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Exam 11: Reporting for Control

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Question 81

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Which of the following would be classified as a prevention cost on a quality cost report?

A) Cost of field servicing and handling complaints.
B) Warranty repairs and replacements.
C) Systems development.
D) Rework labour and overhead.

E) A) and B)
F) None of the above

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Question 82

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Which of the following would be classified as an appraisal cost on a quality cost report?

A) Supervision of testing and inspection activities.
B) Systems development.
C) Quality engineering.
D) Quality training.

E) A) and C)
F) B) and D)

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Question 83

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Which of the following is the main assumption that is made about managers in general in support of decentralization?

When a division is operating at full capacity,the transfer price to other divisions should include opportunity costs.

The Northern Division of the Gordon Company reported the following data for last year: -What was the return on investment last year for the Northern Division?

Some managers believe that residual income is superior to return on investment as a means of measuring performance,as it encourages the manager to make investment decisions that are more consistent with the interests of the company as a whole.

Delmar Corporation is considering the use of residual income as a measure of the performance of its divisions.What major disadvantage of this method should the company consider before deciding to institute it?

The Millard Division's operating data for the past two years are provided below: Millard Division's margin in Year 2 was 150% of the margin in Year 1. -What were the sales for Year 2?

Harwood Company's quality cost report is to be based on the following data: $\begin{array}{ll}\text { Amortization of test equipment } & \$ 94,000 \\\text { Quality cireles } & \$ 54,000 \\\text { Product recalls } & \$ 20,000 \\\text { Test and inspection of incoming materials } & \$ 82,000 \\\text { Debugging software errors } & \$ 11,000 \\\text { Rework labour and overhead } & \$ 48,000 \\\text { Technical support provided to suppliers } & \$ 12,000 \\\text { Net cost of scrap } & \$ 29,000 \\\text { Lost sales due to poor quality } & \$ 74,000\end{array}$ Required: Prepare a quality cost report in good form with separate sections for prevention costs,appraisal costs,internal failure costs,and external failure costs.

The Holmes Division recorded operating data as follows for the past year: -For the past year,what was the turnover?

Thais Company's quality cost report is to be based on the following data: -What will be the total prevention cost appearing on the quality cost report?

Ricric Corporation has provided the following data for one of its products: -The manufacturing cycle efficiency for this operation is closest to which of the following?

Which of the following best describes a segment of a business responsible for both revenues and expenses?

Eacker Company's quality cost report is to be based on the following data: -What will be the total appraisal cost appearing on the quality cost report?

(Appendix 11A)If two products are good substitutes,the sales quantity variance for each product can be analyzed further into a market volume variance and a market share variance.

Ordinarily,managers are NOT aware of the magnitude of their quality costs since these costs cut across departmental lines and are not normally tracked and accumulated by the cost system.

The emphasis in the balanced scorecard is on improvement rather than meeting a preset standard.

Division P of Turbo Corporation has the capacity for making 75,000 wheel sets per year and regularly sells 60,000 each year on the outside market.The regular sales price is $100 per wheel set,and the variable production cost per unit is $65.Division Q of Turbo Corporation currently buys 30,000 wheel sets (of the kind made by Division P) yearly from an outside supplier at a price of $90 per wheel set.Division Q would like to buy the 30,000 wheel sets it needs annually from Division P at $87 per wheel set.What would be the change in annual operating income for the company as a whole,compared to what it is currently?

(Appendix 11A)If two products are close substitutes,the sales volume variance for each product can be split into a sales quantity variance and a sales mix variance.

Eade Company's quality cost report is to be based on the following data: -What will be the total internal failure cost appearing on the quality cost report?