ESSAY:

1. What roles do management accountants play in TQM?

The role of management accountants in total quality management includes gathering
all relevant quality information, participating actively in all phases of the quality
program, and reviewing and disseminating quality cost reports.

2. How can management accountants meet the challenges of TQM?

To meet the challenges of total quality management, management accountants need
to have a clear understanding of TQM methodology. They must be able to design,
create, or modify information systems that measure and monitor quality and evaluate
progress toward total quality as expected of each organizational unit and the total
enterprise.

3. Describe JIT purchasing and its benefit.

Just-in-time (JIT) purchasing is the purchase of goods or materials such that a
delivery immediately precedes demand or use. Benefits include lower inventory
holdings (reduced warehouse space required and less money tied up in inventory) and
less risk of inventory obsolescence and spoilage.

4. What are the core principles of total quality management?

The core principles of TQM include (1) focusing on satisfying the customer, (2) striving
for continuous improvement, and (3) involving the entire work force.

5. Why is continuous quality improvement essential to achieve TQM and critical to an

organization’s success and competitive position?
Continuous improvement (Kaizen) in total quality management is the belief that
quality is not a destination; rather, it is a way of life and firms need to continuously
strive for better products with lower costs.
In today’s global competition, where firms are forever trying to outperform the
competition and customers present ever-changing expectations, a firm can never
reach the ideal quality standard and needs to continuously improve quality and
reduce costs to remain competitive.

6. What is cost of conformance?

Costs of conformance are costs incurred to ensure that products or services meet
quality standards and include prevention costs and appraisal costs.

7. What is cost of Nonconformance?

Internal and external failure costs are costs of non-conformance. They are costs
incurred or opportunity costs because of rejection of products or services.

8. Many organizations found that investment in prevention and appraisal usually

resulted in major cost savings in other areas. Explain this phenomenon.
Better prevention of poor quality often reduces all other costs of quality. With fewer
problems in quality, appraisal is needed because the products are made right the first
 time. Fewer defective units also reduce internal and external failure costs as the
occasion for repairs, rework, and recalls decrease.
It is easier to design and build quality in than try to inspect or repair quality in.
Theoretically, if prevention efforts are completely successful, there will be no need to
incur appraisal costs and there will be no internal failure or external failure costs. In
practice, appraisal costs usually do not decrease, partly because management needs
to ensure that quality is there as expected. Nonconformance costs, however, decrease
at a much faster pace than prevention costs increase.

9. Define quality.
Quality for a product or service can be defined as a “product or service that conforms
to a design which meets or exceeds the expectations of customers at a price they are
willing to pay.”

10. What is TQM?

Procter & Gamble defines TQM as “the unyielding and continually improving effort
by everyone in an organization to understand, meet, and exceed the expectations of
customers.” Typical characteristics of TQM include focusing on satisfying customers,
striving for continuous improvement, and involving the entire workforce.

11. At what point can a firm consider its effort to achieve total quality management
complete?
TQM is a continual effort and never completes. Global competition, new technology,
and ever-changing customer expectations make TQM a continual effort for a
successful firm.

12. Describe the 3 main measures used in the theory of accounts.

The three main measures used in the theory of constraints are:
i. Throughput contribution equal to sales revenue minus direct materials costs.
ii. Investments (inventory) equal to the sum of materials costs of direct materials
inventory, work-in-process inventory and finished goods inventory, research and
development costs, and costs of equipment and buildings.
iii. Other operating costs equal to all operating costs (other than direct materials)
incurred to earn throughput contribution.

13. Describe the four key steps in managing bottleneck operations.

The four key steps in managing bottleneck resources are:
Step 1: Recognize that the bottleneck operation determines throughput contribution.
Step 2: Search for, and find the bottleneck.
Step 3: Keep the bottleneck busy, and subordinate all non-bottleneck operations to the
bottleneck operation.
Step 4: Increase bottleneck efficiency and capacity.

14. What are the purposes of conducting a quality audit?

 The purposes of conducting a quality audit are to identify strengths and weaknesses
in quality practices and levels of a firm’s quality and to help the firm identify the
target areas for quality improvements.

15. What is gap analysis?

A gap analysis is a type of benchmarking that includes analyzing the differences in
practices between the firm and the best-in-class. The objective of gap analyses is to
identify strengths, weaknesses, and target areas for quality improvement.

16. Describe the processes for an effective implementation of TQM.

The Institute of Management Accountants (IMA) believes an effective implementation
of total quality management will take between three and five years and involves the
following tasks:
Year 1
a. Create a quality council and staff
b. Conduct executive quality training programs
c. Conduct quality audits
d. Prepare gap analysis
e. Develop strategic quality improvement plans
Year 2
a. Conduct employee communication and training programs
b. Establish quality teams
c. Create measurement systems and set goals
Year 3
a. Revise compensation / appraisal / recognition systems
b. Launch external initiatives with suppliers
c. Review and revise

17. What are the main features in a JIT production system?

Just-in-time (JIT) production is a “demand-pull” manufacturing system that has the
following features:

a. Organize production in manufacturing cells,

b. Hire and retain workers who are multi-skilled,
c. Aggressively pursue total quality management (TQM) to eliminate defects,
d. Place emphasis on reducing both setup time and manufacturing lead time, and
e. Carefully select suppliers who are capable of delivering quality materials in a
timely manner.

18. Why is it often necessary to revise a firm’s compensation and appraisal systems when
implementing TQM?
Reward and recognition are the best means of reinforcing the emphasis on TQM.
Moreover, proper reward and recognition structures can be very powerful stimuli to
promote TQM. Efforts and progress will most likely be short-lived if no change is
 made to the compensation / appraisal / recognition systems to make them in line with
the objectives of the firm’s TQM.

19. Describe how the internet can be used to reduce the cost of placing purchase orders.
The sequence of activities involved in placing a purchase order can be facilitated by
use of the Internet. A company can streamline the procurement process for its
customers – e.g., having online a complete price list, information about expected
shipment dates, and a service order capability that is available 24 hours a day with
email or fax confirmation.

20. What is reengineering?

Reengineering is the fundamental rethinking and redesign of business processes to
achieve improvements in critical measures of performance such as cost, quality,
service, speed, and customer satisfaction.

MULTIPE CHOICE: THEORIES

1.Ohio Corporation recently implemented a just-in-time (JIT) production system along

with a series of continuous improvement programs. If the firm is now considering
adopting a total quality management (TQM) program, it would likely find that TQM:
a. is consistent with both JIT and continuous improvement.
b. is consistent with JIT but inconsistent with continuous improvement.
c. is consistent with continuous improvement but inconsistent with JIT.
d. is inconsistent with both JIT and continuous improvement.
e. is an antiquated management technique.

2.Which of the preceding activities would likely not be considered part of The Gap clothing
company’s value chain?
a. Designing a new product line.
b. Locating and then negotiating terms with a clothing manufacturer.
c. Marketing an existing product line.
d. Distributing goods from regional warehouses to local stores.
e. All of the above activities would be an element in the company’s value chain.

3. The activities performed by a manufacturing organization could be categorized as pre-

production (such as research and development and product design), production-
related, and post-production (such as marketing and customer service). Which
activities should the firm focus on if management understands the value chain concept
and desires to meet organizational goals?
a. Pre-production activities.
b. Production-related activities.
c. Post-production activities.
 d. Pre-production, production-related, and post-production activities.
e. Pre-production and production-related activities.

4.In order for a company to achieve a sustainable competitive advantage, it must perform
value chain activities:
a. at the same quality level as competitors, at the same cost.
b. at the same quality level as competitors, but at a lower cost.
c. at a higher quality level than competitors, at a higher cost.
d. at a higher quality level than competitors, but at no greater cost.
e. at either the same quality level as competitors, but at a lower cost, or at a higher
quality level than competitors, but at no greater cost.

5. The process of managing the various activities in the value chain, along with the
associated costs, is commonly known as:
a. activity-based costing
b. strategic cost management
c. total quality management
d. computer-integrated costing
e. sound management practices (SMP)

6. A company has a bottleneck operation that slows production. Which of the following
tools or approaches could the firm use to determine the most cost-effective ways to
eliminate this problem?
a. Linear programming.
b. Theory of constraints.
c. Decision-tree diagrams.
d. Payoff matrices.
e. Strategic path analysis (SPA).

7. Which of the following can be linked to the relatively recent wave of corporate
scandals?
a. Greedy corporate executives.
b. Managers who make over-reaching business deals.
c. Lack of oversight by companies' audit boards and boards of directors.
d. Shoddy work by external auditors.
e. All of the above.

8. The focus on customers occurs in which functions of the value chain:

a. research and development
b. production
c. marketing
d. distribution
e. all of the above

9. In the value-chain, accounting is in the _____ function:

 a. research and development
b. design
c. support
d. customer service
e. distribution

10. Trends that are causing changes in management accounting today include:
a. advances in technology
b. increased global competition
c. a shift from a manufacturing to a service-based economy
d. a., b.
e. a., b., c.

11. The most dominant influence on management accounting over the past decade is:
a. increased global competition
b. a shift from a manufacturing to a service-based economy
c. advances in technology
d. none of the above

12. Conventional and just-in-time manufacturers both

a. Maintain large inventories of their products.
b. Sell only to other manufacturing companies.
c. Desire to meet customers' deadlines.
d. Require about the same amount of space to operate

13. The period that begins with the arrival of materials and ends with the shipment of a
completed good is the
a. cycle time.
b. manufacturing cell.
c. computer-integrated manufacturing.
d. performance period.

14. A just-in-time manufacturer is more likely than a conventional manufacturer to

a. receive more frequent deliveries of materials.
b. spend less money on advertising.
c. need workers with fewer skills.
d. all of the above.

15. A conventional manufacturer is more likely than a just-in-time manufacturer to

a. have a short production cycle.
b. produce goods in small batches.
c. hold large inventories to serve as buffers.
d. none of the above.

16. Which of the following statements is correct?

 a. Costs of controlling quality include prevention and appraisal costs
b. Costs of failing to control quality include internal and external failure costs
c. A and B are both correct
d. A and B are both incorrect.

17. All of the following except one are examples of prevention costs
a. preventive maintenance
b. operator training
c. design engineering
d. testing activities

18. The following are examples of external failure costs except

a. warranty work
b. returned merchandise
c. rework
d. correcting invoice errors

19. Which of the following statements best describes the relationship between costs of
quality?
a. The more that is spent on prevention and appraisal costs, the overall costs of
quality will be reduced
b. The more that is spent on prevention and appraisal costs, the overall costs of
quality will remain the same.
c. Overtime prevention and appraisal costs will eliminate all internal and external
costs.
d. Internal and external costs will increase as prevention and appraisal costs
increase.

20. Just-In-Time accounting has fewer transactions because

a. all manufacturing costs are combined in one account called Raw and In Process
Inventory
b. employees in production cells are required to perform various tasks, some are
considered direct costs and some are indirect costs. Therefore the distinction is
eliminated.
c. Less movement of inventory between department to department.
d. All of the above