Deck 24: New Measures of Performance

Question 1

Which of the following requires that quality be manufactured rather than inspected into products?

A) ABC
B) JIT
C) Restructured environment
D) TMP

Answer 1

B

Question 2

Which of the following is NOT one of the components of economic value added?

A) Net operating profit after taxes
B) Average total assets
C) Weighted average cost of capital
D) Invested capital

Answer 2

B

Question 3

Which of the following is NOT one of the components of residual income?

A) Operating profit
B) Average total assets
C) Weighted average cost of capital
D) Minimum required rate of return

Answer 3

C

Question 4

Exhibit 24-1 Shriber Company had the following balance sheet at the end of 2012:
Refer to Exhibit 24-1. Shriber Company had $223,400 in operating income before taxes this year, a tax rate of 25% and a weighted average cost of capital of 16%. Using this information, determine Shriber's economic value added for 2012.

A) $25,552
B) $167,550
C) $141,998
D) $11,020

Question 5

The emphasis of JIT is to:

A) Improve non-value-added activities
B) Reduce value-added activities
C) Manage the flow of goods with a push process
D) Remove all waste from a production or service process

Question 6

A company's interest-bearing debt and stockholders' equity is equal to its:

A) Average total assets
B) Invested capital
C) Return on investment
D) Weighted average cost of capital

Question 7

A company's invested capital is equal to its:

A) Short-term and long-term assets
B) Operating assets
C) Total assets less non-interest-bearing (short term) liabilities
D) Long-term assets

Question 8

Just-in-time provides savings by:

A) Lowering inventory levels
B) Freeing resources for other uses
C) Reducing returns from customers
D) All of these are correct

Question 9

Yavapai Industries has decided to start calculating economic value added. Yavapai's accountant gathered the following information: Using this information, calculate Yavapai's economic value added.

A) $41,773
B) $27,900
C) $298,375
D) $37,541

Question 10

The weighted average cost of capital is:

A) The average return expected by both equity owners and debt holders
B) The average return expected by equity owners
C) The average return expected by debt holders
D) The net operating profit after taxes

Question 11

Exhibit 24-1 Shriber Company had the following balance sheet at the end of 2012:
Refer to Exhibit 24-1. Using the information above, determine Shriber's invested capital assets.

A) $530,290
B) $898,510
C) $887,490
D) $879,700

Question 12

Suppliers for a company using a just-in-time inventory system:

A) Must be low cost
B) Must be dependable
C) Must deliver quality products
D) All of these are correct

Question 13

The just-in-time inventory system increases:

A) Inventory levels
B) Centralized support
C) The number of costs to allocate
D) None of these are correct

Question 14

The just-in-time inventory system focus is:

A) A low cost supplier
B) State of the art, high technology equipment
C) Multiskilled workers
D) Waste elimination

Question 15

When using the just-in-time inventory system, production schedules are based on:

A) Raw material inventory levels
B) The customers' demand
C) Machine and labor capacity
D) Predetermined levels of production

Question 16

Adoption of a just-in-time inventory system:

A) Avoids a buildup of parts and inventory
B) Provides an accurate allocation of costs
C) Replaces direct allocation as the most accurate method of assigning overhead cost
D) Is based on a demand push theory

Question 17

The formula for economic value added is:

A) Net operating profit after tax - (Minimum required rate of return × Invested capital)
B) Net operating profit after tax - (Weighted average cost of capital × Average total assets)
C) Net operating profit before tax - (Minimum required rate of return × Average total assets)
D) Net operating profit after tax - (Weighted average cost of capital × Invested capital)

Question 18

Organizations using just-in-time:

A) Must obtain material only when needed for production
B) Must manufacture quality into the products
C) Must keep inventories at a minimum
D) All of these are correct

Question 19

A performance measurement system that emphasizes the income earned over and above the income required to cover the cost of capital is:

A) Operating profit
B) Economic value added
C) Return on investment
D) Return on income

Question 20

Which of the following is the revolutionary management accounting tool that tends to reduce waste associated with inventories?

A) ABC
B) JIT
C) Economic value added
D) TQM

Question 21

The process of measuring, monitoring, and minimizing prevention, appraisal, internal failure, and external failure costs is:

A) Activity-based costing
B) Cost of quality
C) Just-in-time
D) Prevention costing

Question 22

An example of an appraisal cost would be:

A) Product recalls
B) Adjusting test equipment
C) Scrap
D) Process or product design

Question 23

An example of a prevention cost would be:

A) Product recalls
B) Adjusting test equipment
C) Scrap
D) Process or product design

Question 24

Costs incurred to educate suppliers are:

A) Prevention costs
B) Appraisal costs
C) Internal failure costs
D) External failure costs

Question 25

Which of the following are NOT included in the COQ model?

A) Opportunity costs
B) External failure costs
C) Appraisal costs
D) Prevention costs

Question 26

A signaling device that pulls parts forward through the production system is known as a(n):

A) Kanban
B) Safety stock
C) Leading measure
D) Outcome measure

Question 27

Which of the following are some of the defining characteristics of total quality management?

A) Emphasis of quality and continuous improvement and continuously planning, controlling, and evaluating improvement using specific measures
B) Emphasis of profitability before quality and continuous improvement and continuously planning, controlling, and evaluating improvement using specific measures
C) Emphasis of quality and continuous improvement and continuously reducing costs
D) Emphasis of reducing costs and continuously planning, controlling, and evaluating improvement using specific measures

Question 28

Costs incurred to train production employees are:

A) Prevention costs
B) Appraisal costs
C) Internal failure costs
D) External failure costs

Question 29

The amount of warranty claims due to product defects would be classified as a(n):

A) Prevention costs
B) Appraisal costs
C) Internal failure costs
D) External failure costs

Question 30

Costs incurred to inspect products after manufacturing are:

A) Prevention costs
B) Appraisal costs
C) Internal failure costs
D) External failure costs

Question 31

Costs incurred due to reduced product yield are:

A) Prevention costs
B) Appraisal costs
C) Internal failure costs
D) External failure costs

Question 32

Costs incurred to handle customer complaints are:

A) Prevention costs
B) Appraisal costs
C) Internal failure costs
D) External failure costs

Question 33

Costs incurred for routine maintenance of production equipment are:

A) Prevention costs
B) Appraisal costs
C) Internal failure costs
D) External failure costs

Question 34

An example of an internal failure cost would be:

A) Product recalls
B) Adjusting test equipment
C) Scrap
D) Process or product design

Question 35

Which of the following statements is NOT true under the JIT philosophy?

A) Inventory is completed only when ordered by customers
B) Raw materials are received when needed for production
C) Safety stock is maintained to deal with defective products
D) Manufacturing activities must be pulled by need for output

Question 36

Which of the following costs are generally the highest?

A) Prevention costs
B) Appraisal costs
C) Internal failure costs
D) External failure costs

Question 37

Costs incurred for downtime of production equipment are:

A) Prevention costs
B) Appraisal costs
C) Internal failure costs
D) External failure costs

Question 38

Costs incurred to repair products under warranty are:

A) Prevention costs
B) Appraisal costs
C) Internal failure costs
D) External failure costs

Question 39

Which of the following is a management philosophy on increasing profitability by improving the quality of products and processes?

A) Balanced scorecard management
B) Costs of quality measurement
C) Process management
D) Total quality management

Question 40

An example of an external failure cost would be:

A) Product recalls
B) Adjusting test equipment
C) Scrap
D) Process or product design

Question 41

Defective products per million produced is an example of a(n):

A) Innovation process measure
B) Financial performance measure
C) Service-after-sale process measure
D) Operations process measure

Question 42

A technical tool that provides users with the ability to study, control, and improve processes of all types is a:

A) Balanced scorecard
B) Statistical process control
C) Cost of quality analysis
D) Just-in-time inventory

Question 43

Customer satisfaction is the result of the right combination of:

A) Cost, quality and time
B) Cost, quality, and product performance
C) Discounts, quality and customer support
D) Quality, time and product warranty

Question 44

Which of the following is NOT a leading performance measure?

A) Time to complete contract
B) Delivery cost to customer
C) Acquisition rates
D) Average response time for a service call

Question 45

An example of an outcome performance measure is:

A) Number of defecting customers
B) Percentage of on-time deliveries
C) Number of production interruptions
D) Delivery cost to the customer

Question 46

In general, performance measures that allow a company to monitor the cost, quality, and time of producing goods or services are called:

A) Outcome performance measures
B) Leading performance measures
C) Customer retention measures
D) Financial performance measures

Question 47

Performance measures that monitor a company's effectiveness in identifying new products or services and then creating and bringing those products to market are:

A) Outcome performance measures
B) Innovation process measures
C) Research and development measures
D) Financial performance measures

Question 48

The first key to strong financial performance is:

A) Cost control
B) Customer satisfaction
C) Proper allocation of manufacturing overhead
D) Strategic planning

Question 49

Traditional financial measures are now being supplemented in which area(s)?

A) Learning and growth
B) Customer service
C) Internal process improvement
D) All of these are correct

Question 50

Which of the following is NOT an outcome performance measure?

A) Customer retention rates
B) Customer acquisition rates
C) Costs to recruit customers
D) Returns by customers

Question 51

An example of a leading performance measure is:

A) Production cycle time
B) Number of new customers
C) Company's percent of total number of customers in the market
D) Customer retention rates

Question 52

A performance measure that monitors a company's commitment to warranty its product would be called a(n):

A) Service-after-sale process measure
B) Innovation process measure
C) Financial performance measure
D) Operations process measure

Question 53

A balanced scorecard approach to performance measurement would allow the inclusion of all BUT which of the following measures?

A) Measures of customer satisfaction
B) Measures of financial performance
C) Measures of worker satisfaction
D) All of these could be measures in a balanced scorecard

Question 54

Performance measures that allow a company to monitor factors such as whether it is gaining market share and customer profitability are called:

A) Internal process measures
B) Employee productivity measures
C) Outcome performance measures
D) Leading performance measures

Question 55

Design cycle time is an example of a(n):

A) Innovation process measure
B) Financial performance measure
C) Service-after-sale process measure
D) Operations process measure

Question 56

Which of the following is NOT part of the Balanced Scorecard Framework?

A) "How do we appear to shareholders?"
B) "How will we sustain change and progress?"
C) "What business processes must we excel at?"
D) "What is our current market share?"

Question 57

An example of a leading performance measure is:

A) Number of new customers
B) Customer retention rates
C) Average response time for a service call
D) Company's percent of total number of customers in the market

Question 58

An example of an outcome performance measure is:

A) Percentage of on-time deliveries
B) Retaining current customers
C) Purchase cost to the customer
D) Production cycle time

Question 59

The criticism of traditional management accounting measures is that they focus too much on:

A) Intangible corporate capabilities
B) Information assets
C) Periodic financial measures
D) Research and development

Question 60

What can be used to measure performance with respect to customer satisfaction?

A) Number of new customers
B) Number of product returns
C) Customer retention rates
D) Warranty repairs

Question 61

What are the two types of customer performance measures?

A) Innovation process and operations process
B) Leading performance and outcome performance
C) Service-after-sale process and six sigma quality
D) Leading indicators and lagging indicators

Question 62

Which of the following is NOT a factor with respect to learning and growth?

A) Alignment of goals
B) Effective communication
C) Identifying and creating new products
D) Integration of efforts across departments

Question 63

An example of an innovation process measure is:

A) Customer requests handled on first call
B) Modifications required per design
C) Six sigma quality
D) Costs per customer service incident

Question 64

An example of a leading measure of learning and growth is:

A) Output per employee
B) Average employee years with the company
C) Percentage of employees participating in education activities
D) Number of women managers

Question 65

Which of the following is a measure of learning and growth in an organization?

A) Employee satisfaction
B) Productivity
C) Employee retention
D) All of these are correct

Question 66

Mohave Company has decided to start calculating economic value added. Mohave's accountant gathered the following information:

Question 67

Which of the following is NOT true of the balanced scorecard approach to performance measurement?

A) It can be effective in manufacturing, merchandising, and service firms
B) The measures developed must match the company's strategy and vision
C) The measures should be linked such that improvement on one measure should lead to improvement in related measures
D) A standard balanced scorecard can be developed to suit many organizations

Question 68

An example of an outcome measure of learning and growth is:

A) Output per employee
B) Average life cycle of personal computers owned by the company
C) Percentage of employees participating in education activities
D) Average time to disseminate information to employees

Question 69

An operation process that has six sigma quality:

A) Has very high quality
B) Has the lowest possible cost
C) Is very competitive
D) Is completed on schedule nearly every time

Question 70

An example of an operations process measure is:

A) Customer requests handled on first call
B) Modifications required per design
C) Six sigma quality
D) Costs per customer service incident

Question 71

Which of the following is NOT true regarding changes in accounting information that external users desire?

A) Users generally need more nonfinancial information
B) Users generally desire more objective and verifiable information
C) Users generally desire less detailed information
D) Users generally desire information more frequently than at year-end

Question 72

Which of the following processes is NOT effective in supporting customer satisfaction?

A) Learning and growth measures
B) Innovation process measures
C) Service-after-sale process measures
D) Operations process measures

Question 73

A process that measures all costs involved in creating, producing, and using a product is known as:

A) Outcome performance measures
B) Balanced scorecard
C) Leading performance measures
D) Life cycle costing

Question 74

Which of the following is NOT true of the balanced scorecard approach to performance measurement?

A) It includes financial and nonfinancial measures
B) The measures developed must match the company's strategy and vision
C) It should include measures of financial, customer, internal process, and learning and growth activities
D) The planning horizon focus is very short term

Question 75

An example of a service-after-sale process measure is:

A) Customer requests handled on first call
B) Modifications required per design
C) Six sigma quality
D) Costs per customer service incident

Question 76

Which of the following is a measure of performance that, if accomplished, should lead to a desired result?

A) Lagging indicators
B) Leading indicators
C) Outcome indicators
D) Market share indicators

Question 77

Performance measures that allow a company to monitor the capabilities of the employee, the information system, and the organizational structure would best be called:

A) Innovative process measures
B) Service-after-sale process measures
C) Learning and growth measures
D) Financial performance measures

Question 78

At the end of 2012, Bernal Corporation reported the following information:

Question 80

List and describe the three major differences between residual income and economic value added.