ABC Can Be Used to Determine the Costs of Quality

question 80

Multiple Choice

ABC can be used to determine the costs of quality and to help refine quality strategies. Quality activities are commonly classified as:

• A) Internal or external
• B) Value-added or non-value-added
• C) Prevention, appraisal, production, or post-sales
• D) Process-oriented or job-oriented

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Definitions:

Indirect Expenses

Costs that are not directly attributable to the production of goods or services, such as administrative and marketing expenses.

Investment Center

A business unit within a company that is responsible for its own revenue, expenses, and investment of capital, often evaluated on its return on investment.

Residual Income

The net income an entity generates above its required rate of return or cost of capital.

Return On Investment

A performance measure used to evaluate the efficiency or profitability of an investment, calculated by dividing net profit by the cost of the investment.