Multiple Choice Questions
1. External failure costs include:
a. Lost sales
b. Costs associated with product repairs made under warranty
c. Product recall costs
d. All of the above

2. Which of the following statements about prevention costs is true?
a. Prevention costs are generally incurred after problems occur.
b. Design and engineering costs are not properly considered prevention costs.
c. Generally, companies find that the incurrence of prevention costs reduces long-run product failure costs.
d. None of the above are true.

3. Which of the following statements regarding quality is true?
a. Over the past 25 years or so, the demand by customers for quality products and services at affordable prices has drastically changed the way companies do business.
b. Improving quality increases sales through higher customer satisfaction and demand, reduces costs, and increases the long-term profitability of companies.
c. Companies have focused on improving the quality of the products or the services they sell through a variety of initiatives, such as total quality management (TQM), market-driven quality, and strategic quality management.
d. All of the above are true.

4. Which of the following statements about productivity measures is true?
a. In order to be useful, productivity measures must be used in conjunction with activity-based costing.
b. In service organizations, productivity measures are important when evaluating the efficiency of personnel.
c. When using productivity measures, the focus is on reducing manufacturing cycle efficiency.
d. All of the above are true.

5. Productivity is a measure of:
a. The effectiveness of the relationships between a company and its customers
b. The leverage needed to generate efficient employees
c. The relationship between outputs and inputs
d. The return earned on the investment in production equipment

6. Which of the following is not a common metric used to measure efficiency and timeliness?
a. Manufacturing cycle time
b. Customer response time
c. Internal failure rate
d. Manufacturing cycle efficiency

7. Which of the following is not a likely environmental cost?
a. Cleaning contaminated water and soil
b. Costs related to recycling products
c. Contamination testing costs
d. Each of the above is an environmental cost.

8. Which of the following is not an appropriate category of environmental costs?
a. Prevention costs
b. Internal failure costs
c. Period costs
d. Detection costs