Performance Management (B3:M4-5) Flashcards
what are the 4 categories of cost associated with product quality?
prevention: training inspection expenses- preproduction preventative maintenance redesign of products / processes search for higher quality suppliers
appraisal -detects defects: statistical checks testing lab maintenance inspection expenses- postproduction
internal failure: rework scrap tooling changes downtime
external failure:
warranty costs
cost of returning goods
liability claims
generally, what are the critical success factors identified in the balanced scorecard?
innovation and HR development, internal business processes, customer satisfaction, financial performance
why are fishbone diagrams useful?
they provide a framework for managers to analyze the problems that contribute to the occurrence of defects
why is a Pareto diagram useful?
represents an individual (bar) and cumulative (line) graphical analysis of errors by type. Used to prioritize process improvement efforts
what kind of chart/diagram is commonly used to determine zero defects and goalpost conformance?
control chart
what is controllable margin?
contribution margin net of controllable fixed costs (costs that managers can impact in less than one year)
describe responsibility of each:
investment center
profit center
revenue center
cost center
investment: rev, exp, invested capital (like an independent business)
profit: rev, exp
revenue: rev
cost: exp
what is the essence of responsibility accounting?
developing performance reports emphasizing costs and revenues that managers can control
*managers are only held accountable for the rev and costs that they are responsible for
what can a non financial measure do? What can’t it do?
direct attention to potential errors or inefficiencies
solve problems or substitute a financial measure
what is the difference between a performance report and strategic plan?
report: specific and short term
plan: broad and long term
as it relates to product quality, what are the conformance costs and non-conformance costs?
conformance: prevention and appraisal
non: internal and external failure
Total Factor Productivity Ratios (TFP)
reflect quantity of all output produced relative to the costs of all inputs used
Partial Productivity Ratios (PPR)
reflect quantity of output produced relative to the quantity of individual inputs used
what is economic value-added?
residual income technique used for capital budgeting and performance evaluation
when using the residual income approach, what is often used as the target or hurdle rate (imputed interest rate)?
historical WACC
*target return on investment set by management is optimal!!
