1. Which of the following statements best describes the relationship among the c

ID: 2489845 • Letter: 1

Question

1. Which of the following statements best describes the relationship among the costs of quality?
A. Spending more on prevention and appraisal costs will increase the total overall costs of quality.
B. Adequate spending on prevention and appraisal costs will eliminate all internal and external failure costs.
C. The amount spent on prevention and appraisal costs has no impact on the amount spent on internal and external failure costs.
D. Spending more on prevention and appraisal costs will reduce the total overall costs of quality.

2. Sifton Electronics Corporation manufactures and assembles electronic motor drives for video cameras. The company assembles the motor drives for several accounts. The process consists of a just-in-time cell for each customer. The following information relates only to one customer's just-in-time cell for the coming year. Projected labor and overhead, $7,370,000; materials costs, $28 per unit. Planned production included 4,000 hours to produce 27,500 motor drives. Actual production for August was 1,600 units, and motor drives shipped amounted to 1,380 units.

From the foregoing information, determine the production costs transferred to Finished Goods during August.
A. $428,800
B. $473,600
C. $408,480
D. $369,840

Explanation / Answer

Answer

Answer 1

Which of the following statements best describes the relationship among the costs of quality?

Answer : D. Spending more on prevention and appraisal costs will reduce the total overall costs of quality.

Explanation:

Costs of quality or quality costs does not mean the use of expensive or very highly quality materials to manufacture a product. The term refers to the costs that are incurred to prevent, detect and remove defects from products. Quality costs are categorized into four main types. These are:

These four types of quality costs are briefly explained below:

Prevention costs:

It is much better to prevent defects rather than finding and removing them from products. The costs incurred to avoid or minimize the number of defects at first place are known as prevention costs. Some examples of prevention costs are improvement of manufacturing processes, workers training, quality engineering, statistical process control etc.

Appraisal costs:

Appraisal costs (also known as inspection costs) are those cost that are incurred to identify defective products before they are shipped to customers. All costs associated with the activities that are performed during manufacturing processes to ensure required quality standards are also included in this category. Identification of defective products involve the maintaining a team of inspectors. It may be very costly for some organizations.

Internal failure costs:

Internal failure costs are those costs that are incurred to remove defects from the products before shipping them to customers. Examples of internal failure costs include cost of rework, rejected products, scrap etc.

External failure costs:

If defective products have been shipped to customers, external failure costs arise. External failure costs include warranties, replacements, lost sales because of bad reputation, payment for damages arising from the use of defective products etc. The shipment of defective products can dissatisfy customers, damage goodwill and reduce sales and profits.

Answer 2

Figures in $

Particulars

Amount

Projected labor and overhead

7370000

Planned production ( motor drives)

27,500

Projected labor and Overhead per motor drive (a/b)

268

Materials costs per motor drive

Total cost per motor drive (c+d)

296

Actual production for August

1,600

production costs transferred to Finished Goods during August (e*f)

473600

Answer : B. $ 473,600