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Flashcards in B1-2 Deck (19):
1

Which of the following is not an element of the manufacturing process typically presented on a cause and effect (Fishbone) diagram?

a.

Machinery.

b.

Method.

c.

Manpower.

d.

Manufacturing Overhead.

 

Choice "d" is correct. Manufacturing overhead is not an element of the manufacturing processing you would expect to see in a cause and effect (fishbone) diagram. It is an allocated cost.

Choice "c" is incorrect. Manpower, machinery, methods, and materials are commonly identified elements of manufacturing processes that would be used to evaluate the source of defects. Manpower is an element of the manufacturing process typically presented on a cause and effect (Fishbone) diagram.

Choice "a" is incorrect. Manpower, machinery, methods, and materials are commonly identified elements of manufacturing processes that would be used to evaluate the source of defects. Machinery is an element of the manufacturing process typically presented on a cause and effect (Fishbone) diagram.

Choice "b" is incorrect. Manpower, machinery, methods, and materials are commonly identified elements of manufacturing processes that would be used to evaluate the source of defects. Method is an element of the manufacturing process typically presented on a cause and effect (Fishbone) diagram.

2

Good Stuff Vitamin Corporation is trying to locate customers that will likely be interested in their range of health related products. The company is promoting their products to active adults and active seniors and has obtained a list of older adults from retirement associations and the names of individuals using other health related products such as athletic footwear. Future promotions are tailored to individual needs based on past orders. Good Stuff's marketing practices could best be characterized as:

a.

Transaction marketing.

b.

Network marketing.

c.

E-marketing.

d.

Database marketing.

Choice "d" is correct. Database marketing involves gathering information on customers and using the information from that database to segment customers into target markets for a more effective selling effort. Good Stuff's marketing research is locating potential customers based on traits exhibited in a database.

Choice "a" is incorrect. Transaction marketing involves attracting customers for a single sale. Good Stuff is selectively marketing and looking for repeat business.

Choice "c" is incorrect. E-marketing uses the internet to accomplish marketing functions. The fact pattern is silent about Good Stuff's communications methods. The best answer is database marketing. 

Choice "b" is incorrect. Network marketing, sometimes referred to as multilevel marketing, focuses on relationships and referrals to accomplish marketing functions. Good Stuff is not developing a distributor network with its marketing efforts.

3

Big Box Retailers is a cost leader that offers the lowest possible prices on consumer goods. The marketing practice that best describes Big Box Retailer's approach would be:

a.

Transaction marketing.

b.

Interaction-based relationship marketing.

c.

Network marketing.

d.

Database marketing.

Choice "a" is correct. Big Box would use transaction marketing practices that emphasize a single sale with no further interaction necessarily required. Customers are attracted to low prices and will likely return based on price only.

Choice "b" is incorrect. Interaction-based relationship marketing says that sales further relationships, thereby driving more sales. Big Box's strategy is to move product through low prices, not to promote relationships.

Choice "d" is incorrect. Database marketing uses data as the foundation for identifying target markets. Big Box promotes low prices without targeting any specific database.

Choice "c" is incorrect. Network marketing is a form of referral and relationship marketing. Big Box focuses on low price transactions, not customer referrals and relationships.

4

The management of a company would do which of the following to compare and contrast its financial information to published information reflecting optimal amounts?

a.

Budget.

b.

Forecast.

c.

Utilize best practices.

d.

Benchmark.

Choice "d" is correct. Benchmarking would be used by a company in comparing its financial data to published information to determine if optimal results had been achieved. Benchmarking is the process often used to identify standards that define or quantify critical success factors.

Choice "a" is incorrect. Budgets are comparisons to internally developed standards not published standards.

Choice "b" is incorrect. Forecasts are internal predictions and not published standards.

Choice "c" is incorrect. Use of best practices represents the implementation of procedures or modifications to operations, not the pure comparison of data to externally-published benchmarks.

5

Which of the following is true regarding Pareto diagrams?

a.

They display the individual and cumulative frequency of quality issues, defects, or problems.

b.

Quality control issues are displayed in order of least to most frequent.

c.

They provide a framework for a manager to analyze the problems that contribute to the occurrence of defects.

d.

They graphically display the impact of measuring goalpost conformance.

Choice "a" is correct. Pareto diagrams combine the elements of a histogram of quality control issues displayed in order of most to least frequent with a line graph that displays the cumulative occurrence of the problems.

Choice "d" is incorrect. Control charts measure conformance of operations within a standard range known as a goalpost (an upper or lower limit).

Choice "c" is incorrect. Cause and effect (fishbone) diagrams typically analyze problems that contribute to the occurrence of defects. Pareto diagrams measure the cumulative impact of identified quality issues.

Choice "b" is incorrect. On a Pareto diagram, quality control issues are displayed in order of most to least frequent.

6

Which of the following design choices for management incentive compensation would most likely emphasize future performance?

a.

Incentive programs that are formula driven.

b.

Bonus programs that depend on company-wide performance.

c.

Restricted stock option programs.

d.

Competitive incentive plans in which commission rates increase as thresholds are met.

 

Choice "c" is correct. Restricted stock option programs may reward current performance but also emphasize future performance. The employee must typically stay through the option strike period and the option is only valuable if the stock price increases.

Choice "a" is incorrect. Fixed (formula driven) plans may or may not emphasize future performance.

Choice "b" is incorrect. Company-wide performance based plans may or may not emphasize future performance.

Choice "d" is incorrect. Competitive commission plans tend to emphasize current performance.

7

Which of the following incentive designs will most likely encourage the use of nonfinancial measures by a manager?

a.

Tying incentives to the manager's individual effort.

b.

Tying incentives to the overall profit of the firm.

c.

All of the answer choices can be equally effective.

d.

Tying incentives to the salary level of the manager.

 

Choice "a" is correct. Managers are more likely to use nonfinancial measures if they are tied to the managers individual effort and, by extension, the manager can control the outcome. 

Choice "b" is incorrect. Tying incentives to the overall profit of the firm links compensation most closely with financial results such that the individual manager may not be as motivated to use non financial measures.

Choice "d" is incorrect. While a bonus on salary is often very effective in motivating performance, it does not link performance to non financial measures. 

Choice "c" is incorrect. Forcing alignment of individual effort and incentive compensation is more likely to promote the use of non financial measures than aligning incentives with profits or salary levels.

8

Nonfinancial performance measures are often preferable to financial performance measures as a means of constructively motivating operational managers since:

a.

Nonfinancial performance measures are not controlled by financial records.

b.

Financial performance measures are not tied to operations.

c.

Nonfinancial measures are more easily associated with operational objectives.

d.

Financial performance measures are punitive.

Choice "c" is correct. Nonfinancial measures (such as delivery time, raw materials used or miles driven) are performance features that operational managers intuitively understand and can more easily manage than financial performance measures.

Choice "a" is incorrect. The separation of nonfinancial performance measures from financial records does not change the effectiveness of those measures for operational managers.

Choice "d" is incorrect. Financial performance measures can be punitive; however, they are not inherently more or less punitive than nonfinancial performance measures.

Choice "b" is incorrect. Financial performance measures provide insight into the financial operations of a business function but may not be fully understood by operational managers.

9

Quality programs normally include a number of techniques to find and analyze problems. The technique commonly used to rank and analyze the individual and cumulative causes of defects is called a:

a.

Pareto Diagram.

b.

Control Chart.

c.

Fishbone Diagram.

d.

Value Chain Analysis.

 

Choice "a" is correct. A Pareto diagram represents an individual and cumulative graphical analysis of errors by type. Individual error types are represented on a histogram (bar graph) while the cumulative number of errors is presented on a line graph. The Pareto diagram is used to prioritize process improvement efforts.

Choice "b" is incorrect. A control chart shows the performance of a particular process in relation to acceptable upper and lower limits of deviation. Performance within the limits is termed statistical control. Processes are designed to ensure that performance consistently falls within the acceptable range of error.

Choice "c" is incorrect. A fishbone diagram describes a process, the contributions to the process and the potential problems that could occur at each phase of a process. The chronological sequence of events is represented by a single horizontal line while the contributions to the process are represented by diagonal lines that create the image of a fishbone.

Choice "d" is incorrect. A value chain analysis is a macro level flowchart that shows the relationship between broad functional areas, the product delivered by the organization and manner in which value is added at each link in the chain.

10

Quality programs normally include a number of techniques to find and analyze problems. The technique commonly used to determine zero defects and goalpost conformance is called a:

a.

Fishbone Diagram.

b.

Pareto Diagram.

c.

Value Chain Analysis.

d.

Control Chart.

Choice "d" is correct. A control chart shows the performance of a particular process in relation to acceptable upper and lower limits of deviation. Performance within the limits is termed statistical control. Processes are designed to ensure that performance consistently falls within the acceptable range of error.

Choice "b" is incorrect. A Pareto diagram represents an individual and cumulative graphical analysis of errors by type.

Choice "a" is incorrect. A fishbone diagram describes a process, the contributions to the process, and the potential problems that could occur at each phase of a process. The chronological sequence of events is represented by a single horizontal line while the contributions to the process are represented by diagonal lines that create the image of a fishbone.

Choice "c" is incorrect. A value chain analysis is a macro level flowchart that shows the relationship between broad functional areas, the product delivered by the organization, and manner in which value is added at each link in the chain.

11

Quality programs normally include a number of techniques to find and analyze problems. The technique commonly used to analyze the source of potential problems and their locations within a process is called a:

a.

Control Chart.

b.

Pareto Diagram.

c.

Value Chain Analysis.

d.

Fishbone Diagram.

Choice "d" is correct. A fishbone diagram describes a process, the contributions to the process, and the potential problems that could occur at each phase of a process. The process is represented by a single horizontal line while the contributions to the process are represented by diagonal lines that create the image of a fishbone. Fishbone diagrams provide a framework for managers to analyze the problems that contibute to the occurrence of defects.

Choice "a" is incorrect. A control chart shows the performance of a particular process in relation to acceptable upper and lower limits of deviation. Performance within the limits is termed statistical control. Processes are designed to ensure that performance consistently falls within the acceptable range of error.

Choice "b" is incorrect. A Pareto diagram represents an individual and cumulative graphical analysis of errors by type. Individual error types are represented on a histogram (bar graph), while the cumulative number of errors is presented on a line graph. The Pareto diagram is used to prioritize process improvement efforts.

Choice "c" is incorrect. A value chain analysis is a macro level flowchart that shows the relationship between broad functional areas, the product delivered by the organization, and manner in which value is added at each link in the chain.

12

Which of the following is a true statement regarding nonfinancial measures of a process?

a.

All of the answer choices are true.

b.

They are an effective substitute for financial measures.

c.

They are best viewed as problem solvers.

d.

They are best viewed as attention directors.

Choice "d" is correct. Nonfinancial measures are an effective way to observe problems as they occur and thereby direct attention to potential errors or inefficiencies before poor financial results are produced.

Choice "c" is incorrect. While nonfinancial measures are highly effective at directing management to a problem, they are not viewed as a primary source of problem solving data.

Choice "b" is incorrect. Nonfinancial measures are a good complement to financial measures but they are not a substitute.

Choice "a" is incorrect, as described above, non financial measures are attention directors, not problem solves or a substitute for financial measures.

13

Which of the following performance measures is nonfinancial?

a.

Percentage of defective products.

b.

Gross profit margin.

c.

Return on investment.

d.

Economic value-added.

Choice "a" is correct. Computation and reporting of a percentage of defective products is a nonfinancial measure. Typically financial measures deal with costs, revenues, or financial reports. Nonfinancial measures generally focus on operational statistics (such as defective products) rather than items measured in dollars.

Choice "c" is incorrect. Return on investment is based on financial statement amounts and represents a financial measure, not a nonfinancial measure.

Choice "b" is incorrect. Gross profit margin is based on financial statement amounts and represents a financial measure, not a nonfinancial measure.

Choice "d" is incorrect. Economic value added is based on financial statement amounts and represents a financial measure, not a nonfinancial measure.

14

Which of the following is true regarding Productivity Ratios?

a.

PPR is calculated as the quantity of output produced divided by cost of the single input used.

b.

TPR is calculated as the quantity of output produced in a given period divided by the sales price of outputs during the same period.

c.

Partial productivity ratios (PPRs) consider the quality and price of a single input.

d.

Total productivity ratios (TPRs) consider all inputs simultaneously as well as the prices of the inputs.

Choice "d" is correct. Total productivity ratios consider all inputs and prices of those inputs.

Choice "c" is incorrect. Partial productivity ratios are concerned only with the quantity of a single input (e.g., direct material or direct labor) and do not consider the price of the input.

Choice "b" is incorrect. TPR is calculated as the quantity of output produced in a given period divided by thecost of inputs in the same period, not the sales price of outputs.

Choice "a" is incorrect. PPR is calculated as the quantity of output produced divided by quantity of the single input used, not the cost.

15

Which of the following is not a characteristic of effective performance measures?

a.

The measure relates to the goals of the organization.

b.

The measure is under the control of the employee.

c.

The measure emphasizes long-term over short-term issues.

d.

The measure is objective and easily measured.

Choice "c" is correct. Effective performance measures should balance both long and short-term issues.

Choice "b" is incorrect. Effective performance measures have a number of characteristics. They should relate to the goals of organization, be objective and easily measured, be under the control of the employee, and understood by the employees. Employee control of the performance measured is a characteristic of an effective performance measure.

Choice "d" is incorrect. Effective performance measures have a number of characteristics. They should relate to the goals of organization, be objective and easily measured, be under the control of the employee, and understood by the employees. Objectivity and ease of measurement is a characteristic of an effective performance measure.

Choice "a" is incorrect. Effective performance measures have a number of characteristics. They should relate to the goals of organization, be objective and easily measured, be under the control of the employee, and understood by the employees. Contribution to the goals of the organization is a characteristic of an effective performance measure.

16

The quality control tool used to evaluate error rates and process improvement issues in a manner that combines both a histogram and a line graph is referred to as a:

a.

Kanban.

b.

Fishbone diagram.

c.

Pareto diagram.

d.

Control chart.

Choice "c" is correct. A Pareto diagram illustrates the cumulative effect of errors or process issues in both a line graph that accounts for all errors or issues and a histogram that displays individual errors or issues in relation to all other issues and errors in the following manner:

 

Choice "b" is incorrect. A fishbone diagram analyzes cause and effect and does not display the relationship between errors and process issues contemplated by a Pareto diagram.

Choice "d" is incorrect. A control chart shows the degree of compliance with goalpost quality standards over time.

Choice "a" is incorrect. Kanban is Japanese for card and is used as a supply chain and inventory control mechanism.

17

Executive perks are often criticized since the compensation provided to the manager:

a.

Is not taxable.

b.

Occurs without Board of Director's approval.

c.

Unfairly reduces traditional compensation.

d.

Can be excessive.

 

Choice "d" is correct. Executive perks (e.g., vacation homes, the use of company jets, etc.) are often viewed as excessive.

Choice "b" is incorrect. The Board of Directors approves perquisites (perks) provided to high-level employees.

Choice "a" is incorrect. Perks are generally taxable.

Choice "c" is incorrect. Few would argue that perks unfairly reduce traditional compensation.

18

Fabro, Inc. produced 1,500 units of Product RX-6 last week. The inputs to the production process for Product RX-6 were as follows.

450 pounds of Material A at a cost of $1.50 per pound.

300 pounds of Material Z at a cost of $2.75 per pound.

300 labor hours at a cost of $15.00 per hour.

What is the best productivity measure for the first-line supervisor in Fabro, Inc.'s production plant?

a.

$15.00 per labor hour.

b.

2.00 units per pound.

c.

0.33 units per dollar input.

d.

5.00 units per labor hour.

 

Choice "d" is correct. The best productivity measure for the production supervisor is 5.00 units per labor hour. This measures the efficiency and productivity of plant labor, which is within the supervisor's control.

Choice "c" is incorrect. Most of the cost factors are outside the control of the production supervisor.

Choice "b" is incorrect. The supervisor can affect the efficiency of material usage but not the units per pound.

Choice "a" is incorrect. The supervisor has no control over the hourly cost of labor.

19