BEC 1.2 Flashcards
Operations Mgmt: Performance Mgmt & Impact of Measures on Behavior
Explain the purpose of a balanced scorecard
Framework used for implementing strategy that converts an entity’s strategic objectives into a set of performance measures
What are the total factor productivity ratios (TFP) and partial productivity ratios (PPR)?
TFP and PPR are 2 types of productivity measures used as external benchmarks.
Total factor productivity ratios (TFPs) reflect the quantity of all output produced relative to the costs of all inputs used.
Partial productivity ratios (PPRs) reflect the quantity of output produced relative to the quantity of individual inputs used.
What is a control chart and how is it used as a statistical quality-control tool?
A control chart is used to plot a comparison of actual results by batch or other suitable constant internal to an acceptable range.
Control charts effectively indicate whether there is a trend toward improved quality conformance or deteriorating quality conformance
How are Pareto diagrams and fishbone diagrams used to identify quality-control issues (defects)?
A Pareto diagram identifies the frequency (highest to lowest) of defects or problems that demand management attention
Once intially identified in the Pareto diagram, the individual defects/problems are further analyzed by cause and effect in a fishbone diagram
What are the characteristics of effective performance measures?
Effective performance measures:
- Relate to the goals of the organization
- Balance long- and short- term issues
- Reflect mgmt of key activities sometimes referred to as critical success factors in the balanced scorecard
- Are under the control or influence of the employee
- Are understood by the employee
- Are used to both evaluate and reward the employee or otherwise constructively influence behavior
- Are objective and are easily measured.
- Are used consistently
Define transaction marketing
Customers are attracted for the sake of a single sale
Define interaction-based relationship marketing
When customers are attracted for the purpose of a sale that serves as the basis for an ongoing relationship
Define database marketing
Information is gathered on customers and the information from that database is used to segment customers into target markets for a more effective selling effort
Identify three types of compensation generally available
- Fixed salary
- Bonuses
- Perks
List 5 issues related to incentive compensation
- Time horizon - Does the plan exclusively emphasize current reward for current performance or does it promote ongoing performance?
- Fixed vs. variable bonuses - Is the incentive pay formula driven or subjective?
- Stock vs. accounting-based performance valuation - Is the measurement of performance based on accounting data or equity values?
- Local vs. company-wide performance - Does the incentive reward for local (division) or company-wide performance?
- Cooperative vs. competitive plans - Does the incentive reward group or individual accomplishment?
Name the 3 components of produc cost and identify which of these components are categorized as prime cost and conversion costs
Direct materials (DM) Direct labor (DL) Manufacturing overhead (Mfg Ovhd)
Prime Cost = DM + DL
Conversion Costs = DL + Mfg Ovhd
Distinguish between product and period cost
Product Costs: Inventorial - become COGS when sold
Period Costs: Expensed in period incurred as they are not inventoriable
Name the 3 most frequent objectives of an entity’s cost accounting system(s).
- Product costing (inventory and cost of goods manufactured and sold).
- Efficiency measurements (comparison to standards)
- Income determination (profitability)
Determine the traditional overhead rate
Traditional overhead rate = Budgeted mfg ovhd costs / Est. cost driver
Define relevant range
Range of volume for which the assumptions of the cost driver (i.e., linear relationship with the costs incurred) are valid and in which the actual value of the cost driver exist
Compare and contrast the direct method and step-down method for allocating service costs in activity-based costing.
Under direct method - each service dept’s total costs are directly allocated to the production departments without recognizing that the service departments themselves may use the services from other service departments
Under step-down method - sequential approach is used to allocate service department costs to production departments as well as other service departments
With joint products, what is the treatment of costs incurred before the split-off point?
Costs incurred before the split-off point are sunk costs, not relevant to further processing decisions
Joint costs are allocated by an arbitrary means such as by unit volume relationships or relative net realizable values at the split-off point
What is the formula for cost of goods manufactured?
(B)eginning WIP (beginning)
(A)dd Add: DM + DL + Mfg Ovhd
(S)ubtract Less: WIP (ending)
(E)nding COG Manufactured
What is the formula for COGS?
Manufacturing entity: Finished goods (beg) \+ COG manufactured - Finished goods (ending) = COGS
Alternative formula Beginning inventory \+ Purchases - Ending inventory =COGS
What is the difference between job and process costing?
Job Costing
With job costing, each unit/batch is unique and easily identifiable costs are determined by each job
Ex: We print your resume in our print shop
Process Costing:
With process costing, continuous mass-produced identical units are manufactured, and costs are determined by activity/process/department
Ex: We process crude oil into gasoline
What is an equivalent unit and how are the costs applied?
Used in process costing, equivalent units are fully completed and partially completed units during the period
In applying costs, determine the units, then costs, then apply the cost flow assumption for cost per unit and allocation of costs
How are equivalent units and total cost calculated using the FIFO method?
Equivalent units =
(Beginning WIP x % to be completed)
+ Units started and completed
+ (Ending WIP x % completed)
Total costs = Cost incurred during the current period
How are equivalent units and total cost calculated using the weighted average method?
Equivalent units = Units completed and transferred out + (Ending WIP x % completed)
Total costs = Costs in beginning WIP + Costs incurred during the current period
Name the types of spoilage and indicate the appropriate accounting treatment
Abnormal: Charge to income of the current period
Normal: Increase the cost of the product produced (i.e., inventory)
Define activity-based costing (ABC)
ABC is a costing theory that assumes that resource consuming activities cause costs and that costs should be assigned to benefiting products based on the activities performed and the resources consumed.
ABC systems often divide costs into multiple activity centers and identify the activities that drive the costs in each cost center. Costs are then assigned based on the volume of cost drivers at the determined rate per cost driver.
