Ch 3, Module 4

Question 1

what is the purpose of financial and nonfinancial performance measures

Answer 1

designed to provide feedback that will motivate appropriate employee behaviors

Question 2

financial measures

Answer 2

meant to promote financial effectiveness

financial scorecards, Roi, ROA, ROE etc

Question 3

nonfinancial measures

Answer 3

meant to promote operating effectiveness

• TFP
• PPR

Question 4

Total factor productivity ratios

Answer 4

all quantity output / cost of all inputs

Question 5

partial productivity ratio

Answer 5

quantity of output produced / quantity of a specific input

Question 6

control chart

Answer 6

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

Question 7

pareto diagrams

Answer 7

used to determine the frequency of defects that often demand the greatest attention

shows frequency of defects from highest to lowest frequency

Question 8

cause-and-effect (fishbone) diagram

Answer 8

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

Question 9

cost SBU

Answer 9

managers are held responsible for controlling cost

Question 10

revenue SBU

Answer 10

managers are held responsible for generating revenue

Question 11

profit SBU

Answer 11

managers are held responsible for achieving a target profit

Question 12

Investment SBU

Answer 12

managers are held responsible for return on assets invested

Question 13

contribution margin

Answer 13

= revenue - variable cost

Question 14

controllable margin

Answer 14

= CM - controllable fixed cost

Question 15

controllable cost

Answer 15

fixed costs that managers can influence in less than one year

Question 16

balanced scorecard

Answer 16

gathers informatino on multiple dimensions of an organization’s performance defined by critical success factors necessary to accomplish the firm’s strategy

Question 17

components included in the balance scorecard

Answer 17

financial

internal business processes - effectiveness and efficiency of operations

customer satisfaction

advancement of innovation and human resources development (Learning and growth) - employees

Question 18

quality defined

Answer 18

product’s ability to meet or exceed customer expectations

Question 19

conformance cost

Answer 19

costs of ensuring conformance with wuality standards are classifed as prevention and appraisal costs

Question 20

What are the types of conformance cost

Answer 20

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

Question 21

Nonconformance cost

Answer 21

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!

Question 22

What kind of relatinoship is there between spending on the conformance vs nonconformance costs?

Answer 22

inverse