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QUESTION NO: 1
A company with many branch stores has decided to use its best-performing store as a benchmark organization for the purpose of analyzing the accuracy and reliability of branch store financial reporting.
Which one of the following is the most likely measure to be included in a financial benchmark?
A. High turnover of employees.
B. High level of employee participation in setting budgets.
C. High amount of bad debt write-offs.
D. High number of suppliers.
Answer: C
Explanation:
Internal benchmarking is the application of best practices in one part of the organization (e.g., a high-performing branch store) to its other parts (other branches). This process requires, among other things, use of quantitative and qualitative measures. A key indicator for financial performance measurement is the amount of bad debt write-offs. A high level of bad debt write-offs could indicate fraud, which would compromise the accuracy and reliability of financial reports. Bad debt write-offs may result from recording fictitious sales.
QUESTION NO: 2
Which of the following costs of quality is a failure cost?
A. Systems development costs.
B. Costs of inspecting in-process items.
C. Contract penalty for delivery of nonconforming goods.
D. Costs of quality circles.
Answer: C
Explanation:
Failure costs are incurred after defective output has been removed from production. A contract penalty for faulty goods is an example of an external failure cost.
QUESTION NO: 3
A traditional quality control process in manufacturing consists of mass inspection of goods only at the end of a production process. A major deficiency of the traditional control process is that:
A. It is expensive to do the inspections at the end of the process.
B. It is not possible to rework defective items.
C. It is not 100% effective.
D. It does not focus on improving the entire production process.
Answer: A
Explanation:
The process used to produce the goods is not thoroughly reviewed and evaluated for efficiency and effectiveness. Preventing defects and increasing efficiency by improving the production process raises quality standards and decreases costs.
QUESTION NO: 4
In which of the following organizational structures does total quality management (TQM) work best?
A. Hierarchal.
B. Teams of people from the same specialty.
C. Teams of people from different specialties.
D. Specialists working individually.
Answer: C
Explanation:
TQM advocates replacement of the traditional hierarchal structure with teams of people from different specialties. This change follows from TQM's emphasis on empowering employees and teamwork. Employees should (1) have proper training, necessary information, and the best tools;
(2) be fully engaged in the decision process; and (3) receive fair compensation. If such empowered employees are assembled in teams of individuals with the required skills, TQM theorists believe they will be more effective than people performing their tasks separately in a rigid structure.
QUESTION NO: 5
Focusing on customers, promoting innovation, learning new philosophies, driving out fear, and providing extensive training are all elements of a major change in organizations. These elements are aimed primarily at:
A. Copying leading organizations to better compete with them.
B. Focusing on the total quality of products and services.
C. Being efficient and effective at the same time, in order to indirectly affect profits.
D. Managing costs of products and services better, in order to become the low-cost provider.
Answer: B
Explanation:
TQM is a comprehensive approach to quality. It treats the pursuit of quality as a basic organizational function that is as important as production or marketing. TQM is the continuous pursuit of quality in every aspect of organizational activities through (1) a philosophy of doing it right the first time; (2) employee training and empowerment; (3) promotion of teamwork; (4) improvement of processes; and (5) attention to satisfaction of customers, both internal and external. TQM emphasizes the supplier's relationship with the customer, identifies customer needs, and recognizes that everyone in a process is at some time a customer or supplier of someone else, either inside or outside of the organization.
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Updated: May 27, 2022