92) Which of the following is a prevention activity in controlling quality?
A) Designing products for manufacturability.
B) Inspecting machines.
C) Statistical process control.
D) Field testing.
93) Which of the following is an appraisal activity?
A) Quality evaluations.
B) Statistical process control.
C) Warranty repairs.
D) Field replacements.
94) Which of the following is a prevention activity?
A) Field replacements.
B) Warranty repairs.
C) Supplier certification.
D) Statistical process control.
95) Which of the following is an internal failure activity?
A) Quality evaluations.
B) Inspecting materials.
C) Inspecting machines.
D) Delaying processes.
96) Internal failure activities:
A) seek to prevent defects in the products or services being produced.
B) inspect inputs and attributes of individual units of products or services to detect whether they
conform to specifications or customer expectations.
C) correct defective processes or products and services before they are delivered to customers.
D) are activities required after defective products or services are delivered to customers.
97) External failure activities:
A) seek to prevent defects in the products or services being produced.
B) inspect inputs and attributes of individual units of products or services to detect whether they
conform to specifications or customer expectations.
C) correct defective processes or products and services before they are delivered to customers.
D) are activities required after defective products or services are delivered to customers.
98) Prevention activities:
A) seek to prevent defects in the products or services being produced.
B) inspect inputs and attributes of individual units of products or services to detect whether they
conform to specifications or customer expectations.
C) correct defective processes or products and services before they are delivered to customers.
D) are activities required after defective products or services are delivered to customers.
99) Appraisal activities:
A) seek to prevent defects in the products or services being produced.
B) inspect inputs and attributes of individual units of products or services to detect whether they
conform to specifications or customer expectations.
C) correct defective processes or products and services before they are delivered to customers.
D) are activities required after defective products or services are delivered to customers.
100) Forensic Specialists compiled the following information for its first quarter cost of quality
report:
Sales $ 5,600,000
Cost of goods sold $ 3,360,000
Disposing of scrap $ 235,200
Quality training $ 84,000
Inspecting materials on delivery $ 280,000
Performance reviews $ 70,000
Resolving customer complaints $ 31,920
Certifying suppliers $ 140,000
The total cost of prevention activities for Forensic Specialists is:
A) $294,000.
B) $224,000.
C) $459,200.
D) $504,000.
101) Forensic Specialists compiled the following information for its first quarter cost of quality
report:
Sales $ 5,600,000
Cost of goods sold $ 3,360,000
Disposing of scrap $ 235,200
Quality training $ 84,000
Inspecting materials on delivery $ 280,000
Performance reviews $ 70,000
Resolving customer complaints $ 31,920
Certifying suppliers $ 140,000
The relevant percentage to be used to express internal failure activities at Forensic Specialists is:
A) 27.9%.
B) 4.77%.
C) 4.2%.
D) 15.02%.
102) Forensic Specialists compiled the following information for its first quarter cost of quality
report:
Sales $ 5,600,000
Cost of goods sold $ 3,360,000
Disposing of scrap $ 235,200
Quality training $ 84,000
Inspecting materials on delivery $ 280,000
Performance reviews $ 70,000
Resolving customer complaints $ 31,920
Certifying suppliers $ 140,000
The total cost of external failure activities at Forensic Specialists is:
A) $420,560.
B) $31,920.
C) $117,600.
D) $175,000.
103) Forensic Specialists compiled the following information for its first quarter cost of quality
report:
Sales $ 5,600,000
Cost of goods sold $ 3,360,000
Disposing of scrap $ 235,200
Quality training $ 84,000
Inspecting materials on delivery $ 280,000
Performance reviews $ 70,000
Resolving customer complaints $ 31,920
Certifying suppliers $ 140,000
The relevant percentage to be used to express appraisal activities at Forensic Specialists is:
A) 5.7%.
B) 33.2%.
C) 2.75%.
D) 1.25%.
104) Tabor Detective Services is evaluating its system. The company gathered the information
below:
Process Available Hours per Week Value-Added Time (hours
per client) Average Demand
Interviews 70 2 20
Research 130 3 30
Pursuit 75 0.5 120
Travel 200 4 35
Practical capacity is 75% for each process.
Which process is most likely to be a current bottleneck?
A) Interviews.
B) Research.
C) Pursuit.
D) Travel.
105) Windom Corporation manufactures small airplane propellers. Sales for April totaled
$850,000. Information regarding resources for the month follows:
Resources Used Resources Supplied
Parts management $ 30,000 $ 35,000
Energy 50,000 50,000
Quality inspections 45,000 50,000
Long-term labor 25,000 35,000
Temporary labor 20,000 24,000
Setups 70,000 100,000
Materials 150,000 150,000
Depreciation 60,000 100,000
Marketing 70,000 75,000
Customer service 10,000 20,000
Administrative 50,000 70,000
In addition, Windom spent $25,000 on 50 engineering changes with a cost driver rate of $500
and $30,000 on eight outside contracts with a cost driver rate of $3,750.
Required:
a. Prepare a traditional income statement.
b. Prepare an activity-based income statement.
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106) Rock Island Manufacturing makes motor brackets. Information regarding resources for the
month follows:
Resources Used Resources Supplied
72
Parts management $ 60,000 $ 70,000
Energy 100,000 100,000
Quality inspections 90,000 100,000
Long-term labor 50,000 70,000
Temporary labor 40,000 48,000
Setups 140,000 200,000
Materials 300,000 300,000
Depreciation 120,000 200,000
Marketing 140,000 150,000
Customer service 20,000 40,000
Administrative 100,000 140,000
In addition, Rock Island spent $25,000 on 40 engineering changes with a cost driver rate of
$600.
Required:
a. Prepare an analysis of the unused resource capacity for the month.
107) Mirror Industries manufactures electric trolling motors. Sales for the month totaled
$1,700,000. Information regarding resources for the month follows:
Resources Used Resources Supplied
Administrative $ 100,000 $ 140,000
Customer service 20,000 40,000
Depreciation 120,000 200,000
Energy 100,000 100,000
Engineering 50,000 52,000
Long-term labor 50,000 70,000
Marketing 140,000 150,000
Materials 300,000 300,000
Parts management 60,000 70,000
Quality inspections 90,000 100,000
Setups 140,000 200,000
Temporary labor 40,000 48,000
Required:
a. Prepare a traditional income statement.
b. Prepare an activity-based income statement.
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108) Miracle Mile Corporation manufactures electric scooters. Information regarding resources
for the month follows:
Resources Used Resources Supplied
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Administrative $ 100,000 $ 145,000
Customer service 25,000 50,000
Depreciation 130,000 200,000
Energy 90,000 90,000
Engineering 50,000 52,000
Long-term labor 60,000 80,000
Marketing 120,000 130,000
Materials 250,000 250,000
Parts management 65,000 75,000
Quality inspections 100,000 120,000
Setups 150,000 200,000
Temporary labor 50,000 56,000
Required:
a. Prepare an analysis of the unused resource capacity for the month.
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109) Taylor’s Cafe Supply Company delivers restaurant supplies throughout the city. Taylor’s
adds 4% to the order cost to cover the delivery cost. The delivery fee is meant to just cover the
cost of delivery. A consultant has analyzed the delivery service using activity-based costing
methods and identified four activities. Data on these activities are:
Activity Cost Driver Cost Driver Volume
Process order number of orders $ 25,000 4,000 orders
Load truck number of items 50,000 80,000 items
Deliver merchandise number of orders 30,000 4,000 orders
Process invoice number of invoices 24,000 6,000 invoices
Total overhead $ 129,000
Two of Taylor’s customers are City Diner and Le Chien Chaud. Below are data on orders and
deliveries to these two customers:
City Diner Le Chien Chaud
Order value $ 24,000 $ 32,000
Number of orders 50 100
Number of items 550 1,600
Number of invoices 12 120
Required:
(a) What would be the delivery charge for each customer under the current policy of 4% of order
value?
(b) What would the activity-based costing system estimate as the cost of delivering to each
customer?
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110) Vargas Financial (VF) only offers checking accounts. Customers can write checks and use a
network of automated teller machines. VF earns revenue by investing the money deposited
(subject to reserve requirements). Currently VF averages 6% return annually on its investments.
In order to compete with larger banks, VF pays depositors 1% on all deposits. A recent study
classified the operating costs of the bank into four activities. Data on these activities are:
Activity Cost Driver Cost Driver Volume
Use ATM number of uses $ 2,000,000 10,000,000 uses
Visit branch number of visits 6,000,000 750,000 visits
Process transaction number of transactions 4,000,000 40,000,000
transactions
General bank overhead total deposits 8,000,000 450,000,000
Total overhead $ 20,000,000
Data on two representative customers are shown below:
Customer A Customer B
ATM uses 300 50
Branch visits 5 20
Number of transactions 60 1,200
Average deposit $ 450 $ 10,000
Required:
(a) Compute the operating profit for Vargas Financial.
(b) Compute the profit of Customer A and Customer B, assuming that customer costs are based
only on deposits.
(c) Compute the profit of Customer A and Customer B, assuming that customer costs are
computed using the information in the activity-based costing analysis.