Chapter 10 Learnsmart
Assembling products and handling baggage are examples of Blank______ processes.
internal business
What the company does in an attempt to satisfy customers falls into the Blank______ group of the balance scorecard.
internal business processes
What the company does in an attempt to satisfy customers falls into the _____ group of the balance scorecard
internal business processes
The amount of time a product spends waiting to be worked on, to be moved, to be inspected, or to be shipped is referred to as
queue
The amount of time a product spends waiting to be worked on, to be moved, to be inspected, or to be shipped is referred to as _____ time
queue
Which of the following is not one of the three primary types of responsibility centers?
sales
Using net book value (instead of gross cost) to calculate average operating assets
increases ROI over time
The manufacturing cycle efficiency (MCE) is computed by relating the value-added time to the
throughput
A company can increase its return on investment (ROI) by
-reducing operating expenses -increasing sales
Net operating income ÷ Average operating assets =
Return on investment
Leading indicators of future financial success include
customer satisfaction measures
EBIT is another term for
net operating income
Garnett, Inc. has a required rate of return on new projects of 12%. The Western division of Garnett is currently earning a combined return on investment (ROI) of 14.5% on the projects in its division. Western's manager is considering a project that is projected to earn 13.25%. Which of the following statements regarding the manager's decision are correct?
-The manager may decide to reject the project because it will lower the current ROI earned by his division. -Accepting the project is in the best interest of the company as a whole.
Comparing actual net income to budgeted net income is often done to evaluate the manager of a(n)
profit
Marcos Co. is considering a project that will increase residual income by $15,000. The project has a 12% return on investment (ROI) which exceeds the company's 10% required rate of return. Marcos Co. currently has an overall 15% ROI in the department where this project would be implemented. Which of the following statements regarding this potential investment are true?
-The project should be accepted by the company because it increases overall residual income. -The department manager may not want to accept the project because it will lower the overall ROI for the department.
Computing ROI using the expanded model provides additional insights. ROI can be lowered by excessive operating expenses which can depress _____ and excessive operating assets which can depress _____
-margin -turnover
Carlos Inc requires a minimum rate of return of 10% on its average operating assets. The housewares department currently has average operating assets of $200,000 and a net operating income of $24,000. The department's residual income is?
$24,000 - ($20,000 x 10%) = $4,000
Toys, Trinkets and More requires a minimum rate of return of 12% on its average operating assets. The toy department currently has average operating assets of $300,00 and a net operating income of $42,000. The department's residual income is
$42,000 - ($300,000 x 12%) = $6,000
Which of the following performance measures are part of the balanced scorecard?
-Learning and growth -Financial -Customer
Which of the following evaluation measures are used for investment center managers only—not for cost or profit center managers?
-Return on investment (ROI) -Residual income
Which of the following statements are true?
-Using balanced scorecard performance measures to reward employees can result in sub-optimal results. -It is important that balanced scorecard measures are not easily manipulated.
Operating assets include
-accounts receivable -inventory -equipment
A manufacturing cycle efficiency of 40% means that
-the typical order is being worked on 40% of the time-value-added activities are being performed 40% of the time
Gavin, Inc. recorded the following information for one of its products. All amounts are in days: Wait time 5.0; Inspection time 0.7; Process time 2.5; Move time 0.4; Queue time 3.0. Gavin's delivery cycle time is _____ days
11.6
Residual income =
Net operating income (NOI) - (Average operating assets × Minimum required rate of return)
Which of the following business segments would not be considered a cost center?
Retail outlet
Sales ÷ Average operating assets Net operating income ÷ Sales
Sales ÷ Average operating assets Net operating income ÷ Sales
The ROI formula typically uses
average operating assets for the year
an _____ ______ consists of an integrated set of performance measures that are derived from and support a company's strategy.
balanced scorecard
A disadvantage of the residual income approach is that it
cannot be used to evaluate different sized divisions
The manager of a(n) _____ center does not have control over revenue or the use of investment funds
cost
An organization in which decision-making authority is spread throughout the organization is
decentralized
The elapsed time from when a customer order is received until the finished goods are shipped is known as the
delivery cycle time
The manager of a(n)_____ center has control over costs, revenue, and investments in operating assets.
investment
When managers are evaluated on residual income, rather than on return on investment (ROI), they will be ______ likely to pursue projects that will benefit the entire company.
more
A MCE of less than 1 indicates
non-value added time is present
Compensation should
only be tied to balanced scorecard measures after the organization has been successfully managed with it for some time
A balanced scorecard
presents a theory of how a company can take action to attain its desired outcomes
The only value-added component of throughput time is _____ time.
process
The net operating income that an investment center earns above the minimum required return on its operating assets is its _____ income.
residual
The inability to compare divisions of different sizes is a major disadvantage of
residual income only
Any part of an organization whose manager has control over and is accountable for all three centers (cost, profit, or investments) is a(n0 _____ center.
responsibility
In decentralized organizations, decision-making authority is
spread throughout the organization
Operations are able to respond quickly to customers and changes in the environment in a decentralized organization because Blank
there are fewer managers that must be consulted before a decision is made
The elapsed time from when a customer order is received until production of the order is started is called _____ time
wait
Return on investment =
Net operating income ÷ Average operating assets
Service departments, such as the accounting department, are generally considered _____ centers, while sales offices are often considered _____
cost profit
which of the following is not a characteristic of decentralization?
decentralization reduces how accountable lower level manager are for the outcomes of their decisions
Net operating income is income before _____ and _____
interest taxes
The period from which a product begins production as raw materials and ends as a finished product is known as _____ time or manufacturing cycle time.
throughput
Financial performance measures
-focus on past, not future performance -need to be integrated with nonfinancial measures in the balanced scorecard
Adams, Inc. has found that their managers are reluctant to replace old equipment with new, updated equipment. To stop this practice, Adams should compute ROI using assets' net book values.
False
An integrated set of performance measures that are derived from the company's strategy is
a balanced scorecard
The manager of a(n) _____ center has control over both costs and revenues, but not over the use of investment fund
profit
ROI can be calculated as
-net operating income ÷ average operating assets -margin × turnover
Quick to Ship Company has a process time of 2 days and a throughput time of 8 days. The manufacturing cycle efficiency is
.25
JPL, Inc. recorded the following information for one of its products. All amounts are in days: Wait time 4.0; Inspection time 0.6; Process time 2.3; Move time 0.7; Queue time 3.1. JPL's throughput (manufacturing cycle) time is Blank______ days.
6.7
Choose the four groups of performance measures typically used in the balanced scorecard approach.
Financial, customer, internal business processes, and learning and growth
Which of the following statements is not a weakness of using return on investment (ROI) to evaluate performance?
ROI does not include the investment in nonoperating assets, such as land held for investment or stock in other companies.
