Chapter 1 MCQ

1. D 11. D 21. B
2. D 12. A 22. D
3. B 13. A 23. D
4. D 14. A 24. B
5. A 15. D 25. C
6. D 16. A 26. D
7. D 17. D 27. B
8. A 18. D 28. D
9. D 19. D 29. D
10. D 20. B 30. D

Chapter 2 MCQ
1. B 11. D 21. A 31. B 41. B
2. B 12. C 22. C 32. B 22. A
3. A 13. D 23. D 33. A 43. A
4. A 14. B 24. B 34. C
5. B 15. D 25. C 35. D
6. C 16. B 26. B 36. C
7. B 17. C 27. A 37. C
8. D 18. B 28. B 38. C
9. B 19. A 29. C 39. A
10. C 20. A 30. D 40. B

Chapter 3 MCQ

1. A
2. D
3. D
4. A
5. B
6. D
7. A
Chapter 4 MCQ

Chapter 5 Matching Type

1. C 6. A
2. H 7. B
3. E 8. J
4. F 9. D
5. I 10. G

Chapter 5 MCQs

1. B 11. C 21. C
2. B 12. B 22. C
3. C 13. C 23. D
4. E 14. B 24. C
5. C 15. D 25. C
6. C 16. C 26. C
7. D 17. A 27. D
8. C 18. B 28. A
9. A 19. E 29. C
10. D 20. B 30. D
Chapter 6 Exercise 6 (Quality Improvement, Relevant Cost Analysis)

Requirement 1

Cost of new equipment and installation P12,000,000

Training 3,000,000
Total additional cost of the new process P15,000,000

Requirement 2

Quality cost if no change is made:

Rework 3,000 x 40% x P2,000 = P 2,400,000

Repair 3,000 x 15% x P2,500 = 1,125,000
Appraisal 600,000
Inspection 3,000 x P50 = 150,000
Lost contribution:
Contribution margin per unit P12,000 x 85% - P2,500 = P7,700

Lost sales 3,000  0.8 – 3,000 = x 750 5,775,000

Total current cost of quality P10,050,000
Quality cost with the new process:

Warranty repair 3,000  0.8 x 5% x P1,000 = – 187,500

Savings from the new process each year P 9,862,500
Years effective x 3
Total P29,587,500
Appraisal and inspection cost in Year 1 – 750,000
Total savings over 3 years P28,837,500

Requirement 3

Yes. The cost of the new process is P15,000,000 and the expected benefits is P28,837,500 over three
years. The firm can expect to earn a return of over 90%.
Requirement 4

The following factors should be considered before making the final decision:

a. Accuracy of cost estimates including

• Contribution margin per unit

• Costs of current repair and rework
• Cost of repair with the new process
• Cost of the new process
b. Reliability of estimations of

• Rates of rework and repair

• Lost sales
• Amount of time before the current product become obsolete
c. Reaction of competitors

Requirement 5

The member of the board would be right if we ignore the financial payoff of the new process and if
the firm is going to be in business for only three years. Having high quality products, especially for a
high-end product such as the one the firm is selling, is crucial for a long term success.
Chapter 6

Answer to Multiple Choice Questions

1. C 11. C 21. A 31. A 41. D

2. B 12. A 22. D 32. C 42. D

3. C 13. C 23. D 33. D 43. C

4. D 14. B 24. B 34. D 44. D

5. D 15. C 25. C 35. A 45. A

6. A 16. D 26. B 36. B 46. C

7. C 17. D 27. A 37. A 47. A

8. C 18. D 28. C 38. D

9. C 19. A 29. D 39. B

10. D 20. A 30. D 40. C

Chapter 7

Answer to Multiple Choice Questions

1. D 6. C

2. D 7. D

3. C 8. C

4. A 9. D

5. A 10. A
Chapter 8
Answer to Multiple Choice Questions
1. D 11. D 21. D
2. D 12. A 22. B
3. B 13. A 23. B
4. B 14. D 24. A
5. D 15. B 25. D
6. C 16. D
7. D 17. D
8. C 18. C
9. D 19. B
10. A 20. D