Chapter 6 Flashcards
(24 cards)
What changes in costs are most conducive to implementing a JIT inventory system?
Decrease in cost per purchase order and increase in inventory unit carrying cost (more purchase orders of fewer items each)
What are appraisal costs in quality control principles and name some examples?
They discover and remove defective parts before they are shipped to the customer or the next department. Examples include Statistical quality checks, testing, inspection, and maintenance of the laboratory
What are the two types of costs associated with quality control and what are they made up of?
Conformance costs: Prevention costs and Appraisal costs
Nonconformance costs: Internal failure and External failure
What are prevention costs and list some examples
Prevention costs are incurred to prevent the production of defective units: Employee training, inspection expenses, preventative maintenance, redesign of product, redesign of processes, search for higher-quality suppliers
What are appraisal costs and list some examples
Appraisal costs and incurred to discover and remove defective parts before they are shipped to the customer or the next department: Statistical quality checks, testing, inspection, maintenance of the laboratory
What are internal failure costs and list some examples:
Internal failure costs are costs to cure a defect discovered before the product is sent to the customer: Rework costs, scrap, tooling changes, cost to dispose, cost of the lost unit, downtime
What are external failure costs and name some examples:
External failure costs are cost to cure the defect discovered after the product is sent to the customer: Warranty costs, cost of returning the good, liability claims, lost customers, reengineering an external failure
What is one benefit of JIT inventory?
A more efficient use of employees with multiple skills. (decrease the number of job classifications to just a few)
What is absolute conformance?
It is the most rigorous standard of quality because it represents a perfect, or ideal level of compliance
What is the theory of constraints?
It is concerned with maximizing throughput by identifying and alleviating constraints. It says that organizations are impeded from achieving objectives by the existence of one or more constraints. Organizations or projects must be operated in a manner that either works around or leverages the constraint (ex. bottleneck)
What is benchmarking?
A process where a company compares itself to its peers to measure and to understand where improvements can be made in its processes.
What does the scope baseline include?
It describes the project’s deliverables, the amount of time required to complete the project, and attributes that can be excluded from the project. (it doesn’t include the team members that will work on the project)
What is functional interdependence?
The failure of developed nations to fully engage emerging nations within worldwide institutions
What is country risk?
It encompasses the political risk, economic risk, transfer risk, sovereign risk, and exchange rate risk associated with engaging in business with foreign countries
What are repatriation restrictions?
It exists when a company invests money in a foreign company but is restricted from bringing that money back to its home country
What is risk averse behavior?
It describes managers who demand more return on an investment as risk increases. They expect to be compensated for increased risk. (anticipate greater return for greater risk)
What is risk seeking behavior?
If an investor’s certainty equivalent, the point at which the investor is indifferent to risk, exceeds the expected return on an investment, the investor is actually seeking a lower return for a higher risk.
What is risk indifferent behavior?
It occurs when an investor’s certainty equivalent is equal to the expected return on the investment
What is business risk?
Business risk represents the risk associated with the unique circumstances of a particular company, as they might give the shareholder value of that company. If an entity purely uses its own cumulative earnings in capitalizing it’s operations, it is exposes to the risks of it’s own unique circumstances
What is a floating-rate bond?
It would automatically adjust the return on the financial instrument to produce a constant market value for that instrument. No premium or discount would be required since market changes would be accounted for through the interest rate. (It is most likely to maintain a constant market value)
What is the price earnings (P/E) ratio?
It measures the amount that investors are willing to pay for each dollar of earnings per share. Higher P/E ratios generally indicate that investors are anticipating more growth and are bidding up the price of the shares in advance of performance
What is one way to calculate the economic rate of return on common stock?
(Dividends + Change in price) / Beginning Price
It measures the dividend income and capital growth in relation to the initial investment, the beginning price of the stock
What are the nature and scope of assurance engagements and consulting engagements as far as implementation is concerned?
The nature and scope of an assurance engagement is determined by the internal auditor, however, the nature and scope of a consulting engagement is subject to agreement with the engagement client
What is the responsibility of the project manager?
The project manager is responsible for project administration on a day-to-day basis including identifying and managing internal and external stakeholder expectations
