14) The cost of inspection at various stages of production is an example of what type of cost?
A) Appraisal cost
B) External failure cost
C) Prevention cost
D) Internal failure cost
15) The cost of reengineering the production process to reduce defect rate is an example of which of the following?
A) Internal failure cost
B) Appraisal cost
C) External failure cost
D) Prevention cost
16) What do you call the costs incurred to avoid production of poor quality goods or services?
A) External failure costs
B) Internal failure costs
C) Appraisal costs
D) Prevention costs
17) The cost of warranty work comes under which of the following cost categories?
A) Appraisal cost
B) Internal failure cost
C) External failure cost
D) Prevention cost
18) The cost to improve equipment and processes comes under which of the following cost categories?
A) Prevention cost
B) External failure cost
C) Appraisal cost
D) Internal failure cost
19) The cost of product liability claims comes under which category of costs?
A) Appraisal cost
B) Prevention cost
C) Internal failure cost
D) External failure cost
20) The lost profits from losing customers would come under which of the following categories?
A) Prevention cost
B) Appraisal cost
C) External failure cost
D) Internal failure cost
21) The cost of training personnel is an example of an:
A) appraisal cost.
B) prevention cost.
C) internal failure cost.
D) external failure cost.
22) Losses caused by downtime in the production process are considered a(n):
A) external failure cost.
B) prevention cost.
C) appraisal cost.
D) internal failure cost.
23) Perkins Company has been experiencing lost sales and high returns recently, so they decided to undertake a comprehensive quality program. Here are factors being considered:
Finished products need to be inspected before shippingEstimated cost: $45,000
Production equipment needs upgradingEstimated cost: $400,000
Perkins knows that if it undertakes this program, it will be able to reduce warranty repair costs by $25,000. They also know they will be able to avoid lost profits by retaining customers, but they cannot quantify that benefit with any degree of precision. Should Perkins go ahead with the quality program?
A) Yes, they should, regardless of any other considerations.
B) No, they should not.
C) They should, only if the benefit of avoiding lost profits is estimated to be over $420,000.
D) They should, only if the benefit of avoiding lost profits is estimated to be over $445,000.
24) Pollenti Company has just merged with another industrial firm whose business had been failing. Pollenti immediately conducted a thorough study of the new company's work processes, and produced a report including the data shown below:
•A new inspection process is recommended to minimize defective raw materials. It would cost $12,000 to implement.
•Shoddy business practices are resulting in excessive warranty costs?$15,000 more than normal due mainly to material failure.
•Reengineering of the assembly line will increase productivity. It would cost $18,000 to implement.
•Inefficient workplace design is costing $5,000 in unnecessary rework costs.
•Estimated amount of lost profits due to dissatisfied customers who turn to the competition is $80,000.
Based on the above, what is the amount of prevention costs, if any, included here?
A) $18,000
B) $12,000
C) $15,000
D) Zero
25) Pollenti Company has just merged with another industrial firm whose business had been failing. Pollenti immediately conducted a thorough study of the new company's work processes, and produced a report including the data shown below:
•A new inspection process is recommended to minimize defective raw materials. It would cost $12,000 to implement.
•Shoddy business practices are resulting in excessive warranty costs?$15,000 more than normal due mainly to material failure.
•Reengineering of the assembly line will increase productivity. It would cost $18,000 to implement.
•Inefficient workplace design is costing $5,000 in unnecessary rework costs.
•Estimated amount of lost profits due to dissatisfied customers who turn to the competition is $80,000.
Based on the above, what is the amount of appraisal costs, if any, included here?
A) $18,000
B) $12,000
C) $15,000
D) Zero
26) Pollenti Company has just merged with another industrial firm whose business had been failing. Pollenti immediately conducted a thorough study of the new company's work processes, and produced a report including the data shown below:
•A new inspection process is recommended to minimize defective raw materials. It would cost $12,000 to implement.
•Shoddy business practices are resulting in excessive warranty costs?$15,000 more than normal due mainly to material failure.
•Reengineering of the assembly line will increase productivity. It would cost $18,000 to implement.
•Inefficient workplace design is costing $5,000 in unnecessary rework costs.
•Estimated amount of lost profits due to dissatisfied customers who turn to the competition is $80,000.
Based on the above, what is the amount of internal failure costs, if any, included here?
A) $5,000
B) $12,000
C) $15,000
D) Zero
27) Pollenti Company has just merged with another industrial firm whose business had been failing. Pollenti immediately conducted a thorough study of the new company's work processes, and produced a report including the data shown below:
•A new inspection process is recommended to minimize defective raw materials. It would cost $12,000 to implement.
•Shoddy business practices are resulting in excessive warranty costs?$15,000 more than normal due mainly to material failure.
•Reengineering of the assembly line will increase productivity. It would cost $18,000 to implement.
•Inefficient workplace design is costing $5,000 in unnecessary rework costs.
•Estimated amount of lost profits due to dissatisfied customers who turn to the competition is $80,000.
Based on the above, what is the amount of external failure costs, if any, included here?
A) $5,000
B) $12,000
C) $95,0