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Chapter 27 - Quality Management and Measurement
TRUE/FALSE
1. Many traditional management information systems do not produce meaningful results for today's
business environment.
2. Traditional management information systems focus on financial reporting.
3. A management information system can be designed to support many different types of management
philosophies.
4. The primary focus of a management information system is management of costs.
5. A management information system is not designed to provide data about individual customers.
6. Reducing the costs of quality and increasing overall product quality can be achieved simultaneously.
7. Total quality management requires all business functions to work together to ensure product quality.
8. Total quality management seeks continuous improvement on product quality and analyzes
performance using nonfinancial measures.
9. The two components of costs of quality are costs of conformance and costs of nonconformance.
10. Low costs of conformance usually result in high costs of nonconformance.
11. Internal failure costs and prevention costs make up the costs of conformance.
12. External failure costs are the costs incurred after the product is shipped or the service is delivered to
the customer.
13. Cost control concerns have largely been replaced with concern for nonfinancial measures in JIT
settings.
14. The key to good quality control is to have periodic inspection points staffed by qualified quality
control personnel.
15. The key to good quality control is to evaluate quality early enough so that changes are made before the
product is sold.
16. The first step in ensuring the production of high-quality products is to have a sound product design.
17. The last step in ensuring the production of high-quality products is to have a sound product design.
18. As a consequence of many manufacturing firms attempting to reduce the number of suppliers with
which they deal, vendors that do not supply products with high quality and reliable delivery schedules
may expect to be forced out of business.
19. As a consequence of many manufacturing firms attempting to reduce the number of suppliers with
which they deal, vendors that supply high-quality products and reliable delivery schedules may expect
increased business.
20. Traditionally, the point of sale and shipment of a product has ended the management accountant's
responsibility with respect to the product. In a new manufacturing environment, the measure of
customer satisfaction may be an accounting responsibility too.
21. In the new manufacturing environment, the point of sale and shipment of a product ends the
management accountant's responsibility with respect to the product.
22. Service businesses cannot measure the quality of their work.
23. Benchmarking and process mapping are two methods to measure quality.
24. Quality in manufacturing simply means a product has to be dependable and free of defects.
25. Managers' concerns about the quality of a product or service include customer defections.
26. The Six Sigma quality standard was used by Motorola to improve its performance.
27. The organization that promotes improvement in quality worldwide is called the International
Organization for Standardization.
28. The Deming Application Prize for quality originated in Japan.
29. Though focus on quality is considered a modern management issue, the Deming Application Prize
actually originated in 1951.
30. The Malcolm Baldrige Quality Award was created by the U.S. Congress.
31. The Baldrige performance criteria focus on a single aspect of quality.
32. At present, very few countries belong to the ISO.
MULTIPLE CHOICE
1. The primary focus of a management information system is on the management of
a.
people.
b.
costs.
c.
activities.
d.
time.
2. Information captured by a management information system allows managers to do all of the following
except
a.
determine accurate product or service costs.
b.
improve processes.
c.
provide timely feedback.
d.
satisfy all customer inquiries.
3. How does an ERP system differ from an MIS?
a.
The ERP system informally links the different areas of management for specific purposes.
b.
There is no difference.
c.
The ERP system combines all areas of management into one centralized data warehouse.
d.
The ERP system can be used only in a service business.
4. Maxine Lavon is the controller for Prater Industries. She has been asked to develop a plan for
installing a management information system in her company. She will need to do all of the following
to help managers except
a.
evaluate.
b.
perform.
c.
repeat.
d.
plan.
5. Quality costs of conformance and costs of nonconformance are related to each other
a.
rarely.
b.
directly.
c.
indirectly.
d.
inversely.
6. Which of the following is not an example of a conformance cost?
a.
Prevention cost
b.
Appraisal cost
c.
Quality engineering cost
d.
External failure cost
7. The overall objective of controlling the costs of quality is to eliminate
a.
appraisal costs.
b.
costs of nonconformance.
c.
costs of conformance.
d.
the costs of quality.
8. Which of the following is a good indicator of management's strong commitment to product quality?
a.
Product recalls increased as a percentage of sales
b.
Nonconformance costs increased as a percentage of total quality costs
c.
Customer service costs reduced by 70 percent over the previous year
d.
High costs of conformance to quality
9. Some companies have moved to JIT without changing the substance of their accounting systems.
Relying on the former accounting system may present problems for management because
a.
traditional accounting systems are designed to track items (labor efficiency, purchase
price, overhead absorption) that are no longer primary concerns of management.
b.
control of cost drivers will be lost.
c.
managers do not understand the new manufacturing environment.
d.
traditional accounting systems discourage the creation of large inventories that are
necessary to ensure uninterrupted production runs.
10. With respect to product quality,
a.
quality must be “traded off” against cost considerations.
b.
the best quality control systems rely on inspection points to ensure product quality.
c.
accountants do not need to be concerned with quality control reporting, as it is entirely
nonfinancial in nature.
d.
quality output starts with correct product design.
11. CAD is
a.
a cost allocating decision.
b.
computer aided downtime.
c.
a computer-based engineering system.
d.
an organizational environment.
12. When a firm changes to a JIT operating and management philosophy,
a.
it attempts to increase the number of suppliers it has for each item it uses to ensure a
reliable flow of materials into the production process.
b.
it seeks out the lowest-cost bidder for supplies in order to minimize costs.
c.
it works more closely with fewer suppliers.
d.
all of these are correct.
13. Measures of customer complaints and warranty claims are used in tracking
a.
materials/scrap control performance.
b.
inventory performance.
c.
quality performance.
d.
delivery performance.
14. Lipps Company manufactures custom-designed medical equipment for paramedic units. In May 2010,
the company incurred the following costs of quality:
Product design costs
$ 8,600
Product recall costs
5,200
Product simulation costs
13,500
Product testing costs
3,500
Product warranty claims
2,000
Scrap and rework costs
3,000
Total quality costs of conformance for May were
a.
$27,600.
b.
$11,600.
c.
$25,600.
d.
$22,100.
15. Lipps Company manufactures custom-designed medical equipment for paramedic units. In May 2010,
the company incurred the following costs of quality:
Product design costs
$ 8,600
Product recall costs
5,200
Product simulation costs
13,500
Product testing costs
3,500
Product warranty claims
2,000
Scrap and rework costs
3,000
Total quality costs of nonconformance for May were
a.
$24,200.
b.
$13,700.
c.
$10,200.
d.
$8,200.
16. Woodruff Company manufactures custom-designed medical equipment for paramedic units. In June
2010, the company incurred the following costs of quality:
Product design costs
$12,800
Product recall costs
6,700
Product simulation costs
20,500
Product testing costs
8,000
Product warranty claims
3,000
Scrap and rework costs
5,000
Total quality costs of conformance for June were
a.
$41,300.
b.
$32,800.
c.
$40,300.
d.
$43,800.
17. Woodruff Company manufactures custom-designed medical equipment for paramedic units. In June
2010, the company incurred the following costs of quality:
Product design costs
$12,800
Product recall costs
6,700
Product simulation costs
20,500
Product testing costs
8,000
Product warranty claims
3,000
Scrap and rework costs
5,000
Total quality costs of nonconformance for June were
a.
$11,700.
b.
$14,700.
c.
$22,700.
d.
$15,700.
18. Erin Stover has been appointed chief accountant for Dancer Industries. The company has three
divisions that manufacture floor tiles. The industry is very competitive, and Dancer Industries has lost
market share in each of the last four years. Three years ago, management announced a companywide
restructuring and the adoption of total quality management. Since that time, each of the divisions has
been allowed to chart its own path toward TQM. Stover is new to the company and has asked to see
summary figures of the costs of quality for each of the divisions. The following data were presented to
her for the past six months:
Adams County
Division
Armstrong
County Division
Butler County
Division
Company
Totals
Sales
$2,650,000
$1,653,125
$2,150,000
$6,453,125
Appraisal costs
$ 52,110
$ 27,460
$ 42,570
$ 122,140
External failure costs
44,980
49,560
31,450
125,990
Internal failure costs
32,100
56,780
28,450
117,330
Prevention costs
42,240
25,440
58,340
126,020
Total costs of quality
$ 171,430
$ 159,240
$ 160,810
$ 491,480
Conformance costs for Adams County Division are
a.
$84,210.
b.
$87,220.
c.
$94,350.
d.
$77,080.
19. Erin Stover has been appointed chief accountant for Dancer Industries. The company has three
divisions that manufacture floor tiles. The industry is very competitive, and Dancer Industries has lost
market share in each of the last four years. Three years ago, management announced a companywide
restructuring and the adoption of total quality management. Since that time, each of the divisions has
been allowed to chart its own path toward TQM. Stover is new to the company and has asked to see
summary figures of the costs of quality for each of the divisions. The following data were presented to
her for the past six months:
Adams County
Division
Armstrong
County Division
Butler County
Division
Company
Totals
Sales
$2,650,000
$1,653,125
$2,150,000
$6,453,125
Appraisal costs
$ 52,110
$ 27,460
$ 42,570
$ 122,140
External failure costs
44,980
49,560
31,450
125,990
Internal failure costs
32,100
56,780
28,450
117,330
Prevention costs
42,240
25,440
58,340
126,020
Total costs of quality
$ 171,430
$ 159,240
$ 160,810
$ 491,480
Conformance costs for Butler County Division are
a.
$100,910.
b.
$89,790.
c.
$71,020.
d.
$59,900.
20. Erin Stover has been appointed chief accountant for Dancer Industries. The company has three
divisions that manufacture floor tiles. The industry is very competitive, and Dancer Industries has lost
market share in each of the last four years. Three years ago, management announced a companywide
restructuring and the adoption of total quality management. Since that time, each of the divisions has
been allowed to chart its own path toward TQM. Stover is new to the company and has asked to see
summary figures of the costs of quality for each of the divisions. The following data were presented to
her for the past six months:
Adams County
Division
Armstrong
County Division
Butler County
Division
Company
Totals
Sales
$2,650,000
$1,653,125
$2,150,000
$6,453,125
Appraisal costs
$ 52,110
$ 27,460
$ 42,570
$ 122,140
External failure costs
44,980
49,560
31,450
125,990
Internal failure costs
32,100
56,780
28,450
117,330
Prevention costs
42,240
25,440
58,340
126,020
Total costs of quality
$ 171,430
$ 159,240
$ 160,810
$ 491,480
Nonconformance costs for Armstrong County Division are
a.
$77,020.
b.
$106,340.
c.
$52,900.
d.
$75,000.
21. Erin Stover has been appointed chief accountant for Dancer Industries. The company has three
divisions that manufacture floor tiles. The industry is very competitive, and Dancer Industries has lost
market share in each of the last four years. Three years ago, management announced a companywide
restructuring and the adoption of total quality management. Since that time, each of the divisions has
been allowed to chart its own path toward TQM. Stover is new to the company and has asked to see
summary figures of the costs of quality for each of the divisions. The following data were presented to
her for the past six months:
Adams County
Division
Armstrong
County Division
Butler County
Division
Company
Totals
Sales
$2,650,000
$1,653,125
$2,150,000
$6,453,125
Appraisal costs
$ 52,110
$ 27,460
$ 42,570
$ 122,140
External failure costs
44,980
49,560
31,450
125,990
Internal failure costs
32,100
56,780
28,450
117,330
Prevention costs
42,240
25,440
58,340
126,020
Total costs of quality
$ 171,430
$ 159,240
$ 160,810
$ 491,480
Nonconformance costs for the total company are
a.
$239,470.
b.
$243,320.
c.
$252,010.
d.
$248,160.
22. Erin Stover has been appointed chief accountant for Dancer Industries. The company has three
divisions that manufacture floor tiles. The industry is very competitive, and Dancer Industries has lost
market share in each of the last four years. Three years ago, management announced a companywide
restructuring and the adoption of total quality management. Since that time, each of the divisions has
been allowed to chart its own path toward TQM. Stover is new to the company and has asked to see
summary figures of the costs of quality for each of the divisions. The following data were presented to
her for the past six months:
Adams County
Division
Armstrong
County Division
Butler County
Division
Company
Totals
Sales
$2,650,000
$1,653,125
$2,150,000
$6,453,125
Appraisal costs
$ 52,110
$ 27,460
$ 42,570
$ 122,140
External failure costs
44,980
49,560
31,450
125,990
Internal failure costs
32,100
56,780
28,450
117,330
Prevention costs
42,240
25,440
58,340
126,020
Total costs of quality
$ 171,430
$ 159,240
$ 160,810
$ 491,480
Conformance costs as a percentage of sales for Armstrong County are
a.
4.66 percent.
b.
4.97 percent.
c.
6.43 percent.
d.
3.20 percent.
23. Erin Stover has been appointed chief accountant for Dancer Industries. The company has three
divisions that manufacture floor tiles. The industry is very competitive, and Dancer Industries has lost
market share in each of the last four years. Three years ago, management announced a companywide
restructuring and the adoption of total quality management. Since that time, each of the divisions has
been allowed to chart its own path toward TQM. Stover is new to the company and has asked to see
summary figures of the costs of quality for each of the divisions. The following data were presented to
her for the past six months:
Adams County
Division
Armstrong
County Division
Butler County
Division
Company
Totals
Sales
$2,650,000
$1,653,125
$2,150,000
$6,453,125
Appraisal costs
$ 52,110
$ 27,460
$ 42,570
$ 122,140
External failure costs
44,980
49,560
31,450
125,990
Internal failure costs
32,100
56,780
28,450
117,330
Prevention costs
42,240
25,440
58,340
126,020
Total costs of quality
$ 171,430
$ 159,240
$ 160,810
$ 491,480
Conformance costs as a percentage of sales for the total company are
a.
3.91 percent.
b.
7.62 percent.
c.
3.85 percent.
d.
3.77 percent.
24. Erin Stover has been appointed chief accountant for Dancer Industries. The company has three
divisions that manufacture floor tiles. The industry is very competitive, and Dancer Industries has lost
market share in each of the last four years. Three years ago, management announced a companywide
restructuring and the adoption of total quality management. Since that time, each of the divisions has
been allowed to chart its own path toward TQM. Stover is new to the company and has asked to see
summary figures of the costs of quality for each of the divisions. The following data were presented to
her for the past six months:
Adams County
Division
Armstrong
County Division
Butler County
Division
Company
Totals
Sales
$2,650,000
$1,653,125
$2,150,000
$6,453,125
Appraisal costs
$ 52,110
$ 27,460
$ 42,570
$ 122,140
External failure costs
44,980
49,560
31,450
125,990
Internal failure costs
32,100
56,780
28,450
117,330
Prevention costs
42,240
25,440
58,340
126,020
Total costs of quality
$ 171,430
$ 159,240
$ 160,810
$ 491,480
Nonconformance costs as a percentage of sales for Butler County are
a.
2.79 percent.
b.
3.44 percent.
c.
4.04 percent.
d.
4.69 percent.
25. Erin Stover has been appointed chief accountant for Dancer Industries. The company has three
divisions that manufacture floor tiles. The industry is very competitive, and Dancer Industries has lost
market share in each of the last four years. Three years ago, management announced a companywide
restructuring and the adoption of total quality management. Since that time, each of the divisions has
been allowed to chart its own path toward TQM. Stover is new to the company and has asked to see
summary figures of the costs of quality for each of the divisions. The following data were presented to
her for the past six months:
Adams County
Division
Armstrong
County Division
Butler County
Division
Company
Totals
Sales
$2,650,000
$1,653,125
$2,150,000
$6,453,125
Appraisal costs
$ 52,110
$ 27,460
$ 42,570
$ 122,140
External failure costs
44,980
49,560
31,450
125,990
Internal failure costs
32,100
56,780
28,450
117,330
Prevention costs
42,240
25,440
58,340
126,020
Total costs of quality
$ 171,430
$ 159,240
$ 160,810
$ 491,480
Total quality costs as a percentage of sales for Adams County are
a.
2.91 percent.
b.
3.56 percent.
c.
6.47 percent.
d.
9.63 percent.
26. Erin Stover has been appointed chief accountant for Dancer Industries. The company has three
divisions that manufacture floor tiles. The industry is very competitive, and Dancer Industries has lost
market share in each of the last four years. Three years ago, management announced a companywide
restructuring and the adoption of total quality management. Since that time, each of the divisions has
been allowed to chart its own path toward TQM. Stover is new to the company and has asked to see
summary figures of the costs of quality for each of the divisions. The following data were presented to
her for the past six months:
Adams County
Division
Armstrong
County Division
Butler County
Division
Company
Totals
Sales
$2,650,000
$1,653,125
$2,150,000
$6,453,125
Appraisal costs
$ 52,110
$ 27,460
$ 42,570
$ 122,140
External failure costs
44,980
49,560
31,450
125,990
Internal failure costs
32,100
56,780
28,450
117,330
Prevention costs
42,240
25,440
58,340
126,020
Total costs of quality
$ 171,430
$ 159,240
$ 160,810
$ 491,480
Total quality costs as a percentage of sales for the total company are
a.
3.77 percent.
b.
13.13 percent.
c.
3.85 percent.
d.
7.62 percent.
