The Upper Limit and Lower Specifications for a Service Are

question 141

Multiple Choice

The upper limit and lower specifications for a service are 5.0 min. and 3.0 min., respectively. The process standard deviation is 0.4 min. and the process average is 4.0 min. What conclusion can be drawn?

• A) The process is capable.
• B) The process is not capable.
• C) The specifications should be changed to 4.2 and 3.8 respectively.
• D) No out- of- spec. services will be performed.

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Definitions:

Activity-Based Costing

A pricing technique that allocates expenses to goods or services according to the tasks and materials involved in their creation.

Activity Cost Pools

A costing method that groups all the costs associated with a specific activity, allowing more accurate allocation of costs to products or services.

Activity Cost Pools

Aggregations of all the overhead costs associated with specific activities, used in activity-based costing.

Customer Margin

The profit generated from a particular customer, calculated by subtracting the costs associated with serving that customer from the revenue they generate.