Solution manual cost accounting 8th by kinney chapter 17

To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com CHAPTER 17 IMPLEMENTING QUALITY CONCEPTS Learning Objectives After reading and studying Chapter 17, you should be able to answer the following questions: What is quality, and from whose viewpoint should it be evaluated? What is benchmarking, and why companies engage in it? What constitutes the total quality management philosophy? How is the Baldrige Award related to quality? What are the types of quality costs, and how are those types related? How is cost of quality measured? How are the balanced scorecard and a cost management system used to provide information on quality in an organization? How is quality instilled as part of an organization’s culture? (Appendix) What international quality standards exist? ©2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, and test bank To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 17: Implementing Quality Costs IM Terminology Appraisal cost: a quality control cost incurred to monitor and compensate for mistakes not eliminated through prevention activities Benchmarking: the process of investigating, comparing and evaluating a company’s products, processes, and/or services against either those of competitors or companies believed to be the ―best in class‖ Control chart: a graphical presentation of the actual process results that indicates the upper and lower control limits and those results that are out of control Cost of compliance: the sum of prevention and appraisal costs; compliance costs are incurred to reduce or eliminate the present and future costs of failure; thus, they are proactive expenditures Cost of noncompliance: the sum of internal failure costs and external failure costs, resulting from production imperfections External failure costs: quality control costs for items such as warranty work, customer complaints, litigation, and defective product recalls that are incurred after a faulty unit of product has been shipped to the customer Grade: the quality level that a product or service has relative to the inclusion or exclusion of characteristics (especially price) to satisfy additional needs Internal benchmarking: benchmarking practice that directs its focus on how and why one organizational unit is performing better than another Internal failure costs: quality control costs, such as scrap or rework, incurred to remedy defective units before they are shipped to customers ISO 9000 series: a comprehensive series of international quality standards that define the various design, material procurement, production, quality-control, and delivery requirements and procedures necessary to achieve quality assurance Prevention cost: a quality control cost incurred to improve quality by preventing defects resulting from dysfunctional processing Process benchmarking: benchmarks against companies that are the best in a specific characteristic rather than just the best in a specific industry Quality: the summation of all the characteristics of a product or service that influences its ability to meet the stated or implied needs of the buyer Quality audit: a third-party review of product design activities, manufacturing processes and controls, quality documentation and records, and management quality policy and philosophy Quality control (QC): the implementation of practices and policies designed to reduce variability and product defects; QC places the primary responsibility for quality at the source: the maker or provider Results benchmarking: benchmarking practice in which an end product or service is examined using a process called reverse engineering; the focus is on product/service specifications and performance results ©2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, and test bank To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 17: Implementing Quality Costs IM Six sigma: a production view of quality that states that a process should produce no more than 3.4 defects per million ―opportunities‖ (i.e., chances for failure or not meeting required specifications) Statistical process control (SPC): the use of techniques to analyze where fluctuations (or variations) occur in the process Strategic benchmarking: a practice that focuses on strategy and how companies compete, seeking to identify the winning strategies that have enabled high performing companies to be successful in their marketplaces Total quality management (TQM): a management approach centered on quality, based on the participation of all its members, and aiming at long-term success through customer satisfaction and benefits to all members of the organization and society Value: the characteristic of meeting the highest number of customer needs at the lowest possible total cost ©2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, and test bank To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 17: Implementing Quality Costs IM Lecture Outline LO.1: What is quality, and from whose viewpoint should it be evaluated? A Introduction Managers recognize that the pursuit of high quality is a fundamental organizational strategy for competing in a global economy Consumers desire a wide variety of product choices but companies have resource constraints that force them to make trade-offs among price, quality, service, and promptness of delivery This chapter discusses the issues of quality, benchmarking, total quality management, quality costs and their measurement, as well as how a balanced scorecard and cost management system are used to support quality initiatives B What is Quality? General a After the Industrial Revolution, quality was defined as conformity to designated specifications b The American Society for Quality Control defines quality as conformity to requirements, where ―requirements‖ are measurable written or verbal specifications, product descriptions, procedures, policies, job descriptions, instructions, purchase/service orders, etc c The late quality expert Joseph Juran, defined quality as fitness for use and, by doing so, allows the user rather than the producer to judge quality d Currently, the following definition has general acceptance: Quality is the summation of all the characteristics of a product or service that influence its ability to meet the stated or implied needs of the person acquiring it e Quality should be viewed as both a production issue and a profitability and longevity issue f All organizational processes (production, procurement, distribution, finance, and promotion) are involved in quality improvement efforts Therefore, two related perspectives of quality are i The totality of internal processes generating a product or service; and ii Customer satisfaction with the product or service Production view of quality a Productivity is measured by the quantity of good outputs generated during a time period and any factor that either slows or stops a production process, or causes unnecessary work reduces productivity b Activity analysis is the process of detailing the various repetitive actions that are performed in making a product or providing a service and classifying them as value-added and non-valueadded ©2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, and test bank To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 17: Implementing Quality Costs IM i A value-added activity is an activity that increases the worth of the product or service to the customer and for which the customer is willing to pay ii A non-value-added activity consumes time and generates costs but adds no customer value iii Text Exhibit 17-1 lists some non-value-added activities and how they can be reduced to achieve the specified benefits c Many companies focus on a six sigma production view of quality, which means that a process should produce no more than 3.4 defects per million ―opportunities‖ (chances for failure or not meeting required specifications) i A 2007 survey found that the average company operates at approximately three sigma d Quality control (QC) encompasses all attempts to reduce variability and product defects Primary responsibility for the quality of a product or service is placed at the source—the maker or provider e Statistical process control (SPC) includes techniques to identify fluctuations or variations that occur in a process; SPC is based on the theory that a process has natural (common cause) variations over time and that these variables can cause ―errors,‖ resulting in defective goods or poor service i These errors are typically produced at points of uncommon (nonrandom or specialcause) variations Fortunately, these variations are often eliminated after the installation of computer-integrated manufacturing systems ii A control chart can be used to analyze process variations A control chart is a graphical presentation of the results of a specified activity that indicates the upper and lower control limits and when those results are out of control (See text Exhibit 17-2.) Consumer view of quality a Every customer who acquires a product or service receives a set of characteristics and a set of organizational characteristics: i Product/service characteristics include features, warranty, packaging, and price (purchase and after-purchase) ii Organizational characteristics include convenience of access, timeliness of delivery and service, reputation, and credit availability b From a customer’s perspective, quality relates to both performance and value c i This perspective derives from increased competition, public interest in product safety, and litigation relative to products and product safety ii Text Exhibit 17-3 lists eight basic characteristics that are commonly included in a customer’s definition of product quality In addition to the quality characteristics listed in Exhibit 17–3, the following additional quality characteristics apply to service organizations: ©2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, and test bank To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 17: Implementing Quality Costs IM i assurance, in that customers expect employees to be knowledgeable, courteous, and trustworthy; ii tangibles, in that customers expect quality physical facilities, equipment, and appearance of personnel; and iii empathy, in that customers expect a high degree of caring and attention from employees d Grade (of a product or service) refers to the addition or removal of product or service characteristics or features in order to satisfy additional customer needs such as price e Value is the characteristic of meeting the highest number of customer needs at the lowest possible price f Customers often make quality determinations by comparing a product or service to an ideal rather than to an actual product or service of the same type or in the same industry LO.2: What is benchmarking, and why companies engage in it? C Benchmarking Benchmarking is the process of investigating, comparing, and evaluating a company’s products, processes, and/or services against those of companies believed to be best-in-class a Text Exhibit 17-4 lists eleven reasons to benchmark b The end result is that an understanding of another company’s production and performance methods is gained which allows the benchmarking company to identify its own strengths and weaknesses As indicated in text Exhibit 17-5, four basic types of benchmarking exist: internal, results, process, and strategic a Internal benchmarking directs its focus on how and why one organizational unit is performing better than another i The primary difficulty with internal benchmarking is that none of the organizational units may be performing on a quality level attained by external parties b Results benchmarking involves examining an end product or service using a process called reverse engineering in which the focus is on product/service specifications and performance results c i However, if benchmarking leads to making an exact replica of another’s product, serious ethical and legal considerations exist ii Because of the potential for stagnation, comparisons should also be made against companies that are the best in a specific characteristic rather than just the best in a specific industry Process benchmarking focuses on best practices and how the best-in-class companies achieved distinction ©2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, and test bank To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 17: Implementing Quality Costs IM d Strategic benchmarking is non-industry specific and focuses on how companies compete and on the winning strategies that have enabled high performing companies to be successful in their marketplaces Benchmarking steps are detailed in text Exhibit 17-6 LO.3: What constitutes the total quality management philosophy? D Total Quality Management General a Total quality management (TQM) is a management approach centered on quality, based on the participation of all its members, and aimed at long-term success through customer satisfaction and benefits to all members of the organization and to society b TQM embodies four important tenets: i To dictate continuous improvement for an internal managerial system of planning, controlling, and decision making for continuous improvement; ii To require participation by everyone in the organization; iii To focus on improving goods and services from the customer’s point of view; and iv To value long-term partnerships with suppliers Quality System a Effective quality management requires the implementation of a system that provides information on the organization’s quality processes so management can plan, control, evaluate performance, and make decisions for continuous improvement b Quality consideration has not traditionally been part of the planning process and has usually involved an after-the-fact measurement of errors due to a certain level of defects being tolerated as part of the ―natural‖ business process in the United States c A total quality system needs to be designed to reorient thinking i The old way: Ignore defects prior to occurrence, inspect quality in, and accept a reasonable number of defects ii The new way: Design quality in, prevent defects from occurring, and strive for continuous improvement d The new way of viewing quality produces these end results: i Ability to set goals and identify methods for quality improvements; ii A system capable of measuring quality and providing feedback on quality enhancements; and ©2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, and test bank To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 17: Implementing Quality Costs IM iii Increased teamwork and movement of organizational attitude from product inspection and defect correction to proactive quality assurance Employee involvement a Top management must develop an atmosphere that is conducive to quality improvements and set an example of commitment to TQM b Workers should be encouraged to provide feedback and made to feel they are an important part of the process of success c Encouraging employees to make quality suggestions and training them to perform multiple job functions will help improve efficiency and quality Product/service improvement a TQM focuses management’s attention on the relationship between the internal production/service process and the external customer whose satisfaction is the ultimate evidence of success b Companies must recognize that they may need to stop serving some groups of customers based on the results of cost-benefit analyses First, however, attempts should be made to make ―non-performing‖ customers profitable c Customer service programs often produce valuable information about customer recency/frequency of use, preferences, spending patterns, etc d A company must first determine who its value-adding customers are and then understand what they want: typically, quality, value, and good service e ―Good‖ service is an intangible but most customers agree that good service reflects the interaction between themselves and organizational employees i Good service also means quick response time in the event of problems or questions ii Frequently, only service quality separates one product from its competition Long-term supplier relationships a Adopting a TQM philosophy encourages companies to review their entire supply chain and establish long-term relationships with preferred suppliers b Given the substantial amount of outsourcing that is now being used, companies need to be certain that they are ―linking up‖ with suppliers that will enhance product quality and customer satisfaction c i Many of these relationships will result in single sourcing or certification of suppliers ii To ensure compliance with preferred supplier requirements, companies often perform quality audits of their vendors Some critics of TQM have called it nothing more than a management fad that does not work when practical attempts are made to implement its concepts ©2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, and test bank To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 17: Implementing Quality Costs IM i A rebuttal is that poor management, not poor ideas, may be responsible for the inconsistencies of TQM or other managerial interventions ii Companies using TQM have cited many positive outcomes and benefits (see text Exhibit 17-7) LO.4: How is the Baldrige Award related to quality? E The Baldrige Award The Malcolm Baldrige Quality Award is the embodiment of TQM in the United States a The Baldrige Award focuses attention on management systems, processes, and consumer satisfaction as the tools required to achieve product and service excellence b There are three versions of Baldrige criteria: business and not-for-profit, education, and health care c To win the Baldrige Award, applicants must demonstrate excellence in seven categories: leadership; strategic planning; customer and market focus; measurement, analysis, and knowledge management; workforce focus; process management; and results i Text Exhibit 17-8 illustrates the relationships among the criteria performance categories ii To achieve at least 70 percent of the points allocated within a category, the National Institute of Standards and Technology which manages the award must determine that the organization is effective and systematic in deploying and achieving the multiple requirements within each category and is innovative in continuously seeking improvement d Putting TQM into practice in an organization can be very costly given the length of time needed to introduce and teach the philosophy and concepts throughout the company i One survey found that it takes about five years for a company to implement TQM and another five years before its benefits are fully realized e The Deming Prize, named for the late management guru, W Edwards Deming, is Japan’s equivalent of the Baldrige Award and has even more rigorous requirements i Three years or more after a company receives the Deming Application Prize it may qualify for the Japan Quality Medal if its implementation of TQM has improved substantially beyond the level that existed at the time when the Deming Application Prize was won ii Although the Baldrige Award and the Deming Prize are both designed to recognize quality achievements and increase awareness of TQM, the Baldrige Award is more focused on results and the importance of sharing information ©2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, and test bank To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 17: Implementing Quality Costs IM 10 LO.5: What are the types of quality costs, and how are those types related? F Types of Quality Costs There are four types of quality costs a Prevention costs are costs whose purpose is to improve quality by preventing product defects resulting from dysfunctional processing i Prevention activities include improved production equipment, worker training, and engineering and product modeling b Appraisal costs are costs incurred to monitor and compensate for mistakes not eliminated through prevention activities c Internal failure costs are expenditures, such as scrap or rework, incurred to remedy defective units before they are shipped to customers d External failure costs are expenditures for items such as warranty work, customer complaints, litigation, and defective product recalls incurred after a faulty unit of product has been shipped to the customer i Although both types of failure costs are expensive, an organization would prefer to incur internal, rather than external failure costs The TQM process will result in a cycle of benefits as shown in text Exhibit 17-9 a The TQM philosophy stipulates that total costs will decrease as quality improvements are made in an enterprise b This cycle of benefit will continue in a company that is profitable and secure in its market share—two principal goals of an organization Quality costs can be summarized into two categories: (1) cost of quality compliance or assurance and (2) cost of noncompliance or quality failure (See text Exhibit 17-10) a Costs of compliance equal the sum of prevention costs and appraisal costs b Costs of noncompliance are the results of production imperfections and are equal to the sum of internal and external failure costs Information relating to production quality, or the lack thereof, is included in inspection reports, SPC control charts, and customer returns or complaints Information concerning quality costs is partially included in the accounting records and supporting documentation a Quality costs historically have not been accorded separate recognition in the accounting system b Actual or estimated costs may be used in measuring the cost of quality ©2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, and test bank To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 17: Implementing Quality Costs c IM 11 A system in which quality costs are readily available or determinable provides useful information to managers trying to make spending decisions by pinpointing the areas that would provide the highest cost-benefit ratio Text Exhibit 17–11 indicates points in the production–sales cycle at which quality costs are usually incurred An information feedback loop should be in effect to link the types and causes of failure costs to future prevention costs LO.6: How is cost of quality measured? G Measuring the Cost of Quality Theoretically, if prevention and appraisal costs were prudently incurred, failure costs would become $0 and thus the total cost of quality would equal the sum of the prevention and appraisal costs Pareto analysis is one way management can decide where to concentrate its quality prevention cost dollars by classifying the causes of process problems according to the impact on some stated objective A company wanting to use TQM and continuous improvement should record and report its quality costs separately so that managers can plan, control, evaluate, and make decisions relating to the activities that cause the costs Simply having quality cost information available does not necessarily enhance quality A firm’s chart of accounts can be extended to accommodate either separate tracing or allocating quality costs to new accounts (See text Exhibit 17-12.) a Coding transactions representing quality costs permits such transaction types and amounts to be reformatted so that cost of quality reports can be prepared (See text Exhibit 17-13) b Formulas for calculating an organization’s total cost of quality, using prevention, appraisal, and failure categories should be utilized (See text Exhibit 17-14) High quality allows a company to improve current profits, either through lower costs or higher prices—but management is also interested in business objectives other than short-run profits LO.7: How are the balanced scorecard and a cost management system used to provide information on quality in an organization? H Obtaining Information about Quality from the Balanced Scorecard and CMS A firm must manage organizational costs so that a reasonable value-to-price relationship can be achieved Companies lacking cost management skills cannot expect to succeed in the long run Cost management involves using management accounting information for the purposes of setting and communicating organizational strategies, establishing, implementing, and monitoring the success of methods to accomplish the strategies, and assessing the level of success in meeting the promulgated strategies A strategic cost management accounting system reports more of the costs and benefits of organizational activities than financial accounting reports ©2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, and test bank To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 17: Implementing Quality Costs IM 12 a Financial accounting requires that R&D costs be expensed as incurred, but a product’s cost is largely determined during the design stage i Since design has implications for perceived product value, necessary production technology, ease of product manufacturability, product durability, and the likelihood of product failure, such costs should be accumulated by the CMS as a part of product cost b Financial accounting requires that all production costs be inventoried and does not distinguish whether such costs add customer value i c A strategic CMS differentiates between costs that add value and those that not so that managers and employees can work to reduce the nonvalue-added costs and enhance continuous improvement Financial accounting is monetarily based and therefore does not directly measure nonfinancial organizational activities such as defects and customer complaints Additionally, many activities critical to success in a quality-oriented, global marketplace are related to time—a nonmonetary characteristic i A useful cost management accounting system ensures availability of information related to nonmonetary occurrences (such as late deliveries or defect rates) and incorporates that information into a balanced scorecard so that management can achieve total quality management and profitability goals One management accounting tool that is useful in implementing strategy is a balanced scorecard (BSC) which assesses performance from four perspectives: learning and growth; internal business; customers; and financial a A BSC can be used to provide information on quality and help frame management decision processes i Learning and growth examples: training employees to use new technology, focusing performance measurements on employee satisfaction, retention, and productivity ii Internal business examples: empowering employees to troubleshoot production problems and manage quality iii Customers examples: ensuring that all employees are focused on important customer criteria, such as lead time, quality, service, and price; empowering sales staff to offer discounts and allowances when necessary to provide quality sales and service; surveying customers on satisfaction levels; and comparing customer retention rates after improvement processes implemented iv Financial examples: analyzing changes in revenues, sales returns, and cost of goods sold; comparing market share before and after improvements implemented b The perspectives can be integrated with the seven categories of the Malcolm Baldrige National Quality Award (MBNQA): i The learning and growth perspective of the BSC is compatible with, and reflective of, information shown in the MBNQA workforce focus category ii The internal business perspective is compatible with the process management category iii The customer perspective reflects the MBNQA’s customer and market focus category ©2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, and test bank To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 17: Implementing Quality Costs IM 13 iv The financial perspective can be seen in the results category c Both the BSC and the MBNQA criteria emphasize the use of nonfinancial performance measurements as indicators of progress toward organizational goals i Text Exhibit 17-15 lists goals and measurements for the BSC perspectives LO.8: How is quality instilled as part of an organization’s culture? I Quality as an Organizational Culture Quality must be perceived as a moving target, which is why TQM exemplifies the principle of continuous improvement Performance standards must be set continuously higher for everyone in the organization to convey the sense of working toward a common goal Committed and consistent top management leadership is the catalyst for moving the company culture toward an esprit de corps in which every individual becomes obsessed with surpassing customer expectations The firm must empower employees to participate fully in the quest for excellence by providing the means by which employees gain pride, satisfaction, and substantive involvement With its focus on process and customers, TQM is founded on one very obvious and simple principle: Do the right things right the first time, all the time, on time, and continuously improve Text Exhibit 17-16 indicates how organizations have move along the path to quality ―High quality‖ is not a static concept; when one problem has been solved, another one is always waiting for a solution LO.9: (Appendix) What international quality standards exist? J Assessing Quality Internationally General a To compete effectively in a global environment, companies must recognize the need for and be willing to initiate compliance with a variety of standards outside their domestic borders b Standards are essentially the international language of trade; they are formalized agreements that define the various contractual, functional, and technical requirements to assure customers that products, services, processes, and/or systems what they are expected to ISO a The ISO 9000 series is a primary international guideline for quality standards ©2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, and test bank To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 17: Implementing Quality Costs IM 14 i The International Organization for Standardization (ISO), based in Geneva, Switzerland, developed a comprehensive list of quality standards known as the ISO 9000 series ii Text Exhibit 17-17 describes the ISO 9000 ―family‖ of standards b The standard is written in a general manner and prescribes the generic design, material procurement, production, quality control, and delivery procedures necessary to achieve quality assurance c ISO 9000 registration is required for regulated products sold in the European Union; however, since there is no international organization that administers the program, companies seeking ISO certification must qualify under an internationally accepted registration program that is administered by a national registrar (such as Underwriters Laboratories in the U.S.) d To be registered, a company must first submit to a quality audit by a third-party reviewer which encompasses a review of product design activities, manufacturing processes and controls, quality documentation and records, and management quality policy and philosophy e Internally, certification helps ensure higher process consistency and quality and should help to reduce costs Externally, ISO 9000 certified companies have an important distinguishing characteristic from their noncertified competitors f ISO certification is not required to business in the United States but many U.S companies are ISO certified because of international sales EFQM a The European Foundation for Quality Management (EFQM) was founded in 1988 by the presidents of 14 major European companies with the endorsement of the European Commission to develop a European framework for quality improvement similar to the U.S Malcolm Baldrige National Quality Award and Japan’s Deming Prize b The EFQM Excellence Model is shown in text Exhibit 17-18 c The model is based on the premise that leadership is delivered through people, policy and strategy, and partnerships and resources, which all impact organizational processes d The EFQM model’s effectiveness is indicated by its widespread use as a management system and a means of organizational self-assessment e The following fundamental concepts provide the model’s foundation: i Results orientation: Excellence is achieving results that delight all of the organization’s stakeholders ii Customer focus: Excellence is creating sustainable customer value iii Leadership and constancy of purpose: Excellence is visionary and inspirational leadership, coupled with constancy of purpose iv Management by processes and facts: Excellence is managing the organization through interdependent and interrelated systems, processes, and facts ©2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, and test bank To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 17: Implementing Quality Costs v IM 15 People development and involvement: Excellence is maximizing the contribution of employees through their development and involvement vi Continuous learning, innovation, and improvement: Excellence is challenging the status quo and effecting change by utilizing learning to create innovation and improvement opportunities vii Partnership development: Excellence is developing and maintaining value-adding partnerships viii Corporate social responsibility: Excellence is exceeding the minimum regulatory framework in which the organization operates and striving to understand and respond to the expectations of its stakeholders in society ©2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, and test bank To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 17: Implementing Quality Costs IM 16 Multiple Choice Questions (LO.1) All of the following are important non-value-adding process activities except: a storing products for which there is little immediate demand b sealing the finish on materials prior to assembly c moving materials d experiencing unscheduled production interruptions (LO.1) A graph of actual process results that shows upper and lower limits for the process and which is used to detect when the process is out of control is known as a: a control chart b pareto chart c breakeven chart d process chart (LO.1) Which of the following is least likely to be included in a customer definition of quality? a Reliability b Performance c Non-value added activities d Aesthetics (LO.2) The benchmarking practice in which a product or service is examined using a process known as reverse engineering is: a process benchmarking b internal benchmarking c strategic benchmarking d results benchmarking (LO.2) The benchmarking approach that seeks process performance information from outside the organization’s own industry and which can result in a 35% improvement in performance is a Strategic benchmarking b Results benchmarking c Process benchmarking d Internal benchmarking (LO.3) Which of the following is an important tenet of the total quality management (TQM) philosophy? a To dictate continuous improvement for an internal managerial system of planning, controlling, and decision making for continuous improvement b To require participation by everyone in the organization c To focus on improving goods/services from the customer point of view d All of the above are tenets of TQM (LO.3) Which of the following is usually maintained in the database of a customer loyalty system? a Frequency of use b Customer preferences c Credit card data d All of the above (LO.4) To win the Malcolm Baldrige National Quality Award, applicants must show excellence in all of the following categories except: a leadership b customer focus c cost containment d strategic planning ©2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, and test bank To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 17: Implementing Quality Costs IM 17 (LO.4) All of the following are internal benefits of TQM except: a Increased customer trust and loyalty b Reduced number of errors c Increased profitability through reduced costs d Increased innovation and acceptance of new ideas 10 (LO.5) The four costs of quality can be classified into two categories: a Costs of compliance and costs of assurance b Costs of noncompliance and costs of quality failure c Costs of compliance and costs of quality failure d Internal costs and external costs 11 (LO.5) The four categories of costs associated with product quality costs are: a external failure, internal failure, prevention, and carrying b external failure, internal failure, prevention, and appraisal c external failure, internal failure, training, and appraisal d warranty, product liability, prevention, and appraisal 12 (LO.5) The cost of scrap, rework, and tooling changes in a product quality cost system are categorized as a(n): a external failure cost b internal failure cost c training cost d prevention cost 13 (LO.5) The cost of statistical quality control in a quality cost system is categorized as a(n): a appraisal cost b internal failure cost c training cost d prevention cost 14 (LO.6) All of the following would generally be included in a cost-of-quality report except: a warranty claims b design engineering c supplier evaluations d lost contribution margin 15 (LO.6) Listed below are selected line items from the cost-of-quality report for N Co for the last month: Category Rework Equipment maintenance Product testing Product repair Amount $ 725 1,154 786 695 What is N Co’s total prevention and appraisal cost for the last month? a $786 b $1,154 c $1,940 d $2,665 ©2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, and test bank To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 17: Implementing Quality Costs IM 18 Multiple Choice Solutions b a c d a d d c a 10 c 11 b (CMA Adapted) 12 b (CMA Adapted) 13 a (CMA Adapted) 14 d (CMA Adapted) 15 c (CMA Adapted) $1,154 + $786 = $1,940 ©2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, and test bank  ... SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, and test bank To download more slides, ebook, solutions... total cost ©2011 Cengage Learning All Rights Reserved SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, ... SM Cost Accounting 8th Edition by Raiborn and Kinney Visit http://downloadslide.blogspot.com to download more slides, ebooks, solution manual, and test bank To download more slides, ebook, solutions