Deck 18: Performance Measurement to Support Business Strategy

Question 1

One advantage of nonfinancial measures is that managers directly involved in operations are likely to understand them.

Answer 1

True

Question 2

A balanced scorecard uses only nonfinancial measures to determine how well the organization is doing in view of competing stakeholder concerns.

Answer 2

False

Question 3

Partial productivity is the ratio of the value of output to the value of all key inputs.

Answer 3

False

Question 4

Continuous improvement involves the search for and implementation of the best way to do something as practiced by other organizations or in other parts of one's own organization.

Question 5

Manufacturing cycle time is the total time involved in processing, moving, storing, and inspecting a good or providing a service.

Question 6

The primary objective of benchmarking is to evaluate performance of an activity, operation, or organization relative to the performance by other companies.

Question 7

The number of defective units is an example of a subjective performance measure.

Question 8

In general, all managers in a given organization are responsible for the same things and should be evaluated using the same financial and nonfinancial measures.

Question 9

At the middle levels in the organization, control and performance measurement focus on how people carry out the daily activities that create the organization's products.

Question 10

Improving the efficiency of the manufacturing cycle involves decreasing the time spent processing a good.

Question 11

A balanced scorecard is basically a balance sheet prepared using nonfinancial measures.

Question 12

One reason financial measures are used to evaluate performance is that they are easily quantifiable.

Question 13

A business model is a description of how different levels and employees in the organization must perform for the organization to achieve its goals and objectives.

Question 14

One of the important guidelines of benchmarking is to not benchmark everything at the best-in-the-business level; no organization can be the best at everything.

Question 15

In general, the use of multiple measures to evaluate performance is better than the use of a single performance measure.

Question 16

At the upper level of the organization, performance measurement focuses on whether the organization is meeting its responsibilities and performing well from the stakeholders' perspective.

Question 17

One disadvantage of using nonfinancial measures to evaluate performance is that they are only available on a monthly, quarterly, or annual basis.

Question 18

The concept of a balanced scorecard is to measure how well the organization is doing from the view of employees, suppliers, customers, business partners, and the community, as well as the shareholders.

Question 19

In general, performance measures-financial and nonfinancial-should relate to what managers at different levels control.

Question 20

One question that an organization's mission statement should answer is how the organization will evaluate its performance relative to its competitors.

Question 21

________ is a firm's ability to generate products or services that are perceived by its customers as being superior and unique as opposed to those offered by its competitors.

A) Strategy
B) Product differentiation
C) Cost leadership
D) The balanced scorecard

Question 22

Which of the following balanced scorecard perspectives focuses on customer service issues?

A) Financial.
B) Customer.
C) Internal Business Process.
D) Learning and Growth.

Question 23

A business model attempts to minimize problems associated with:

A) decentralization.
B) divisional autonomy.
C) goal congruence.
D) maximizing profits.

Question 24

Which of the following nonfinancial measures would not be used to evaluate a middle manager's performance?

A) Frequency of meeting customer delivery requirements.
B) Amount of unwanted employee turnover.
C) Success in dealing with suppliers.
D) Fulfilling responsibilities to company shareholders.

Question 25

In the balanced scorecard, the financial perspective addresses which of the following questions?

A) "To achieve our mission, how will we sustain our ability to change and improve?"
B) "To succeed financially, how should we appear to our shareholders?"
C) "To satisfy our shareholders and customers, in what business process must we excel?"
D) "To achieve our mission, how should we appear to our customers?"

Question 26

Employees empowered with real decision-making authority are more likely to be more responsive to customer concerns.

Question 27

Which of the following best describes possible objectives related to the customer perspective of the balanced scorecard?

A) Reduced cycle time, project management.
B) Improved relationships, timeliness.
C) Increased revenue, reduced costs.
D) Employee satisfaction, global knowledge improvement.

Question 28

Which of the following balanced scorecard perspectives focuses on shareholder's interests?

A) Financial.
B) Customer.
C) Internal Business Process.
D) Learning and growth.

Question 29

In general, a balanced scorecard is used to evaluate an organization's performance using:

A) standard costs and variance analysis.
B) multiple financial and nonfinancial measures.
C) financial statements and ratio analysis.
D) the Board of Directors' audit committee.

Question 30

One of the results in using balanced scorecards is a shift from a focus on financial results to a focus on:

A) maximizing market share.
B) minimizing budgetary slack.
C) eliminating fraudulent behavior.
D) increasing customer satisfaction.

Question 31

Which of the following balanced scorecard perspectives focuses on employee development?

A) Financial.
B) Customer.
C) Internal Business Process.
D) Learning and growth.

Question 32

Which of the following balanced scorecard perspectives focuses on quality and process improvement?

A) Financial.
B) Customer.
C) Internal Business Process.
D) Learning and growth.

Question 33

Which of the following statements is(are) false regarding performance measures?
(A) In general, the use of multiple measures to evaluate performance is better than the use of a single performance measure.
(B) Managers evaluated using multiple measures will most likely act differently than managers evaluated using single measures.

A) Only A is false.
B) Only B is false.
C) Both of these are false.
D) Neither of these is false.

Question 34

Which of the following is not one of the four views of the balanced scorecard?

A) Financial.
B) Competitor performance.
C) Internal business process.
D) Learning and growth.

Question 35

A balanced scorecard shows measures of performance as they related to areas of performance. Which of the following is a measure of performance of customer value?

A) Gross margin ratio.
B) Retention of existing customers.
C) Hours of job related training.
D) Process cycle time.

Question 36

A description of an organization's values, definition of its responsibilities to stakeholders, and identification of its major strategies is called its:

A) business-level strategy.
B) mission statement.
C) performance objectives.
D) master budget.

Question 37

________ is a firm's ability to implement low costs compared to its competitors with productivity improvements, increased efficiency, reduction of waste, and the use of cost control.

A) Strategy
B) Product differentiation
C) Cost leadership
D) The balanced scorecard

Question 38

Employee involvement in real decision-making is likely to increase the employee's commitment to the organization and its objectives.

Question 39

A balanced scorecard is a set of:

A) performance measures.
B) financial statements.
C) budget schedules.
D) annual reports.

Question 40

Which of the following statements is(are) true regarding financial measures?
(A) One disadvantage of using financial measures to evaluate performance is that they are typically reported on a monthly, quarterly, or annual basis.
(B) One reason financial measures are used to evaluate performance is that they are easily quantifiable.

A) Only A is true.
B) Only B is true.
C) Both of these are true.
D) Neither of these is true.

Question 41

Which of the following is typically not considered an objective of quality control?

A) Reduce costs associated with customer complaints.
B) Reduce costs of honoring product or service warranty.
C) Increase customer satisfaction with product or service.
D) Increase the number of deliveries made when promised.

Question 42

Benchmarks are used to evaluate the performance of an activity or operation relative to other organizations or other parts of one's own organization. Which of the following is not a guideline for using benchmarks to evaluate performance?

A) Benchmarks should only be used for nonfinancial measures.
B) Do not benchmark everything at the best-in-the-business level.
C) Benchmark only best-in-the-business activities that are important.
D) Use internal benchmarks for less important activities or operations.

Question 43

Steinwand Corporation keeps track of the time required to fill orders. Data concerning a particular order appear below:
$$\begin{array} { | l | r | } \hline & \text { Hours } \\\hline \text { Processing Time } & 1.5 \\\hline \text { Inspection Tirne } & 0.2 \\\hline \text { Moving Time } & 2.8 \\\hline \text { Storing Time } & 7.2 \\\hline\end{array}$$

-
The manufacturing cycle efficiency was closest to:

A) 0.24.
B) 0.16.
C) 0.92.
D) 0.08.

Question 44

Which of the following is not included in manufacturing cycle time?

A) Inspection time.
B) Storing time.
C) Moving time.
D) Marketing time.

Question 45

In the balanced scorecard, the learning and growth perspective addresses which of the following questions?

A) "To achieve our mission, how will we sustain our ability to change and improve?"
B) "To succeed financially, how should we appear to our shareholders?"
C) "To satisfy our shareholders and customers, in what business process must we excel?"
D) "To achieve our mission, how should we appear to our customers?"

Question 46

Steinwand Corporation keeps track of the time required to fill orders. Data concerning a particular order appear below:
$$\begin{array} { | l | r | } \hline & \text { Hours } \\\hline \text { Processing Time } & 1.5 \\\hline \text { Inspection Tirne } & 0.2 \\\hline \text { Moving Time } & 2.8 \\\hline \text { Storing Time } & 7.2 \\\hline\end{array}$$

-
The manufacturing cycle time was:

A) 20.3 hours.
B) 25.2 hours.
C) 4.9 hours.
D) 12.1 hours.

Question 47

Functional performance measures differ from customer satisfaction performance measures in that they are used primarily to evaluate:

A) internal processes.
B) external processes.
C) benchmark processes.
D) continuous improvement processes.

Question 48

Which of the following represents value-added time in the manufacturing cycle?

A) Inspection Time.
B) Storage Time.
C) Move Time.
D) Process Time.

Question 49

Which of the following items is not part of the continuous improvement philosophy?

A) Eliminate activities that are nonvalue-added.
B) Improve the efficiency of activities that are value-added.
C) Use benchmarking to identify activities that need improvement.
D) Provide bonus incentives to managers for accurate performance reports.

Question 50

Morgenstern Corporation keeps track of the time required to fill orders. The times recorded for a particular order appear below:
$$\begin{array} { | l | r | } \hline & \text { Hours } \\\hline \text { Processing Time } & 1.6 \\\hline \text { Inspection Tirne } & 0.1 \\\hline \text { Moving Time } & 2.6 \\\hline \text { Storing Time } & 7.2 \\\hline\end{array}$$

-
The manufacturing cycle efficiency was closest to:

A) 0.05.
B) 0.57.
C) 0.14.
D) 0.16.

Question 51

The first step to the successful implementation of a balanced scorecard is specifying the:

A) organization's vision and strategy.
B) elements that pertain to value-added aspects of the business.
C) owner's expectations about return on investment.
D) objectives of all four balanced scorecard measurement perspectives.

Question 52

Travis Corporation keeps track of the time required to fill orders. The times recorded for a particular order appear below:
$$\begin{array} { | l | r | } \hline & \text { Hours } \\\hline \text { Processing Time } & 0.7 \\\hline \text { Inspection Tirne } & 0.3 \\\hline \text { Moving Time } & 2.5 \\\hline \text { Storing Time } & 8.7 \\\hline\end{array}$$
The manufacturing cycle efficiency was closest to:

A) 0.73.
B) 0.06.
C) 0.15.
D) 0.02.

Question 53

In the balanced scorecard, the internal business process perspective addresses which of the following questions?

A) "To achieve our mission, how will we sustain our ability to change and improve?"
B) "To succeed financially, how should we appear to our shareholders?"
C) "To satisfy our shareholders and customers, in what business process must we excel?"
D) "To achieve our mission, how should we appear to our customers?"

Question 54

Mountainburg Corporation keeps track of the time required to fill orders. The times recorded for a particular order appear below:
$$\begin{array} { | l | r | } \hline & \text { Hours } \\\hline \text { Processing Time } & 1.2 \\\hline \text { Inspection Tirne } & 0.3 \\\hline \text { Moving Time } & 3.8 \\\hline \text { Storing Time } & 4.2 \\\hline\end{array}$$
The manufacturing cycle time was:

A) 5.3 hours.
B) 20.7 hours.
C) 15.4 hours.
D) 9.5 hours.

Question 55

Which of the following statements is(are) false?
(A) Internal, regional, and local benchmarks should be used for the most important processes and activities in an organization.
(B) In general, the use of multiple measures to evaluate performance is better than the use of a single performance measure.

A) Only A is false.
B) Only B is false.
C) Both of these are false.
D) Neither of these is false.

Question 56

In the balanced scorecard, the customer perspective addresses which of the following questions?

A) "To achieve our mission, how will we sustain our ability to change and improve?"
B) "To succeed financially, how should we appear to our shareholders?"
C) "To satisfy our shareholders and customers, in what business process must we excel?"
D) "To achieve our mission, how should we appear to our customers?"

Question 57

Morgenstern Corporation keeps track of the time required to fill orders. The times recorded for a particular order appear below:
$$\begin{array} { | l | r | } \hline & \text { Hours } \\\hline \text { Processing Time } & 1.6 \\\hline \text { Inspection Tirne } & 0.1 \\\hline \text { Moving Time } & 2.6 \\\hline \text { Storing Time } & 7.2 \\\hline\end{array}$$

-
The manufacturing cycle time was:

A) 4.3 hours.
B) 31.6 hours.
C) 27.3 hours.
D) 11.5 hours.

Question 58

________ communicates an organization's strategy into an inclusive set of performance measures that provide the structure for implementing that strategy.

A) Productivity component
B) Product differentiation
C) Cost leadership
D) The balanced scorecard

Question 59

The balanced scorecard measures an organization's performance in all of the following areas except:

A) financial.
B) government.
C) customer.
D) learning and growth.

Question 60

Manufacturing Cycle Efficiency is computed as:

A) Processing Time × Manufacturing Cycle Time.
B) Processing Time ÷ Inspection Time.
C) Processing Time ÷ Manufacturing Cycle Time.
D) Moving Time ÷ Storage Time.

Question 61

Which of the following statements is(are) true regarding performance measures?
(A) In general, objective performance measures are better than subjective performance measures.
(B) In general, the use of multiple performance measures is better than the use of single performance measures.

A) Only A is true.
B) Only B is true.
C) Both of these are true.
D) Neither of these is true.

Question 62

Total factor productivity:

A) is a ratio of the value of output to the value of all key inputs.
B) is the same thing as the production volume variance.
C) focuses on an individual input.
D) includes materials and labor but not overhead.

Question 63

The Malcolm Company collected the following information (in days):
$$\begin{array} { | l | r| } \hline \text { Marufacturing product } & 20.0 \\\hline \text { Storing product } & \mathbf { 8 . 0 } \\\hline \text { Transporting product } & 2.0 \\\hline \text { Inspecting product } & 1.0\\\hline\end{array}$$

-
What is the manufacturing cycle efficiency?

A) 28.6%.
B) 64.5%.
C) 71.4%.
D) 90.9%.

Question 64

Partial productivity:

A) is a ratio of the value of output to the value of all key inputs.
B) is the same thing as the production volume variance.
C) focuses on an individual input.
D) includes materials and labor but not overhead.

Question 65

The Majors Company collected the following information (in days):
$$\begin{array} { | l | r| } \hline \text { Inspecting product } & 4 \\\hline \text { Transporting product } & 6 \\\hline \text { Storing product } & 15 \\\hline \text { Manufacturing product } & 40\\\hline\end{array}$$

-
What is the manufacturing cycle time?

A) 21 days.
B) 65 days.
C) 55 days.
D) 46 days.

Question 66

The Otero Manufacturing Company collected the following information (in days):
$$\begin{array} { | l | r | } \hline & \text { April } \\\hline \text { Transporting product } & 2.0 \\\hline \text { Processing product } & 14.0 \\\hline \text { Inspecting product } & 0.5 \\\hline \text { Storing product } & 6.0 \\\hline\end{array}$$

-
What is the manufacturing cycle time?

A) 14.0 days.
B) 16.0 days.
C) 22.0 days.
D) 22.5 days.

Question 67

The Otero Manufacturing Company collected the following information (in days):
$$\begin{array} { | l | r | } \hline & \text { April } \\\hline \text { Transporting product } & 2.0 \\\hline \text { Processing product } & 14.0 \\\hline \text { Inspecting product } & 0.5 \\\hline \text { Storing product } & 6.0 \\\hline\end{array}$$

-
What is the manufacturing cycle efficiency?

A) 87.5%.
B) 63.6%.
C) 62.2%.
D) 42.9%.

Question 68

Which of the following performance measures would be used to evaluate the personnel department performance?

A) Number of product recalls.
B) Percentage of late deliveries.
C) Number of requests for transfers.
D) Length of time to fill vacant positions.

Question 69

Which of the following is not a partial productivity measure?

A) tons output/tons of material used.
B) sales value/total cost.
C) gallons output/direct labor hour.
D) units produced/machine hour.

Question 70

Which of the following is not a mistake often made when measuring nonfinancial performance?

A) Using subjective rather than objective measures.
B) Not linking measure to strategy.
C) Not validating links between activities and strategies.
D) Not setting appropriate performance targets.

Question 71

A subjective performance measure is one where:

A) different people will agree as to the appropriateness of a measure.
B) different people will agree as to the method to calculate the measure.
C) different managers will calculate a measure the same.
D) different managers will view the facts and come to different conclusions.

Question 72

Manufacturing cycle efficiency is computed by dividing process time by:

A) moving time + storage time.
B) storage time + inspection time.
C) moving time + storage time + inspection time.
D) process time + moving time + storage time + inspection time.

Question 73

Partial productivity measures are most closely related to what type of variances?

A) Price variances.
B) Sales mix variances.
C) Efficiency variances.
D) Production volume variances.

Question 74

The Falisari Company collected the following information (in days):
$$\begin{array} { | l | r | } \hline \text { Inspecting product } & 4 \\\hline \text { Transporting product } & 14 \\\hline \text { Storing product } & 20 \\\hline \text { Manufacturing product } & 65 \\\hline\end{array}$$

-
What is the manufacturing cycle efficiency?

A) 100.0%.
B) 82.2%.
C) 63.1%.
D) 76.5%.

Question 75

The Majors Company collected the following information (in days):
$$\begin{array} { | l | r| } \hline \text { Inspecting product } & 4 \\\hline \text { Transporting product } & 6 \\\hline \text { Storing product } & 15 \\\hline \text { Marufacturing product } & 40\\\hline\end{array}$$

-
What is the manufacturing cycle efficiency?

A) 61.5%.
B) 72.7%.
C) 87.0%.
D) 27.3%.

Question 76

The Falisari Company collected the following information (in days):
$$\begin{array} { | l | r | } \hline \text { Inspecting product } & 4 \\\hline \text { Transporting product } & 14 \\\hline \text { Storing product } & 20 \\\hline \text { Manufacturing product } & 65 \\\hline\end{array}$$

-
What is the manufacturing cycle time?

A) 65 days.
B) 34 days.
C) 103 days.
D) 85 days.

Question 77

Which of the following is a total factor productivity measure?

A) Tons output/tons of material used.
B) Units produced/machine hour.
C) Sales value/total cost.
D) Gallons output/direct labor hour.

Question 78

If a manager wants to assess performance relative to the industry, it is best to use:

A) partial productivity measures.
B) production volume variances.
C) sales price variances.
D) total factor productivity.

Question 79

The Malcolm Company collected the following information (in days):
$$\begin{array} { | l| r| } \hline \text { Marufacturing product } & 20.0 \\\hline \text { Storing product } & \mathbf { 8 . 0 } \\\hline \text { Transporting product } & 2.0 \\\hline \text { Inspecting product } & 1.0\\\hline\end{array}$$

-
What is the manufacturing cycle time?

A) 10 days.
B) 31 days.
C) 28 days.
D) 22 days.

Question 80

An objective performance measure is one where:

A) different people will agree as to the appropriateness of a measure.
B) different people will agree as to the method to calculate the measure.
C) different managers will calculate a measure differently.
D) different managers will view the facts and come to different conclusion.