The Cost of Quality and Total Quality Management Quiz

30 Questions

According to Crosby, what costs money in relation to quality?

The actions that involve not doing jobs right the first time

What is the performance standard proposed by Crosby?

Zero Defects

What is the measurement of quality according to Crosby?

Price of Nonconformance

According to Deming, what does improving quality reduce?

Cost

What is the optimum quality level according to Deming?

Always achieved before maximum attainable profit is reached

What does Crosby propose will generate more revenues that exceed the cost of quality?

Improved quality that exceeds customer expectations

Which of the following is NOT an example of conformance as an aim of quality assurance?

Prevention planning

According to the 1:10:100 rule, how much will one dollar spent on prevention save on failure costs?

$100

What is the main benefit of using quality costing?

Greater accuracy in resource evaluation

What is the cost of waiting in the context of quality assurance?

Time wasted while waiting for other people

What is the purpose of collecting and reporting quality cost data?

To improve understanding of resource utilization

What is the 1:10:100 rule used for in quality assurance?

To prioritize expenditure on prevention

Which of the following is the definition of quality costs?

Costs associated with non-achievement of product/service quality

What is the purpose of calculating quality costs?

All of the above

Quality costs are estimated to be approximately what percentage of costs in the manufacturing industry?

25%

Who is responsible for enabling management to understand the implication of quality in terms of money?

Senior management

How can quality costing be used by senior management, shareholders, and financial institutions?

All of the above

What is the price of nonconformance also known as according to Philip Crosby?

Cost of poor quality

Which of the following is NOT an example of prevention cost?

Final inspection

Which of the following is an example of an internal failure cost?

Process downtime costs

What is the difference between prevention costs and appraisal costs?

Prevention costs are incurred to prevent defects from occurring, while appraisal costs are incurred to detect and measure defects.

Which of the following is an example of an external failure cost?

Lost sales costs

What is the difference between internal failure costs and external failure costs?

Internal failure costs are costs incurred due to poor-quality products within the organization, while external failure costs are costs incurred due to poor-quality products that have reached the customer.

Which of the following is NOT a classification of quality costs?

Delivery Delay

Which of the following is a step in preparing to measure costs of quality?

Assigning responsibility to collect data

What is the term used to describe the methodology that measures the cost and performance of resources, activities, and cost objects?

Activity Based Costing (ABC)

What is the main focus of Activity Based Management (ABM)?

Achieving customer value through the continuous management of activities

What was the term 'activity-based costing' created by?

Dr. Robert Kaplan

What is one of the benefits associated with Activity Based Costing (ABC)?

More precise cost information

What is the cost of achieving quality improvements and increased productivity often considered to be?

Small

Study Notes

Quality Costs and Management

According to Crosby, it is the price of nonconformance that costs money in relation to quality.
Crosby proposes a performance standard of "zero defects" and measures quality as conformance to specifications.
Improving quality reduces the cost of rework, inspection, and testing, as well as improves productivity, according to Deming.
The optimum quality level, according to Deming, is the point where the cost of improving quality equals the cost of failure.

Quality Costing

Crosby proposes that investing in quality will generate more revenues that exceed the cost of quality.
The 1:10:100 rule states that one dollar spent on prevention saves ten dollars on appraisal and correction, and one hundred dollars on failure.
The main benefit of using quality costing is to identify areas for improvement and optimize resource allocation.
The cost of waiting is the cost of not taking action to improve quality.

Classification of Quality Costs

Prevention costs include investments in quality planning, training, and process design.
Appraisal costs include the cost of inspecting and testing products.
Internal failure costs include the cost of rework, scrap, and downtime.
External failure costs include the cost of warranty claims, repairs, and replacements.
The difference between prevention costs and appraisal costs is that prevention costs aim to prevent defects, while appraisal costs aim to detect defects.

Activity-Based Costing (ABC)

The term used to describe the methodology that measures the cost and performance of resources, activities, and cost objects is Activity-Based Costing (ABC).
The main focus of Activity-Based Management (ABM) is to improve the efficiency of activities and processes.
ABC was created by Robert Kaplan and Robin Cooper.
One of the benefits associated with ABC is that it helps organizations identify and eliminate non-value-added activities.
The cost of achieving quality improvements and increased productivity is often considered to be an investment in quality.

Test your knowledge on the cost of quality and total quality management with this quiz. Explore topics such as prevention costs, appraisal costs, and the founders' perspective on quality. Sharpen your understanding of quality concepts and their impact on profitability and product design. Join the quiz now and enhance your knowledge on total quality management.

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