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Financial CIA-III Exam (page: 5)
Financial The Certified Internal Auditor Part 3
Updated on: 25-Dec-2025

Viewing Page 5 of 312
CIA-III PDF 1554 Questions

Quality costing is similar in service and manufacturing organizations. Nevertheless, the differences between these organizations have certain implications for quality management. Thus,

  1. Direct labor costs are usually a higher percentage of total costs in manufacturing organizations.
  2. External failure costs are relatively greater in service organizations.
  3. Quality improvements resulting in more efficient use of labor time are more likely to be accepted by employees in service organizations.
  4. Poor service is less likely to result in loss of customers than a faulty product.

Answer(s): B

Explanation:

External failure costs arise when problems occur after delivery. They occur because products or services are nonconforming or otherwise do not satisfy customers. External failure costs in service enterprises are even more important than in manufacturing environments. Faulty goods sometimes maybe reworked or replaced to a customer's satisfaction, but poor service tends to result in a loss of customers.



A means of limiting production delays caused by equipment breakdown and repair is to:

  1. Schedule production based on capacity planning.
  2. Plan maintenance activity based on an analysis of equipment repair work orders.
  3. Pre-authorize equipment maintenance and overtime pay.
  4. Establish a preventive maintenance program for all production equipment.

Answer(s): D

Explanation:

A preventive maintenance program reduces equipment breakdowns and repairs.



The cost of statistical quality control in a product quality cost system is categorized as a(n):

  1. Internal failure cost.
  2. Training cost.
  3. External failure cost.
  4. Appraisal cost.

Answer(s): D

Explanation:

The following are the four categories of quality costs: prevention, appraisal, internal failure, and external failure (lost opportunity). Appraisal costs include quality control programs, inspection, and testing. However, some authorities regard statistical quality and process control as preventive activities because they not only detect faulty work but also allow for adjustment of processes to avoid future defects.



An organization has collected data on the complaints made by personal computer users and has categorized the complaints.



Using the information collected, the organization should focus on:

  1. The total number of personal computer complaints that occurred.
  2. The number of computer complaints associated with CD-ROM problems and new software usage.
  3. The number of computer complaints associated with the lack of user knowledge and hardware problems.
  4. The cost to alleviate all computer complaints.

Answer(s): C

Explanation:

Complaints based on lack of user knowledge and hardware problems are by far the most frequent according to this chart. Consequently, the company should devote its resources primarily to these issues.



An organization has collected data on the complaints made by personal computer users and has categorized the complaints.


The chart displays the:

  1. Arithmetic mean of each computer complaint.
  2. Relative frequency of each computer complaint.
  3. Median of each computer complaint.
  4. Absolute frequency of each computer complaint.

Answer(s): D

Explanation:

This Pareto diagram depicts the frequencies of complaints in absolute terms. It displays the actual number of each type of complaint. The chart does not display arithmetic means, relative frequencies, or medians of each type of complaint.



Viewing Page 5 of 312



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