11) What are costs of qualities (COQ)?

12) What is the most direct financial measure of quality?

13) The managerial accountant at Change Organization needs to determine the total indirect Research and Development (R&D) cost associated with a new machine. The manager revealed total revenues were $4,000,000; and reported that the only prevention cost to allocate were 20,000 hours assigned to R&D at $35 per hour. The manager’s report indicated that the there were no direct costs associated with the machine because there were no resources assigned to the management of quality of the machines.

Required:

Compute the total cost and the percent of revenues associated with the Research and Development at Change Organization.

A) $500,000 total cost; 15.5% of revenues

B) $600,000 total cost; 16.5% of revenues

C) $700,000.total cost; 17.5% of revenues

D) $800,000 total cost; 18.5% of revenues

E) $900,000 total cost; 19.5 % of revenues

14) The Lighthouse Factory manufactures lighthouses, and the managers sell them to the tourists in Rodanthe, North Carolina. A manager revealed that total revenues of lighthouses were $3,500,000. The only indirect appraisal costs associated with 15,000 hours of inspections in manufacturing were $20 per hour. The manager’s report indicated that the there were no direct costs associated with the machine because there were no resources assigned to the management of quality of the machines.

Required:

Compute the total cost and the percent of revenues associated with the inspections at the Lighthouse Factory.

A) $275,000 total cost; 5.62% of revenues.

B) $300,000 total cost; 8.57% of revenues.

C) $350,000 total cost; 9.64% of revenues.

D) $400,000 total cost; 2.08% of revenues.

E) $450,000 total cost; 2.50% of revenues.

15) The managerial accountant at the Candle Factory reported $325,000,000 in revenues and the following external failure costs in 2012:

Cost of Quality Category

 

External failure costs

Estimated forgone contribution margin$14,000,000

and income on lost sales

Total failure costs$325,000,000

Required

Compute the external failure cost to percent of revenues of associated with this loss.

A) 4.00%

B) 4.10%

C) 4.20%

D) 4.30%

E) 4.40%

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