Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Textbook Question
Chapter 14, Problem 26E
Which of the following would be a hidden quality cost?
- a. Inspecting and testing prototypes
- b. Repairing a computer still under warranty
- c. Stopping work to correct process malfunction (discovered using statistical process control procedures)
- d. Lost market share due to poor product performance
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The cost of lost future sales after a customer finds a defect in a product is which type of quality cost?
Prevention cost
Appraisal cost
Internal failure cost
External failure cost
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Sneaky Snacky Squirrel Inc. has a budget
of $900,000 in 2021 for prevention costs. If it
decides to automate a portion of its prevention
activities, it will save $80,000 in variable costs.
The new method will require $40,000 in training
costs and $100,000 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 $50,000. 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 all…
A number of activities that are part of a company's quality control system are listed below:
Required:
1. Classify the costs associated with each of these activities into one of the following categories: prevention cost, appraisal cost,
internal failure cost, or external failure cost.
Prevention Appraisal
Cost
Internal
Failure
Cost
External
Failure
Cost
Activities
Cost
a. Product testing
b. Product recalls
c. Rework labor and overhead
d. Quality circles
e. Downtime caused by defects
f. Cost of field servicing
9 Inspection of goods
h. Quality engineering
Warranty repairs
j Statistical process control
k.
Net cost of scrap
L Depreciation of test equipment
m. Returns and allowances arising from poor quality
n. Disposal of production defects
o. Technical support to suppliers
p. Systems development
q. Warranty replacements
r. Field testing at customer site
s. Quality training
2-n Which tune of costs are incurred in an effort to keen noor auality of conformance from occuirring?
Chapter 14 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 14 - What is the difference between quality of design...Ch. 14 - Why are quality costs the costs of doing things...Ch. 14 - Prob. 3DQCh. 14 - Describe the Taguchi quality loss function, and...Ch. 14 - Identify and discuss the four kinds of quality...Ch. 14 - Explain why external failure costs can be more...Ch. 14 - Prob. 7DQCh. 14 - Prob. 8DQCh. 14 - Describe the three types of quality performance...Ch. 14 - Prob. 10DQ
Ch. 14 - If a firms annual sales are 200 million, what...Ch. 14 - Explain why it is important for a manager to...Ch. 14 - Prob. 13DQCh. 14 - Explain why the Accounting Department should be...Ch. 14 - Prob. 15DQCh. 14 - What is ecoefficiency?Ch. 14 - Prob. 17DQCh. 14 - Prob. 18DQCh. 14 - Prob. 19DQCh. 14 - What are the four categories of environmental...Ch. 14 - Prob. 21DQCh. 14 - What does full environmental costing mean? Full...Ch. 14 - What information is communicated by the unit...Ch. 14 - Evans Company had total sales of 3,000,000 for...Ch. 14 - Prob. 2CECh. 14 - Ross Company implemented a quality improvement...Ch. 14 - Nabors Company had actual quality costs for the...Ch. 14 - Verde Company reported operating costs of...Ch. 14 - Pinter Company had the following environmental...Ch. 14 - Rachel Boyce, president of a company that...Ch. 14 - Quality attributes such as performance and...Ch. 14 - Stahman, Inc., estimates its hidden external...Ch. 14 - Prob. 10ECh. 14 - Abernathy, Inc., produces two different generators...Ch. 14 - Kang Company reported sales of 3,240,000 in 20x5....Ch. 14 - Gagnon Company reported the following sales and...Ch. 14 - Muskogee Company had sales of 60,000,000 in 20x1....Ch. 14 - Javier Company has sales of 8 million and quality...Ch. 14 - In 20x4, Tru-Delite Frozen Desserts, Inc.,...Ch. 14 - Prob. 17ECh. 14 - Prob. 18ECh. 14 - Achieving sustainable development will likely...Ch. 14 - Classify the following environmental activities as...Ch. 14 - At the end of 20x5, Bing Pharmaceuticals began to...Ch. 14 - Prob. 22ECh. 14 - Coyle Pharmaceuticals produces two organic...Ch. 14 - Prob. 24ECh. 14 - Which of the following quality costs is an...Ch. 14 - Which of the following would be a hidden quality...Ch. 14 - Using the Taguchi quality loss function, an...Ch. 14 - Environmental costs are those costs incurred...Ch. 14 - Two products, Product A and Product B, are...Ch. 14 - Kathy Shorts, president of Oliver Company, was...Ch. 14 - Panguitch Company manufactures a component for...Ch. 14 - Gaston Company manufactures furniture. One of its...Ch. 14 - Classify the following quality costs as...Ch. 14 - Wayne Johnson, president of Banshee Company,...Ch. 14 - Recently, Ulrich Company received a report from an...Ch. 14 - In 20x5, Major Company initiated a full-scale,...Ch. 14 - Paper Products Division produces paper diapers,...Ch. 14 - In 2011, Milton Thayne, president of Carbondale...Ch. 14 - Iona Company, a large printing company, is in its...Ch. 14 - Prob. 40PCh. 14 - The following items are listed in an environmental...Ch. 14 - Refer to Problem 14.41. In the environmental...Ch. 14 - The following environmental cost reports for 20x3,...Ch. 14 - Refer to Problem 14.43. In 20x3, Jack Carter,...
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Which of the following quality costs is an internal failure cost? a. Inspection of reworked units b. Lost sales because of products failing to meet specifications c. Replacing a defective product d. Training production line workers in new quality proceduresarrow_forwardWhich of the following is NOT a problem associated with standard cost accounting? a. Standard costing motivates management to produce large batches of products and build inventory. b. Applying standard costing leads to product cost distortions in a lean environment. c. Standard costing data are associated with excessive time lags that reduce its usefulness. d. The financial orientation of standard costing may promote bad decisions. e. All of the above are problems with standard costing.arrow_forwardWhich of the following is not an advantageous reason to reduce inventories? a. Inventories provide a competitive advantage. b. Inventories can invite overproduction. c. Inventories are expensive to maintain. d. Inventories may conceal problems. e. All of these are good reasons to reduce inventories.arrow_forward
- Identify the following activities as per their respective categories under quality costs: 1.Lost profit from lost sales from bad review 2.Unplanned replacement 3.Correction and customer supportarrow_forwardWhich of the following is not a benefit of using RFID technology: Select one: a. Increasing labour productivity b. Reduction of inventory c. Reduction of shrinkage d. Validationarrow_forwardVarious difficulties associated with manual cost accounting system,Please explain the below with example.-Manual entry errors may cause delay in processing and also leads to inefficiency.Please explain with example _There will be risks of fraud arising due to manual cost accounting as these are easily manipulative.Please explain with example - Manual cost accounting consumes lot of time and are also difficult to form reconciliations and variance analysis. -Risk of double entry or missing of entries due to inadequate control over the same.arrow_forward
- Which of the following statements is false with respect to replacement analysis? a. Functional obsolescence is the only type of obsolescence that should be considered in a replacement analysis. b. A changing external environment can lead to the need for a replacement analysis. c. Companies frequently use equipment long after a replacement would be economically justified. d. In a replacement analysis, the current asset is referred to as the defender.arrow_forwardSuppose that clerical erroreither Thaynes or the suppliersis the common root cause of the non-value-added activities. For each non-value-added activity, ask a series of why questions that identify clerical error as the activitys root cause.arrow_forwardWhich of the following is a prevention cost? a. Inspection of materials. b. Continuing supplier verification. c. Prototype inspection. d. Recalls.arrow_forward
- Explain why a new product costing system may be needed when line managers suggest that an apparently profitable product be dropped.arrow_forwardWhich of the following is not an example of a typical external failure cost? Multiple choice question. Product recalls Warranty repairs Debugging system errors Defective product liabilityarrow_forwardThe cost of maintaining records of Information is an example of cost. Internal failure costa Extemal failure costs Appraisal costs None of themarrow_forward
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