Ops Mgmt A - Perf Mgmt and Impact Flashcards Preview

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Flashcards in Ops Mgmt A - Perf Mgmt and Impact Deck (90)
1

Residual Income (RI) =

NI - (Min. Req Rate x Invested Capital)

2

Return on Investment (ROI) =

NI / Invested Capital

3

Profit Margin =

NI / Sales

4

Capital Employed Turnover Rate =

Sales / Invested Capital

5

ROI also =

Profit Margin x Capital Employed Turnover Rate

6

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

mgmt by exception

7

Mgmt by objectives is

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

8

Responsibility Accounting is

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

9

Benchmarking is

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

10

Flexible (incremental) budget is

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

11

Static budget is

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

12

Favorable variance is

when actual costs are less than the budget

13

Profit Margin on Sales =

Income / Sales

14

Asset Turnover =

Sales / Assets

15

Return on Assets (ROA) =

Income / Assets

16

ROA also =

Profit Margin on Sales x Asset Turnover

17

Incentive compensation programs should be setup to

promote and maintain an inspired and productive work environment

18

Controllable revenue would be included in a performance report for

a profit center

19

Only controllable _______ appear in the cost center performance report

costs

20

A profit center includes

both controllable revenues and controllable costs

21

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

calculate the RI for each division and sum

22

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

ROI

23

Profitability Index (PI) =

PV of CF after initial investment / Initial Investment

24

Economic Value Added (EVA) =

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

25

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

revenue level per unit

26

Discounts are _________ not cost outlays

price adjustments

27

An incentive compensation program will

lead employees toward the goals of the organization

28

An unfavorable materials usage variance would be charged to

the manufacturing dept

29

Unfavorable variance is

a disadvantageous result not in the best interest of the company

30

DM usage variance =

Standard cost x (Std qty - Actual qty)

31

RI is preferred over ROI because

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

32

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

replacement value

33

Delivery cycle time is

the time from receipt of the order to order delivery

34

Delivery cycle time =

Wait time + Inspection time + Process time + Move time

35

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

DM and DL; not FOH

36

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

FOH

37

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

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

38

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

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

39

Balanced Scorecard provides for the following 4 perspectives:

- financial performance
- customer knowledge/satisfaction
- internal business processes
- learning and growth (innovation)

40

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

customer's requirement for early completion of the job

41

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

ROI may lead to rejecting projects that yield positive CF

42

The profit center manager can control

the contribution margin

43

Total Contribution Margin =

Total Sales - Total VC

44

Contribution Margin Ratio =

(Unit Price - VC) / Unit Price

45

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?

Fiction

*many financial measures are capable of being independently verieid

46

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

Change in Inventory x Fixed Cost per unit

47

Margin of Safety =

Actual Sales - Breakeven point sales

48

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?

$24,000

*(200-80) * 20%

49

Debt Ratio =

Total Debt / Total Assets

50

ROE =

NI / Stockholder's Equity

51

Debt Ratio + Equity Ratio =

1.0

52

Assets =

Liabilities + Stockholder's Equity

53

Nonfinancial measures include:

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

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

estimated FOH / estimated machine hours

55

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

actual selling and administrative fixed expenses decreased

56

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

Returna & allowances and the # & types of customer complaints

57

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

a decrease in both

58

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:

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

59

Underapplied OH is

Actual OH cost > OH applied to WIP

60

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

Learning and growth

61

Throughput time is

the time from start of manufacturing to delivery

62

Throughput time =

Start time + Process time + Inspection time + Move time

63

Manufacturing Cycle Efficiency (MCE) =

Process time / Throughput time

64

Raw Materials Used =

BI Raw + Purch - EI Raw

65

COGM =

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

66

COGS =

BI FG + COGM - EI FG

67

Gross Profit Margin =

Sales - COGS

68

Imputed cost aka

Implied cost or opportunity cost

69

Imputed cost is

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

70

Of ROI and RI, imputed costs are used in

RI but not ROI

71

Return on Sales (ROS) =

Income / Sales

72

Capital Turnover (CT) =

Sales / Invested Capital

73

ROI also =

ROS x CT

74

Gross Margin % =

(Sales - COGS) / Sales

75

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

ROA

76

Return on Assets (ROA) =

NI / Avg Total Assets

77

Profit Margin =

NI / Net Sales

78

Asset Turnover =

Net Sales / Avg Total Assets

79

ROA also =

Profit Margin x Asset Turnover

80

WACC =

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

81

EVA is also =

NOPAT - (WACC x Capital Used)

82

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

customer perspective

83

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

then no profit is recognized when sold

84

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

strong top mgmt commitment to the process

85

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

goals of the organization

86

Material Purchase Price Variance (MPPV) =

Qty purchased x (Actual price - Standard price)

87

An MPVV that is favorable means

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

88

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

net revenue less controllable division costs

89

Incentive compensation should not be awarded for

clocking in at 8am

90

Incentive compensation can be awarded for

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