Exam #3 Flashcards
Responsibility Center=
Cost Center, Profit Center, and Investment Center
A segment whose manager has control over costs, but not over revenues or investment funds.
Cost Center
A segment whose manager has control over both costs and revenues, but no control over investment funds.
Profit Center
A segment whose manager has control over costs, revenues, and investments in operating assets.
Investment Center
Formula: ROI
Net Operating Income/Average Operating Assets
Formula: Margin
Net operating income/Sales
Formula: Turnover
Sales/Average Operating Assets
Another Formula for ROI:
Margin x Turnover
Formula: Residual Income
Net Operating Income - (Average Operating Assets x Minimum Required Rate of Return)
Focusing on the future costs and benefits that differ between the alternatives
Differential Analysis
A future cost that differs between any two alternatives
Differential Cost
Future revenue that differs between any two alternatives
Differential Revenue
An increase in cost between two alternatives
Incremental Cost
A cost that can be eliminated by choosing one alternative over another
Avoidable Cost
A cost that has already been incurred and cannot be changed regardless of what a manager decides to do
Sunk Cost
The potential benefit that is given up when one alternative is selected over another
Opportunity Cost
A one-time order that is not considered part of the company’s normal ongoing business
Special Order
Companies are forced to make _______________ when they do not have enough capacity to produce all of the products and sales volumes demanded by their customers.
Volume trade-off decisions
When a limited resource of some type restricts the company’s ability to satisfy demand, the company is said to have a _________
Constraint
The machine or process that is limiting overall output is called the ________
Bottleneck
In some industries, two or more products, known as ___________ are produced from a single raw material input.
Joint products
The point in the manufacturing process where joint products can be recognized as a separate product is called the _______
Split-off point
A decision as to whether a joint product should be sold at the split-off point or processed further is known as a _________ further decision.
Sell or process
What is the throughput time?
Process + Inspection + Move + Queue Time
What is the Delivery Cycle Time?
Process + Inspection + Move + Queue + Wait Time
What is the only time that is a value-added time?
Process Time
Formula: Manufacturing Cycle Efficiency
Value-added time/Manufacturing cycle time
