Wrong Answers Ch 12-23 Flashcards
(40 cards)
What 3 strategic objectives would be under the Customer Perspective of a balanced score card for a cost leadership company?
What do these measures evaluate?
1 market share in corrugated boxes market
2 # of new customers
3 customer satisfaction index
succeeding with customers leads to superior financial performance
What 3 strategic objectives would be under the Financial Perspective of a balanced score card for a cost leadership company?
What do these measures evaluate?
1 operating income from productivity gain
2 operating income from growth
3 cost reductions in key areas
Evaluate if company can reduce costs and generate growth
Through cost leadership
What 4 strategic objectives would be under the Internal Business Perspective of a balanced score card for a cost leadership company?
What do these measures evaluate?
1 productivity
2 order delivery time
3 on time delivery
4 # of major process improvements
Leads to more satisfied customers and superior financial
Performance
What 2 strategic objectives would be under the Learning and Growth Perspective of a balanced score card for a cost leadership company?
What do these measures evaluate?
1 % of employees trained in process and quality management
2 employee satisfaction ratings
Cause and effect relationships for improving internal
Business processes, customer satisfaction, financial
Performance
What 2 strategic objectives would be under the Financial Perspective of a balanced score card for a product
differentiation company?
What do these measures evaluate?
1 increase operating income from charging higher margins
2 price premium earned on products
Indicate whether company has charged premium prices
And achieved operating income increases through product
Differentiation
What 3 strategic objectives would be under the Customer Perspective of a balanced score card for a product
differentiation company?
What do these measures evaluate?
1 market share in special purpose high end textile machines
2 customer satisfaction
3 new customers
Succeeding with customers in product differentiation
Strategy leads to superior financial performance
What 3 strategic objectives would be under the Internal business process Perspective of a balanced score card for a product differentiation company?
What do these measures evaluate?
1 manufacturing quality and reduced wastage of direct
Materials
2 new product features added
3 order delivery time
Result in distinctive products delivered to customers
And superior financial performance
What 4 strategic objectives would be under the Learning and Growth Perspective of a balanced score card for a product differentiation company?
What do these measures evaluate?
1 development time for designing new machines
2 improvements in manufacturing processes
3 employee education and skills
4 employee satisfaction
Measures improve company’s capabilities to produce
distinctive products, leading to customer satisfaction and
Superior financial performance
What category of the balanced scorecard would the strategic objective “develop profitable customers go”?
Customer perspective
What category of the balanced scorecard would the strategic objective “introduce new products” go?
Internal business process perspective
Format for calculation of customer level operating income
NAW. SAW. BSS. WM
Revenues at list price
Discounts from list prices
Revenues at actual price
COGS
Gross Margin
Customer level operating costs:
Delivery costs
Order processing costs
Costs of sales visits
Total customer level operating costs
Customer level operating incomeFormat for customer-cost hierarchy report.
Total. Total. NAW. SAW. Total BSS. WM
1=2+7. 2. 3. 4. 7. 5. 6
Revenues (at actual prices)
Customer level costs
Customer level operating income
Distribution channel costs
Distribution channel level operating income
Corporate sustaining costs
Operating income
Orsaks managers allocate all of the corporate sustaining costs to distribution channels, what actions if any should Orsaks managers take, explain?
There’s no cause and effect or benefits received relationship
Btw/ corporate costs and any allocation base
Allocating corporate costs is arbitrary, and not useful for
Investment or performance evaluation decisions
What should corporate sustaining costs be Taken into account for?
Making long run pricing decisions
What other factors (3) should city hospital consider in deciding whether to purchase the special purpose eye testing equipment?
1 quantitative financial factors
2 qualitative factors: benefits to customers, employee morale,
Advantages of having up to date equipment
3 financing factors: availability of cash to purchase new equipment
How would the accrual accounting rate of return be affected by an $10,000 disposal value, assuming there was an initial investment of $110,000, after tax cash flow of $22,900, depreciation of $11,000/yr and a tax rate of 30%?
AARR would increase because accrual accounting income
in year 10 would increase by $7,000 ($10k - $3k from taxes)
This results in a higher avg. annual income in the numerator
How should disposal value of $8000 in year 4 be treated when there is a tax rate of 40% and required rate of return of 12%
1) when calculating NPV ?
2) when calculating AARR?
NPV: $8,000 should not get taxed but multiplied by the
12% discount rate of year 4
AARR: Avg. operating income is unaffected by the
disposal value
Fenster Corp. manufactures windows with wood and metal frames. Fenster has 3 departments: glass, wood and metal. The glass department makes the window glass and sends it to either the wood or metal dept. to get framed. The window is then sold. Upper management sets the production, schedules for the 3 departments and evaluates them on output quantity, cost variances and product quality.
Are the 3 departments cost centers, revenue centers or profit centers? Explain.
The 3 departments are cost centers b/c they are evaluated
Only on output and cost control (cost variances)
Fenster Corp. manufactures windows with wood and metal frames. Fenster has 3 departments: glass, wood and metal. The glass department makes the window glass and sends it to either the wood or metal dept. to get framed. The window is then sold. Upper management sets the production, schedules for the 3 departments and evaluates them on output quantity, cost variances and product quality.
Can a centralized department be a profit center? Why or why not?
Yes, Centralized relates to degree of autonomy of department’s
Decision making
It’s independent of type of responsibility center used to
Evaluate performance
Example of a centralized profit center?
The glass department could be a profit center if upper
management chooses a transfer price for glass
Transferred from glass to metal or wood departments
Suppose upper management of Fenster Corp. decided to let the 3 departments set their own production schedules, buy and sell products in the external market and have the wood and metal departments negotiate with the glass department for glass panes using transfer price.
How would you recommend upper management evaluate the 3 departments if this change is made?
upper mgt. evaluate 3 departments as profit centers b/c
profits would be good indicator of each department’s performance
What is the format for calculating after tax operating income per unit earned by each division using transfer pricing methods:
1) market price, 2) 200% full cost, 3) 350% variable cost
Internal transfers:
Market price. 200% full cost. 350% VC
1 China Division
Division revenue per unit
Cost per unit:
Division Variable Cost per unit
Division Fixed Cost per unit
Total Division Cost per unit
Division operating income per unit
Income tax at 40%
Division net income per unit
2. South Korea
Division revenue per unit
Cost per unit:
Transferred in cost per unit
Division Variable Cost per unit
Division Fixed Cost per unit
Total Division Cost per unit
Division operating income per unit
Income tax at 20%
Division net income per unit
3. US Division
Division revenue per unit
Cost per unit:
Transferred in cost per unit
Division Variable Cost per unit
Division Fixed Cost per unit
Total Division Cost per unit
Division operating income per unit
Income tax at 30%
Division net income per unit
Contribution margin per screen equation?
CM/screen =
net price obtained from selling to outside mkt.
- incremental cost/screen
Minimum transfer price per screen, equation
Minimum transfer price per screen =
Incremental cost/screen
+ opportunity cost/screen (AKA CM/screen for selling division)
