TEST BANK MANAGERIAL ACCOUNTING 15TH EDITION GARRISON chap002b

APP02B-Ref1
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App2B-1
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Professional exam adapted

LO10: Quality cost report (App 2B)

Difficulty
E
M
E
E
E
M
E
M
E

M
M
M
M
M
M
M
M
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LO9: Classification of quality costs (App2B)

Question Type
T/F
T/F
T/F
T/F
T/F
T/F
Conceptual M/C
Conceptual M/C
Conceptual M/C
Conceptual M/C

Conceptual M/C
Conceptual M/C
Conceptual M/C
Conceptual M/C
Conceptual M/C
Conceptual M/C
Conceptual M/C
Conceptual M/C
Conceptual M/C
Conceptual M/C
Conceptual M/C
Multipart M/C
Multipart M/C
Multipart M/C
Multipart M/C


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Problem
Problem
Problem
Problem
Problem

M

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App2B-2
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Appendix 02B
Cost of Quality

True / False Questions

1. Quality of conformance is the degree to which an actual product meets its design
specifications and is free of defects or other problems that might affect appearance
or performance.
True

False

2. An increase in appraisal costs will usually result in a decrease in internal failure
costs.
True

False

3. Internal failure costs result from identification of defects during the appraisal process.
Such costs may include scrap, rejected products, rework, and downtime.
True

False

4. ISO 9000 certification is relatively easy to achieve because little documentation on
quality control procedures is needed.
True

False

5. A product can have a high quality design but have a low quality of conformance.
True

False

6. The information in a quality cost report can be used to help managers determine if
their quality costs are poorly distributed.
True

False

Multiple Choice Questions

App2B-3
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.


7. In order to reduce its overall quality costs, a company should focus most of its efforts
on:

A.
B.
C.
D.

internal failure costs.
external failure costs.

8. If a company wants to decrease its total quality cost, it would usually be best to
spend more money on:

A.
B.
C.
D.
E.

internal and external failure.

prevention and internal failure.
appraisal and external failure.
appraisal and internal failure.

9. The cost of warranty repairs would be classified as a(n):

A.
B.
C.
D.

internal failure co
external failure cos

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

A.
B.
C.
D.

Re-entering data because of keying errors.
Quality data gathering, analysis, and reporting.
Debugging software errors.
Test and inspection of in-process goods.

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

A.
B.
C.
D.

Supervision of testing and inspection activities.
Systems development.
Quality engineerin

App2B-4
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.


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

A.
B.
C.
D.

Technical support provided to suppliers.
Rework labor and overhead.
Debugging software errors.

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

A.

B.
C.
D.

Downtime caused by quality problems.
Supplies used in testing and inspection.
Quality engineerin

14. Which of the following would be classified as an external failure cost on a quality cost
report?

A.
B.
C.
D.

Depreciation of test equipment.
Re-entering data because of keying errors.
Rework labor and overhead.
Liability arising from defective products.

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

A.
B.
C.
D.

Quality improvement projects.

Disposal of defective products.
Depreciation of test equipment.
Final product testing and inspection.

16. Which of the following would be classified as an internal failure cost on a quality cost
report?

A.
B.
C.
D.

Supervision of testing and inspection activities.
Re-entering data because of keying errors.
Cost of field servicing and handling complaints.
Depreciation of test equipment.

App2B-5
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.


17. Which of the following would be classified as an external failure cost on a quality cost
report?

A.
B.
C.
D.

Rework labor and overhead.
Downtime caused by quality problems.

18. Which of the following would be classified as an internal failure cost on a quality cost
report?

A.
B.
C.
D.

Warranty repairs and replacements.
Supplies used in testing and inspection.
Debugging software errors.
Final product testing and inspection.

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

A.
B.
C.
D.

Re-entering data because of keying errors.
Rework labor and overhead.
Technical support provided to suppliers.

20. Which of the following would be classified as an external failure cost on a quality cost
report?

A.
B.
C.
D.

Quality engineering.
Systems development.

21. Which of the following would be classified as an internal failure cost on a quality cost
report?

A.
B.
C.
D.

Re-entering data because of keying errors.
Final product testing and inspection.
Supplies used in testing and inspection.
Depreciation of test equipment.

App2B-6
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.


Fabri Company's quality cost report is to be based on the following data:

22. What would be the total prevention cost appearing on the quality cost report?

A.
B.
C.
D.
23. What would be the total appraisal cost appearing on the quality cost report?

A.
B.
C.
D.
24. What would be the total internal failure cost appearing on the quality cost report?

A.
B.
C.
D.
25. What would be the total external failure cost appearing on the quality cost report?

A.
B.
C.
D.

App2B-7
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.


Eagan Company's quality cost report is to be based on the following data:

26. What would be the total prevention cost appearing on the quality cost report?

A.
B.
C.
D.
27. What would be the total appraisal cost appearing on the quality cost report?

A.
B.
C.
D.
28. What would be the total internal failure cost appearing on the quality cost report?

A.
B.
C.
D.
29. What would be the total external failure cost appearing on the quality cost report?

A.
B.
C.
D.

App2B-8
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.

Faber Company's quality cost report is to be based on the following data:

30. What would be the total prevention cost appearing on the quality cost report?

A.
B.
C.
D.
31. What would be the total appraisal cost appearing on the quality cost report?

A.
B.
C.
D.
32. What would be the total internal failure cost appearing on the quality cost report?

A.
B.
C.
D.
33. What would be the total external failure cost appearing on the quality cost report?

A.
B.
C.
D.

App2B-9
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of

McGraw-Hill Education.


Eagle Company's quality cost report is to be based on the following data:

34. What would be the total prevention cost appearing on the quality cost report?

A.
B.
C.
D.
35. What would be the total appraisal cost appearing on the quality cost report?

A.
B.
C.
D.
36. What would be the total internal failure cost appearing on the quality cost report?

A.
B.
C.
D.
37. What would be the total external failure cost appearing on the quality cost report?

A.
B.
C.
D.

App2B-10
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.


Essay Questions

38. Harui Company's quality cost report is to be based on the following data:

Required:
Prepare a Quality Cost Report in good form with separate sections for prevention
costs, appraisal costs, internal failure costs, and external failure costs.

App2B-11
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.


39. Galati Company's quality cost report is to be based on the following data:

Required:
Prepare a Quality Cost Report in good form with separate sections for prevention
costs, appraisal costs, internal failure costs, and external failure costs.

App2B-12
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.


40. Falstaff Company's quality cost report is to be based on the following data:

Required:
Prepare a Quality Cost Report in good form with separate sections for prevention
costs, appraisal costs, internal failure costs, and external failure costs.

App2B-13
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.


41. Harvie Company's quality cost report is to be based on the following data:

Required:
Prepare a Quality Cost Report in good form with separate sections for prevention
costs, appraisal costs, internal failure costs, and external failure costs.

App2B-14
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.


42. Galant Company's quality cost report is to be based on the following data:

Required:
Prepare a Quality Cost Report in good form with separate sections for prevention
costs, appraisal costs, internal failure costs, and external failure costs.

App2B-15
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.

Appendix 02B Cost of Quality Answer Key

True / False Questions

1.

Quality of conformance is the degree to which an actual product meets its design
specifications and is free of defects or other problems that might affect
appearance or performance.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02B-09 Identify the four types of quality costs and explain how they interact.

2.

An increase in appraisal costs will usually result in a decrease in internal failure
costs.
FALSE
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Decision Making
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02B-09 Identify the four types of quality costs and explain how they interact.

3.

Internal failure costs result from identification of defects during the appraisal
process. Such costs may include scrap, rejected products, rework, and downtime.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02B-09 Identify the four types of quality costs and explain how they interact.

4.

ISO 9000 certification is relatively easy to achieve because little documentation on
quality control procedures is needed.
FALSE
AACSB: Reflective Thinking
AICPA BB: Global
App2B-16
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.


AICPA FN: Reporting
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02B-09 Identify the four types of quality costs and explain how they interact.

5.

A product can have a high quality design but have a low quality of conformance.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02B-09 Identify the four types of quality costs and explain how they interact.

6.

The information in a quality cost report can be used to help managers determine if
their quality costs are poorly distributed.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Reporting
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02B-10 Prepare and interpret a quality cost report.

Multiple Choice Questions

App2B-17
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.

7.

In order to reduce its overall quality costs, a company should focus most of its
efforts on:

A
pr
.ev
en
ti
on
co
st
s.
Bap
.pr
ai
sa
l
co
st
s.
Cint
.er
na
l
fai
lur
e
co

st
s.
D
ex
.te
rn
al
fai
lur
e
co
st
s.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Decision Making
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02B-09 Identify the four types of quality costs and explain how they interact.

App2B-18
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.


App2B-19
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.

8.

If a company wants to decrease its total quality cost, it would usually be best to
spend more money on:

Apr
.e
v
e
nt
io
n.
B
int
.er
na
l
an
d
ex
te
rn
al
fai
lur
e.
C
pr
.ev
en

tio
n
an
d
int
er
na
l
fai
lur
e.

App2B-20
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.


D
ap
.pr
ai
sa
l
an
d
ex
te
rn
al
fai

lur
e.
Eap
.pr
ai
sa
l
an
d
int
er
na
l
fai
lur
e.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Decision Making
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02B-09 Identify the four types of quality costs and explain how they interact.

App2B-21
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.


9.

The cost of warranty repairs would be classified as a(n):

Apr
.ev
en
ti
on
co
st.
Ba
.p
pr
ai
sa
l
co
st.
Cint
.er
na
l
fai
lur
e
co
st.
D
ex
.te
rn

al
fai
lur
e
co
st.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02B-09 Identify the four types of quality costs and explain how they interact.

App2B-22
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.


App2B-23
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.


10.

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

A
Re

.en
ter
in
g
da
ta
be
ca
us
e
of
ke
yi
ng
err
or
s.
B
Qu
.ali
ty
da
ta
ga
th
eri
ng
,
an
al

ysi
s,
an
d
re
po
rti
ng
.

App2B-24
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.


C
D
.eb
ug
gi
ng
so
ft
w
ar
e
er
ro
rs.
D

Te
.st
an
d
in
sp
ec
tio
n
of
inpr
oc
es
s
go
od
s.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02B-09 Identify the four types of quality costs and explain how they interact.
Learning Objective: 02B-10 Prepare and interpret a quality cost report.

App2B-25
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.