Prechapter 10 reading financial accounting
Components of throughput time include:
- inspection time - queue time - process time
ROI can be calculated as
-margin × turnover -net operating income ÷ average operating assets
Quick to Ship Company has a process time of 2 days and a throughput time of 8 days. The manufacturing cycle efficiency is ______.
.25 (2 / 8 =)
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
An integrated set of performance measures that are derived from the company's strategy is
A balanced scorecard
Which of the following statements is correct?
A manager might reject a proposal using ROI that the manager would accept using residual income
Which of the following statements is correct?
A manager might reject a proposal using ROI that the manager, would accept using residual income.
An advantage of using a(n)________ ________is that it continually tests the theories underlying management.
Balanced scorecard
An integrated set of performance measures that are derived from the company's strategy is a(n)
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
Lower-level managers are empowered to make decisions in a_______organization, which can________motivation and job satisfaction.
Decentralized, increase
Choose the groups of performance measures typically used in the balanced scorecard approach.
Financial Learning and growth Customer-related
Net operating income is income before_______and________
Interest, taxes
Which of the following statements is true?
It is important that balanced scorecard measures are not easily manipulated Using balanced scorecard performances to reward employees can result in sub-optimal results.
When managers are evaluated on residual income, rather than on return of investment (ROI), they will be________likely to pursue projects that will benefit the entire company.
More
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
Residual income=
Net Operating Income - (Average Operating Assets x Minimum Required Rate of Return)
Return on investment=
Net Operating Income / Average Operating Assets
EBIT is another term for
Net operating income
A balanced scorecard
Presents a theory of how a company can take action to attain its desired outcomes.
Which is the following statements is not a weakness of using return on investment (ROI) to evaluate performance?
ROI does not include the investment in non operating assets, such as land held for investment or stock in other companies.
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. The manager of the Western division is considering a project that is projected to earn 13.25%. Which of the following statements regarding the manager's decision are correct?
Rejecting the project would be an example of the manager sacrificing the objectives of the overall company in order to improve his segment. The manager may decide to reject the project because it will lower the current ROI earned by his division.
The net operating income that an investment center earns above the minimum required return on its average operating assets is its_______income.
Residual
The inability to compare divisions of different sizes is a major disadvantage of_________.
Residual income only
Which of the following ratios are part of the ROI formula?
Sales ÷ Average operating assets Net operating income ÷ Sales
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 department manager may not want to accept the project because it will lower the overall ROI for the department. The project should be accepted by the company because it increases overall residual income.
The manufacturing cycle efficiency is computed by relating the value-added time to the_______time.
Throughout
The manufacturing cycle efficiency is computed by the value-added time to the_____time
Throughput
The time between when an order is placed and when it is delivered is known as the
delivery cycle time
Choose the four groups of performance measures typically used in the balanced scorecard approach.
financial, customer, internal business processes, learning and growth
Managers of cost centers are expected to ______.
minimize costs, while providing an acceptable level of service
ROI can be calculated as ______.
net operating income ÷ average operating assets margin × turnover
Compensation should
only be tied to balanced scorecard measures after the organization has been successfully managed with it for some time
Any part of an organization whose manager has control over and is accountable for cost, profit, and/or investments is a(n) _________________ center.
responsibility
Net operating income/average operating assets
return on investment
Which of the following is not one of the three primary types of responsibility centers?
sales
In decentralized organizations, decision-making authority is
spread throughout the organization
Valid criticisms of evaluating performance based on return on investment (ROI) include managers may
take actions that increase ROI in the short-run at the expense of long-term performance be put in charge of a business segment that includes committed costs over which a manager has no control reject investment opportunities that are profitable for the company but have a negative impact on a manager's ROI
Operations are able to respond quickly to customers and changes in the environment in a decentralized organization because
there are fewer managers that must be consulted before a decision is made
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
