials wasted during production 8,000
What would be the total of the nonconformance costs on the August quality control report for
Water Industries?
A) $22,000.
B) $21,000.
C) $14,000.
D) $13,000.
85) Glory Enterprises quality control report for August contains the following items:
Liability costs associated with defective products $ 10,000
Disposal costs of defective products failing inspection 20,000
Disposal costs of raw materials failing inspection 30,000
Quality training provided to workers 40,000
Lost sales due to poor quality and defective products 50,000
Advertising costs to offset perception of poor product quality 60,000
Raw materials used to correct defects before product was sold 70,000
Testing and inspecting a sample of finished goods 80,000
What would be the total of the conformance costs on the August quality control report for Glory
Enterprises?
A) $200,000.
B) $170,000.
C) $150,000.
D) $90,000.
86) Glory Enterprises quality control report for August contains the following items:
Liability costs associated with defective products $ 10,000
Disposal costs of defective products failing inspection 20,000
Disposal costs of raw materials failing inspection 30,000
Quality training provided to workers 40,000
Lost sales due to poor quality and defective products 50,000
Advertising costs to offset perception of poor product quality 60,000
Raw materials used to correct defects before product was sold 70,000
Testing and inspecting a sample of finished goods 80,000
What would be the total of the nonconformance costs on the August quality control report for
Glory Enterprises?
A) $120,000.
B) $150,000.
C) $180,000.
D) $210,000.
87) Glory Enterprises quality control report for August contains the following items:
Liability costs associated with defective products $ 10,000
Disposal costs of defective products failing inspection 20,000
Disposal costs of raw materials failing inspection 30,000
Quality training provided to workers 40,000
Lost sales due to poor quality and defective products 50,000
Advertising costs to offset perception of poor product quality 60,000
Raw materials used to correct defects before product was sold 70,000
Testing and inspecting a sample of finished goods 80,000
What would be the total of the prevention costs on the August quality control report for Glory
Enterprises?
A) $180,000.
B) $120,000.
C) $90,000.
D) $70,000.
88) Glory Enterprises quality control report for August contains the following items:
Liability costs associated with defective products $ 10,000
Disposal costs of defective products failing inspection 20,000
Disposal costs of raw materials failing inspection 30,000
Quality training provided to workers 40,000
Lost sales due to poor quality and defective products 50,000
Advertising costs to offset perception of poor product quality 60,000
Raw materials used to correct defects before product was sold 70,000
Testing and inspecting a sample of finished goods 80,000
What would be the total of the appraisal costs on the August quality control report for Glory
Enterprises?
A) $30,000.
B) $70,000.
C) $80,000.
D) $90,000.
89) Glory Enterprises quality control report for August contains the following items:
Liability costs associated with defective products $ 10,000
Disposal costs of defective products failing inspection 20,000
Disposal costs of raw materials failing inspection 30,000
Quality training provided to workers 40,000
Lost sales due to poor quality and defective products 50,000
Advertising costs to offset perception of poor product quality 60,000
Raw materials used to correct defects before product was sold 70,000
Testing and inspecting a sample of finished goods 80,000
What would be the total of the internal failure costs on the August quality control report for
Glory Enterprises?
A) $60,000.
B) $90,000.
C) $100,000.
D) $120,000.
90) Glory Enterprises quality control report for August contains the following items:
Liability costs associated with defective products $ 10,000
Disposal costs of defective products failing inspection 20,000
Disposal costs of raw materials failing inspection 30,000
Quality training provided to workers 40,000
Lost sales due to poor quality and defective products 50,000
Advertising costs to offset perception of poor product quality 60,000
Raw materials used to correct defects before product was sold 70,000
Testing and inspecting a sample of finished goods 80,000
What would be the total of the external failure costs on the August quality control report for
Glory Enterprises?
A) $70,000.
B) $110,000.
C) $120,000.
D) $140,000.
91) Which of the following is not a prevention activity in controlling quality?
A) Certifying suppliers.
B) Field testing.
C) Quality training.
D) Process improvement.