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JA BEC Flashcards > Ops Mgmt A - Perf Mgmt and Impact > Flashcards

Ops Mgmt A - Perf Mgmt and Impact Flashcards

1
Q

Residual Income (RI) =

A

NI - (Min. Req Rate x Invested Capital)

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2
Q

Return on Investment (ROI) =

A

NI / Invested Capital

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3
Q

Profit Margin =

A

NI / Sales

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4
Q

Capital Employed Turnover Rate =

A

Sales / Invested Capital

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5
Q

ROI also =

A

Profit Margin x Capital Employed Turnover Rate

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6
Q

A mgmt practice involving concentration on areas that deserve attention and placing less attention on areas operating as expected is

A

mgmt by exception

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7
Q

Mgmt by objectives is

A

a mgmt practice that involves having a manager and subordinate jointly develop objectives and plans

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8
Q

Responsibility Accounting is

A

a method whereby responsibility is identified and related to managers and then managerial performance is monitored and evaluated based on this

*think cost center, profit center, investment center

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9
Q

Benchmarking is

A

identifying the best in class performance or other measure and then comparing the company’s performance to that standard

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10
Q

Flexible (incremental) budget is

A

a less detailed budget prepared for several possible levels of production (prospective) or adjusted for the level of production actually achieved (retrospective)

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11
Q

Static budget is

A

a very detailed budget prepared for a single target level of activity and it does not change

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12
Q

Favorable variance is

A

when actual costs are less than the budget

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13
Q

Profit Margin on Sales =

A

Income / Sales

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14
Q

Asset Turnover =

A

Sales / Assets

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15
Q

Return on Assets (ROA) =

A

Income / Assets

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16
Q

ROA also =

A

Profit Margin on Sales x Asset Turnover

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17
Q

Incentive compensation programs should be setup to

A

promote and maintain an inspired and productive work environment

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18
Q

Controllable revenue would be included in a performance report for

A

a profit center

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19
Q

Only controllable _______ appear in the cost center performance report

A

costs

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20
Q

A profit center includes

A

both controllable revenues and controllable costs

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21
Q

If you have multiple divisions of a company, you would ________ to find the Residual Income of the company as a whole

A

calculate the RI for each division and sum

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22
Q

A performance measure that may lead a manager of an investment center to forgo investments that could benefit the company as a whole is

A

ROI

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23
Q

Profitability Index (PI) =

A

PV of CF after initial investment / Initial Investment

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24
Q

Economic Value Added (EVA) =

A

After-tax operating income - [WACC x (Total Assets - Current Liabilities)}

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25
Q

In evaluating customer profitability, price discounts would fall into the category of customer

A

revenue level per unit

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26
Q

Discounts are _________ not cost outlays

A

price adjustments

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27
Q

An incentive compensation program will

A

lead employees toward the goals of the organization

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28
Q

An unfavorable materials usage variance would be charged to

A

the manufacturing dept

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29
Q

Unfavorable variance is

A

a disadvantageous result not in the best interest of the company

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30
Q

DM usage variance =

A

Standard cost x (Std qty - Actual qty)

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31
Q

RI is preferred over ROI because

A

RI concentrates on maximizing absolute dollars of income rather than a % return as with ROI

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32
Q

When using ROI, RI, and EVA, the theoretically superior (not necessarily the one most widely used) investment base would be

A

replacement value

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33
Q

Delivery cycle time is

A

the time from receipt of the order to order delivery

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34
Q

Delivery cycle time =

A

Wait time + Inspection time + Process time + Move time

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35
Q

The direct costs that should be traced to specific products include _____ and ______ but not _____

A

DM and DL; not FOH

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36
Q

______ cannot be traced to specific jobs and should instead by allocated based on an allocation rate

A

FOH

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37
Q

In the I/S preparation of an internal report using VC method, fixed selling and admin exp would

A

be used in the computation of operating income but not in the computation of the contribution margin

38
Q

Based on standard direct labor hours, a fixed OH volume variance measures

A

deviation from the normal, or denominator, level of direct labor hours

39
Q

Balanced Scorecard provides for the following 4 perspectives:

A
  • financial performance
  • customer knowledge/satisfaction
  • internal business processes
  • learning and growth (innovation)
40
Q

A DL overtime premium should be charged to a specific job when the overtime is caused by the

A

customer’s requirement for early completion of the job

41
Q

The primary disadvantage of using ROI rather than RI to evaluate the performance of investment center managers is

A

ROI may lead to rejecting projects that yield positive CF

42
Q

The profit center manager can control

A

the contribution margin

43
Q

Total Contribution Margin =

A

Total Sales - Total VC

44
Q

Contribution Margin Ratio =

A

(Unit Price - VC) / Unit Price

45
Q

ROI relies on financial measures that are capable of being independently verified while other forms of performance measures are subject to manipulation. Fact or Fiction?

A

Fiction

*many financial measures are capable of being independently verieid

46
Q

To determine how much lower NI would be if Variable costing was used instead of full absorption costing, you would calculate =

A

Change in Inventory x Fixed Cost per unit

47
Q

Margin of Safety =

A

Actual Sales - Breakeven point sales

48
Q

Product Cott has sales of $200,000, a contribution margin of 20%, and a margin of safety of $80,000. What is Cott’s fixed cost?

A

$24,000

*(200-80) * 20%

49
Q

Debt Ratio =

A

Total Debt / Total Assets

50
Q

ROE =

A

NI / Stockholder’s Equity

51
Q

Debt Ratio + Equity Ratio =

A

1.0

52
Q

Assets =

A

Liabilities + Stockholder’s Equity

53
Q

Nonfinancial measures include:

A 
inventory turnover
labor efficiency
on-time deliveries
schedule attainment
units per hour
throughput time
measures of customer satisfaction
measures of environmental compliance
% of defective products
54
Q

In developing a predetermined FOH application rate for use in a process costing system, the numerator and denominator would be

A

estimated FOH / estimated machine hours

55
Q

A manufacturing company prepares I/S using both absorption and variable costing methods. At the end of a period, actual sales revenue, total gross profit, and total contribution margin were approx. equal to budgeted figures; whereas NI was substantially greater than the budgeted amount. There were no BI or EI. The most likely explanation for the NI increase is that, compared to budget

A

actual selling and administrative fixed expenses decreased

56
Q

Nonfinancial performance measures are important to engineering and operations managers in assessing the quality levels of the products. The indicators ______ and _____ can be used to measure product quality

A

Returna & allowances and the # & types of customer complaints

57
Q

If a company purchases a long term asset on the last day of the current year, the effect on ROI and RI is

A

a decrease in both

58
Q

A job order cost system uses a predetermined FOH rate based on expected volume and expected fixed cost. At the end of the year, underapplied OH might be explained by:

A

Actual volume, less than expected; Actual fixed costs, greater than expected

59
Q

Underapplied OH is

A

Actual OH cost > OH applied to WIP

60
Q

Under the balanced scorecard, employee satisfaction and retention are measures used under

A

Learning and growth

61
Q

Throughput time is

A

the time from start of manufacturing to delivery

62
Q

Throughput time =

A

Start time + Process time + Inspection time + Move time

63
Q

Manufacturing Cycle Efficiency (MCE) =

A

Process time / Throughput time

64
Q

Raw Materials Used =

A

BI Raw + Purch - EI Raw

65
Q

COGM =

A

BI WIP + RM Used + DL + OH Applied - EI WIP

66
Q

COGS =

A

BI FG + COGM - EI FG

67
Q

Gross Profit Margin =

A

Sales - COGS

68
Q

Imputed cost aka

A

Implied cost or opportunity cost

69
Q

Imputed cost is

A

the cost that is incurred by virtue of using an asset instead of investing it or undertaking an alternative course of action

70
Q

Of ROI and RI, imputed costs are used in

A

RI but not ROI

71
Q

Return on Sales (ROS) =

A

Income / Sales

72
Q

Capital Turnover (CT) =

A

Sales / Invested Capital

73
Q

ROI also =

A

ROS x CT

74
Q

Gross Margin % =

A

(Sales - COGS) / Sales

75
Q

A ratio that should be used to compare profitability of 2 electronic companies that differ in size is

A

ROA

76
Q

Return on Assets (ROA) =

A

NI / Avg Total Assets

77
Q

Profit Margin =

A

NI / Net Sales

78
Q

Asset Turnover =

A

Net Sales / Avg Total Assets

79
Q

ROA also =

A

Profit Margin x Asset Turnover

80
Q

WACC =

A

(Cost of Equity x % Equity) + (Cost of Debt x % Debt x (1-marginal tax rate)

81
Q

EVA is also =

A

NOPAT - (WACC x Capital Used)

82
Q

Under the balance scorecard, a company’s success in a targeted market segment is covered by the

A

customer perspective

83
Q

If byproducts are recorded at Net Realizable Value (NRV),

A

then no profit is recognized when sold

84
Q

The most important resource to ensure that a cross-functional team is effective would be

A

strong top mgmt commitment to the process

85
Q

Performance measures should assess how well subunits and managers are meeting the

A

goals of the organization

86
Q

Material Purchase Price Variance (MPPV) =

A

Qty purchased x (Actual price - Standard price)

87
Q

An MPVV that is favorable means

A

that actual material price must have been less than the standard material price

88
Q

In general, the most appropriate basis on which to evaluate the performance of a division manager is the division’s

A

net revenue less controllable division costs

89
Q

Incentive compensation should not be awarded for

A

clocking in at 8am

90
Q

Incentive compensation can be awarded for

A
  • meeting a required deadline
  • finding a $1 million error
  • collection of old AR

JA BEC Flashcards (20 decks)

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