Question 1

Which of the following are key components of a Total Quality Management system?

Accepted Answer

Customer focus, employee involvement, continual improvement, use of data and knowledge

Answer

Group responsibility, staged improvement, knowledge

Answer

Individual responsibility, incremental improvement, use of raw data

Answer

Collective responsibility, continual improvement, use of raw data

Question 2

Based on the attached statement, if TGC prepared a quality cost report for the year, what would be the total prevention costs?

Accepted Answer

$480 000

Answer

$450 000

Answer

$590 000

Answer

&#36;600 000

Question 3

Based on the attached statement, if TGC prepared a quality cost report for the year, what would be the total appraisal costs?

Accepted Answer

&#36;230 000

Answer

&#36;290 000

Answer

&#36;190 000

Answer

&#36;110 000

Question 4

Based on the attached statement, if TGC prepared a quality cost report for the year, what would be the total internal failure costs?

Accepted Answer

&#36;150 000

Answer

&#36;170 000

Answer

&#36;210 000

Answer

&#36;260 000

Question 5

Based on the attached statement, if TGC prepared a quality cost report for the year, what would be the total external failure costs?

Accepted Answer

&#36;50 000

Answer

&#36;90 000

Answer

&#36;100 000

Answer

&#36;80 000

Question 6

Which of the following is (are) the prerequisite(s) for Just In Time (JIT) manufacturing.

Accepted Answer

All the options are prerequisites

Answer

Vendor should produce defect free supplies

Answer

Worker should be empowered to make decisions on his own

Answer

Multi skilled workers working as a team

Answer

Close relationship with few suppliers

Question 7

Just-In-Time aims for

Accepted Answer

zero inventories

Answer

over production

Answer

reduced manpower

Answer

all the options are aims of JIT

Answer

increased numbers of suppliers

Question 8

A just-in-time (JIT) purchasing system may be defined as

Accepted Answer

A purchasing system in which the purchase of material is contracted so that the receipts and usage of material coincide.

Answer

A purchasing system which is based on estimated demand for finished products

Answer

A purchasing system which minimises the sum of inventory ordering costs and inventory holding costs.

Answer

A purchasing system where the purchase of material is triggered when inventory levels reach a pre-determined re-order level

Question 9

Which of the following is NOT associated with Just-In-Time?

Accepted Answer

JIT means getting it right the first time and improving continuously

Answer

JIT aims for zero inventory and perfect quality and operates by demand-pull

Answer

JIT production. Driven by demand for finished products whereby each component on a production line is produced only when needed for the next stage

Answer

Under JIT the manufacturing process becomes flexible, rapid and cost effective

Answer

JIT purchasing. Material purchases are contracted so that the receipt and usage of material to the maximum effect possible coincide

Question 10

Which of the statements about Kaizen costing is INACCURATE?

Accepted Answer

Kaizen costing is a process to re-engineer all company processes

Answer

Kaizen costing aims at reduction of non-value added activities and costs

Answer

Kaizen costing has a goal of improvements in the production cycle time

Answer

Kaizen costing focuses on obtaining small, incremental cost reductions during the production stage of the product life cycle.

Answer

Kaizen costing has the goal of elimination of waste

Question 11

Kaizen costing is different to traditional costing methods. ONE statement has an INCORRECT difference. Select the INCORRECT statement.

Accepted Answer

Traditional costing system will help with costs reductions whereas kaizen costing will help with staff reduction

Answer

Traditional costing methods are aimed at cost control, whereas Kaizen costing is aimed at cost reductions.

Answer

Traditional costing methods often see employees as the cause of the high costs, whereas Kaizen costing sees the employees as a source of ideas on how to reduce costs.

Answer

With traditional costing methods standards are set every 6 to 12 months, however, with Kaizen costing costs reduction is through continuous improvement to attain target profit or to reduce the gap between target and estimated profits.

Answer

Traditional costing does not require culture change but kaizen costing approach does

Question 12

One statement below concerning the six sigma methodology is INCORRECT. Select the INCORRECT statement.

Accepted Answer

Six sigma is a six step process involving problem definition, measurement of the problem, analysis of the data, implementation of a solution, the necessary control systems and monitoring of the solution

Answer

Six Sigma states that what customers are already satisfied with should not be measured

Answer

Six sigma states that only those measures which can be improved should be measured

Answer

The six sigma methodology can be implemented in five phases using the DMAIC method i.e. define, measure, analyse, improve and control.

Answer

Six sigma states that only those measures which are valued by the customer should be measured

Question 13

When using six sigma at the define phase the requirements should meet all the following criteria EXCEPT

Accepted Answer

Aspect of the product or service that satisfies the company's costing needs

Answer

Aspect of the product or service that exceeds the customers expectations, known as delighters

Answer

The customers minimum requirements

Answer

Aspect of the product or service that enhance the customers experiences (known as satisfiers)

Question 14

Target costing starts with determining the price the product could be sold for in the market. SELECT the one statement below that is INACCURATE

Accepted Answer

The market price will also depend on the estimated market share the company can gain. However, this estimation tend to be more reliable than estimating price and requires less experience

Answer

Adding features may make the product attractive enough to gain market share, however, the market maybe unwilling to pay extra for these additional features

Answer

The estimates are based on the success of similar products, however, if the underlying assumptions are incorrect and the contexts are different, then the estimates may be incorrect

Answer

The company, division or manager conducting the estimation may be inexperience, thereby questioning the validity of the estimates

Question 15

In target costing calculating the costs based on the profit margin has the following benefits EXCEPT?

Accepted Answer

The target cost is the number that the company must meet to beat the competitor

Answer

It ensure the company takes the external environment and competitors products into account

Answer

It ensures that profitability objectives can be met

Answer

The target cost will become the target for the internal unit costs to match, that is, the estimated internal cost per unit should be equal to or less than the target cost.

Question 16

In target costing, correctly estimating the costs of developing and producing the product depends on a number of factors. Which statement below is NOT one of those factors?

Accepted Answer

Estimated internal development costs is simple to achieve as this is all internal, no external considerations are required.

Answer

Target cost includes accounting for the fixed costs, some of these may be difficult to accurately estimate

Answer

Estimating the split of the fixed costs also depend on the estimated life of the product. If this is incorrect then the less units would produce higher share of the fixed costs and higher estimated internal costs.

Answer

Fixed costs are absorbed based on the estimated of the number of units to be sold. If this is incorrect, then the estimated internal costs will be incorrect.

Answer

Costs estimates will depend heavily on experience in estimating costs of new products.

Question 17

In target costing, where a cost gap (the estimation of internal costs is greater than the target cost), the following can be considered in trying to close the target cost gap EXCEPT?

Accepted Answer

Decide not to produce the product

Answer

Minimize or eliminate waste in areas such as inventory, transport, handling and floor layout and expensive staff (where retraining less expensive staff would be cheaper)

Answer

Remove features not valued by the market

Answer

Review the product design

Question 18

Target costing and Kaizen costing can intersect. Which of the following statements is INACCURATE

Accepted Answer

Kaizen and target costing are both methods for allocating overhead costs

Answer

Target costing can achieve large cost reductions at the design stage of the product. Kaizen costing, however, reduces costs in much smaller, incremental steps.

Answer

Usually, the target cost becomes the starting point for kaizen cost reductions

Answer

Unlike target costing, which occurs at the beginning of a product’s life, Kaizen costing is a process of long-term continuous improvement by cost reduction throughout the life of the product.

Question 19

Which of the following statements about lifecycle costing is INACCURATE?

Accepted Answer

Lifecycle costing includes all costs over the life of the product but not environmental costs.

Answer

Lifecycle costs includes: R&D, product design, market launch, production, sales, decommissioning, disposal costs and environmental costs (costs of compliance or fines)

Answer

It collates all costs over the life of a product not just a single accounting period

Answer

When all the lifecycle costs are considered the product may prove unprofitable and so not pursued.

Question 20

The following are all steps in the implementation of the target costing process for a product: (1) Calculate the target cost (Selling price less margin)

(2) Calculate the estimated current cost based on the existing product specification

(3) Set the required profit margin

(4) Set the selling price

(5) Calculate the target cost gap

(6) Explore ways to close the cost gap

Which of the following options represents the correct sequence if target costing was to be used?

Accepted Answer

(4), (3), (1), (2), (5), (6)

Answer

(2), (3), (4), (1), (5), (6)

Answer

(1), (2), (3), (4), (5), (6)

Answer

(4), (5), (3), (1), (2), (6)

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