Chapter14 Solutions-Hansen6e

Chapter14 Solutions-Hansen6e - CHAPTER 14 QUALITY COST...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
CHAPTER 14 QUALITY COST MANAGEMENT QUESTIONS FOR WRITING AND DISCUSSION 1. All quality costs are incurred because poor quality may or does exist. 2. Prevention costs are incurred to prevent defects in products; appraisal costs are costs incurred to determine whether products are conforming to specifications; internal failure costs are incurred when nonconforming products are detected prior to shipment; external failure costs are incurred because nonconforming products are delivered to customers. 3. External failure costs can be more devastating because of warranty costs, lawsuits, and damage to the reputation of a company, all of which may greatly exceed the costs of rework or scrap incurred from internal failure costs. 4. Agree. It is poor quality, not good quality, that is costly. All quality costs exist because poor quality may or does exist. 5. Interim quality standards are used to mea- sure a firm’s progress toward better quality within a given period. 6. Interim quality reports are used to measure quality improvement with respect to a current-period standard; multiple-period reports are used to measure quality improvement with respect to a base period; long-range reports are used to measure progress toward achieving the goal of zero defects. 7. Both monetary and nonmonetary incentives can be used to motivate employees. For example, employees can be given a bonus that is equal to a fixed percentage of the savings from a suggestion that improved a product’s quality (referred to as gainsharing). Additionally, awards of excellence can be used to recognize those employees who make outstanding quality contributions. 8. Firms should spend about 2.5% of sales on quality costs. The potential savings from quality improvement is $31 million [$36 million (0.18 $200 million) – $5 million (0.025 $200 million)]. 9. A quality cost report shows the amount of cost for each category as well as the relative cost of each category. This report requires managers to identify the costs that should appear in the report, to identify the current quality performance level, and to begin thinking about the level of quality performance that should be achieved. 10. Two major reasons why the accounting department should be responsible for producing quality cost reports: (1) they have the expertise and training, and (2) they have the objectivity. 11. ISO 9000 is a series of five international quality standards. These standards center on the concept of documentation and control of nonconformance and change. ISO 9000 certification can be a requirement of doing business (e.g., in Europe). Also, many companies have found that the process of applying for ISO 9000, while lengthy and expensive, yields important benefits in terms of self-knowledge. U.S. companies are using ISO 9000 certification as a competitive tool, as well. 12.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/28/2011 for the course ACC 3354 taught by Professor Tesher during the Spring '10 term at St. John's.

Page1 / 33

Chapter14 Solutions-Hansen6e - CHAPTER 14 QUALITY COST...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online