Chapter 11 Flashcards
A rule of thumb stating that one
should monitor those 20% of the factors that
determine 80% of the results.
80/20 rule
An accounting method for allocating indirect and fixed costs to individual products or product lines
based on the value-added activities going
into that product.
Activity-based costing (ABC)
Combines financial
measures with operational measures on customer satisfaction, internal processes, and
the corporation’s innovation and improvement activities
Balanced scorecard
A control that specifies
how something is to be done through policies,
rules, standard operating procedures, and orders from a superior
Behavior control
A phenomenon that
occurs when people substitute activities that
do not lead to goal accomplishment for activities that do lead to goal accomplishment
because the wrong activities are being
rewarded.
Behavior substitution
The process of measuring
products, services, and practices against
those of competitors or companies recognized as industry leaders
Benchmarking
A calculation that is determined by dividing net earnings by the
number of shares of common stock issued.
Earnings per share (EPS)
A shareholder
value method of measuring corporate and divisional performance. Measures after-tax operating income minus the total annual cost of
capital.
Economic value added (EVA)
Software that unites all of a company’s
major business activities, from order processing to production, within a single family of software modules
Enterprise resource planning (ERP) software
A corporatewide, integrated process to manage the uncertainties that could negatively or
positively influence the achievement of the
corporation’s objectives.
Enterprise risk management (ERM)
A process in which
corporate activities and performance results
are monitored so that actual performance can
be compared with desired performance
Evaluation and control
A business unit that uses
money but contributes to revenues only indirectly.
Expense center
Confusion of means with
ends, which occurs when activities originally
intended to help managers attain corporate
objectives become ends in themselves or are
adapted to meet ends other than those for
which they were intended.
Goal displacement
The amount of money a new owner can take out of a firm without harming
the business.
Free cash flow
Confusion of means with
ends, which occurs when activities originally
intended to help managers attain corporate
objectives become ends in themselves or are
adapted to meet ends other than those for
which they were intended.
Goal Displacement
A control that specifies resources, such as knowledge, skills, abilities,
values, and motives of employees.
Input Control
A unit in which performance is measured in terms of the difference between the unit’s resources and its services
or products.
Investment center
An internationally accepted way of objectively documenting a company’s high level of quality operations.
ISO 9000 Standards Series
An internationally accepted way to document a company’s
impact on the environment.
ISO 14000 Standards Series
Essential measures for achieving a desired strategic
option—used in the balanced scorecard.
key performance measures
A method in which managers are compensated for achieving objectives set over a multiyear period.
long-term evaluation method
A technique used to
evaluate corporate activities.
management audit
The difference between the market value of a corporation and the capital contributed by shareholders and
lenders.
market value added
The amount of money
generated by a company before the costs of
financing and taxes are figured.
operating cash flow
