Ch 3, Module 4 Flashcards
what is the purpose of financial and nonfinancial performance measures
designed to provide feedback that will motivate appropriate employee behaviors
financial measures
meant to promote financial effectiveness
financial scorecards, Roi, ROA, ROE etc
nonfinancial measures
meant to promote operating effectiveness
- TFP
- PPR
Total factor productivity ratios
all quantity output / cost of all inputs
partial productivity ratio
quantity of output produced / quantity of a specific input
control chart
important tool used in statistical quality control (SQC).
graphical tool used to plot a comparison of actual results by batch or other suitable constant interval to an acceptable range
show if there is a trend toward improved quality or deteriorating
pareto diagrams
used to determine the frequency of defects that often demand the greatest attention
shows frequency of defects from highest to lowest frequency
cause-and-effect (fishbone) diagram
provide a framework for managers to analyze the problems that contribute to the occurrence of defects. Productions processes that lead to the manufacture of an item are displayed along a production line in a manner that looks like a fishbone. Mangers use the diagram to identify the sources of problems in the production process by resource and take corrective action
cost SBU
managers are held responsible for controlling cost
revenue SBU
managers are held responsible for generating revenue
profit SBU
managers are held responsible for achieving a target profit
Investment SBU
managers are held responsible for return on assets invested
contribution margin
= revenue - variable cost
controllable margin
= CM - controllable fixed cost
controllable cost
fixed costs that managers can influence in less than one year
balanced scorecard
gathers informatino on multiple dimensions of an organization’s performance defined by critical success factors necessary to accomplish the firm’s strategy
components included in the balance scorecard
financial
internal business processes - effectiveness and efficiency of operations
customer satisfaction
advancement of innovation and human resources development (Learning and growth) - employees
quality defined
product’s ability to meet or exceed customer expectations
conformance cost
costs of ensuring conformance with wuality standards are classifed as prevention and appraisal costs
What are the types of conformance cost
prevention cost - incurred to prevent the production of defective units
appraisal costs - to discover and remove defective parts BEFORE they are shipped to the customer or the next department
Nonconformance cost
hard to compute because they also come in the form of opportunity costs (lost sales or reputation damage)
internal failure - costs to cure a defect discovered before the product is sent to the customer (rework cost, scrap, toolin, cost to dispose)
external failure - costs to cure a defect discovered after the product is sent to the customer (warrant costs, cost of return, liability claim, lost customer) –> the worst!
What kind of relatinoship is there between spending on the conformance vs nonconformance costs?
inverse
