Question 1

Customer value measures the revenues generated per customer.

Accepted Answer

A) True 
 B)False

Question 2

The order entry department of a Ahura Associated Industries is considering improvements in the order entry process, which includes preparing quotations based on customers' requests (via the sales representative) and processing orders received from customers.
A typical sequence of events might begin with a sales representative meeting with a customer to discuss the type of system desired. The sales representative then fills out a paper form and faxes it or phones it in to an order entry associate, who might make several subsequent phone calls to the sales representative, the potential customer, or the manufacturing department to prepare the quote properly. These phone calls deal with such questions as exchangeability of parts, part numbers, current prices for parts, or allowable sales discounts. Order entry staff then keys in the configuration of the desired system, including part numbers, and informs the sales representative of the quoted price. Each quote is assigned a quotation number. To smooth production, manufacturing often produces systems with standard configurations in anticipation of obtaining orders from recent quotes for systems. The systems usually involve adding on special features to the standard configuration. Production in advance of orders sometimes results in duplication in manufacturing, however, because customers often fail to put the assigned quotation numbers on their orders. When order entry receives an order, the information on the order is reentered into the computer to produce an order acknowledgement. This order acknowledgement is sent to the manufacturing department, which produces the system ordered by customer. When the order acknowledgement is sent to the invoicing department, the information is reviewed again to generate an invoice to send to the customer. Domingo Perez, the order entry manager, has received many complaints from the order entry department's internal customers regarding quality and timeliness problems, and is considering ways to improve the efficiency and quality of the order entry process.
Required:
(a) Develop some indicators that Perez could use to assess the performance of the order entry process.
(b) List four possible errors that might be found in the quote and/or the order acknowledgement (i.e., the outputs of the order entry process).
(c) What do you think are the likely causes of delays and quality problems?

Accepted Answer

(a) Perez could use several indicators t

Question 3

Which of the following best describes the business and production process performance area of the balanced scorecard?

Accepted Answer

A)  Indicates how the infrastructure for innovation and long-term growth should contribute to a company's strategic goals 
B)  Indicates how a customer oriented strategy adds financial value 
C)  Indicates how areas of the company should work to add value to customers 
D)  Measures the company's success in adding value to shareholders 
A)  Indicates how the infrastructure for innovation and long-term growth should contribute to a company's strategic goals 
B)  Indicates how a customer oriented strategy adds financial value 
C)  Indicates how areas of the company should work to add value to customers 
D)  Measures the company's success in adding value to shareholders

Question 4

Which of the following statements regarding incentive reward systems is False?

Accepted Answer

A)  Employees must believe that their efforts influence performance 
B)  Performance measures must be observable and verifiable 
C)  Impossible goals motivate employees more than easy-to-attain goals 
D)  Performance measures and related rewards must reflect organizational goals 
A)  Employees must believe that their efforts influence performance 
B)  Performance measures must be observable and verifiable 
C)  Impossible goals motivate employees more than easy-to-attain goals 
D)  Performance measures and related rewards must reflect organizational goals

Question 5

It is impossible to use the balanced scorecard as a basis for incentive systems because it contains so many non financial measures of performance.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements about agency theory is True?

Accepted Answer

A)  Agency theory focuses on the characteristics of incentive plans that motivate people 
B)  Agency theory focuses on the contracting behavior between principal and agent 
C)  Agency theory works with the assumption that easy goals will motivate employees to perform at the highest level 
D)  Agency theory seeks to understand the types of performance measures and rewards that motivate employees 
A)  Agency theory focuses on the characteristics of incentive plans that motivate people 
B)  Agency theory focuses on the contracting behavior between principal and agent 
C)  Agency theory works with the assumption that easy goals will motivate employees to perform at the highest level 
D)  Agency theory seeks to understand the types of performance measures and rewards that motivate employees

Question 7

Leading indicators are measures that identify future financial and non-financial outcomes as guides to management decision making.

Accepted Answer

A) True 
 B)False

Question 8

Most financial performance measures are leading indicators.

Accepted Answer

A) True 
 B)False

Question 9

The number of units inspected would be an example of a financial measure of employee productivity.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following would be a performance target in the financial performance area of a balanced scorecard?

Accepted Answer

A)  Account and revenue growth of 10% per year 
B)  Reduction in errors of production from 8 in 1000 pieces to 3 in 1000 pieces 
C)  Revenue growth above the industry average 
D)  25% of sales from new services 
A)  Account and revenue growth of 10% per year 
B)  Reduction in errors of production from 8 in 1000 pieces to 3 in 1000 pieces 
C)  Revenue growth above the industry average 
D)  25% of sales from new services

Question 11

The internal business process area of a balanced scorecard indicates how processes work to add value to customers.

Accepted Answer

A) True 
 B)False

Question 12

A participative, bottom-up approach to designing a balanced scorecard improves its acceptance and use by the organization's members.

Accepted Answer

A) True 
 B)False

Question 13

Subjective performance evaluation:

Accepted Answer

A)  Compares an individual's performance to that of others 
B)  Bases rewards on a performance evaluation formula 
C)  Compares individual performance to set objectives or expectations 
D)  Uses non-quantified criteria to evaluate individuals 
A)  Compares an individual's performance to that of others 
B)  Bases rewards on a performance evaluation formula 
C)  Compares individual performance to set objectives or expectations 
D)  Uses non-quantified criteria to evaluate individuals

Question 14

Customer satisfaction with current products and services is a lagging indicator.

Accepted Answer

A) True 
 B)False

Question 15

A performance evaluation formula computes rewards earned for specific achievements.

Accepted Answer

A) True 
 B)False

Question 16

A leading indicator at one stage of the value-chain can be a lagging indicator at another stage.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is not a cost of including nonfinancial measures in incentive plans?

Accepted Answer

A)  The danger of information overload from too many measures of performance 
B)  The increased cost of performance measurement and supporting information systems 
C)  Increased opportunities for disputes over the validity of performance measures 
D)  All of the above are costs of including nonfinancial measures in incentive plans 
A)  The danger of information overload from too many measures of performance 
B)  The increased cost of performance measurement and supporting information systems 
C)  Increased opportunities for disputes over the validity of performance measures 
D)  All of the above are costs of including nonfinancial measures in incentive plans

Question 18

Absolute performance evaluation compares individual performance to set objectives or expectations.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements describes expectancy theory?

Accepted Answer

A)  People are motivated by financial rewards only 
B)  To motivate people, incentive plans should not include undesirable penalties for poor performance 
C)  People are motivated by monetary or nonmonetary incentives 
D)  Impossible goals result in extra incentive and motivation 
A)  People are motivated by financial rewards only 
B)  To motivate people, incentive plans should not include undesirable penalties for poor performance 
C)  People are motivated by monetary or nonmonetary incentives 
D)  Impossible goals result in extra incentive and motivation

Question 20

Nino Corporation conducted a study of the relationship between employee training costs and benefits. The company determined that it has break-even benefit level of $45,698 per year. This result indicates that Schiller should:

Accepted Answer

A)  Spend at least $45,698 per employee annually on employee training programs 
B)  Invest in employee training programs if the benefits will be at least $45,698 per employee annually 
C)  Generate at least $45,698 in additional sales for every $1 spent on employee training programs 
D)  Expect to save $45,698 per year per employee on waste and efficiency 
A)  Spend at least $45,698 per employee annually on employee training programs 
B)  Invest in employee training programs if the benefits will be at least $45,698 per employee annually 
C)  Generate at least $45,698 in additional sales for every $1 spent on employee training programs 
D)  Expect to save $45,698 per year per employee on waste and efficiency

Customer value measures the revenues generated per customer.

Which of the following best describes the business and production process performance area of the balanced scorecard?

Which of the following statements regarding incentive reward systems is False?

It is impossible to use the balanced scorecard as a basis for incentive systems because it contains so many non financial measures of performance.

Which of the following statements about agency theory is True?

Leading indicators are measures that identify future financial and non-financial outcomes as guides to management decision making.

Most financial performance measures are leading indicators.

The number of units inspected would be an example of a financial measure of employee productivity.

Which of the following would be a performance target in the financial performance area of a balanced scorecard?

The internal business process area of a balanced scorecard indicates how processes work to add value to customers.

A participative, bottom-up approach to designing a balanced scorecard improves its acceptance and use by the organization's members.

Subjective performance evaluation:

Customer satisfaction with current products and services is a lagging indicator.

A performance evaluation formula computes rewards earned for specific achievements.

A leading indicator at one stage of the value-chain can be a lagging indicator at another stage.

Which of the following is not a cost of including nonfinancial measures in incentive plans?

Absolute performance evaluation compares individual performance to set objectives or expectations.

Which of the following statements describes expectancy theory?

Nino Corporation conducted a study of the relationship between employee training costs and benefits. The company determined that it has break-even benefit level of $45,698 per year. This result indicates that Schiller should:

Cost Management and Strategic Decision Making Evaluating Opportunities and Leading Change

Product Costing Systems: Concepts and Design Issues

Cost Accumulation for Job-Shop and Batch Production Operations

Activity-Based Costing Systems

Activity-Based Management

Managing Customer Profitability

Managing Quality and Time to Create Value

Process-Costing Systems

Joint-Process Costing

Managing and Allocating Support-Service Costs

Cost Estimation

Financial and Cost-Volume-Profit Models

Cost Management and Decision Making

Strategic Issues in Making Long-Term Capital Investment Decisions

Budgeting and Financial Planning

Standard Costing, Variance Analysis, and Kaizen Costing

Flexible Budgets, Overhead Cost Management, and Activity-Based Budgeting

Organizational Design, Responsibility Accounting, and Evaluation of Divisional Performance

Transfer Pricing

Filters

Exam 20: Performance Measurement Systems Glossary Photo Credits

Customer value measures the revenues generated per customer.

Which of the following best describes the business and production process performance area of the balanced scorecard?

Which of the following statements regarding incentive reward systems is False?

It is impossible to use the balanced scorecard as a basis for incentive systems because it contains so many non financial measures of performance.

Which of the following statements about agency theory is True?

Leading indicators are measures that identify future financial and non-financial outcomes as guides to management decision making.

Most financial performance measures are leading indicators.

The number of units inspected would be an example of a financial measure of employee productivity.

Which of the following would be a performance target in the financial performance area of a balanced scorecard?

The internal business process area of a balanced scorecard indicates how processes work to add value to customers.

A participative, bottom-up approach to designing a balanced scorecard improves its acceptance and use by the organization's members.

Subjective performance evaluation:

Customer satisfaction with current products and services is a lagging indicator.

A performance evaluation formula computes rewards earned for specific achievements.

A leading indicator at one stage of the value-chain can be a lagging indicator at another stage.

Which of the following is not a cost of including nonfinancial measures in incentive plans?

Absolute performance evaluation compares individual performance to set objectives or expectations.

Which of the following statements describes expectancy theory?

Nino Corporation conducted a study of the relationship between employee training costs and benefits. The company determined that it has break-even benefit level of $45,698 per year. This result indicates that Schiller should:

Cost Management and Strategic Decision Making Evaluating Opportunities and Leading Change

Product Costing Systems: Concepts and Design Issues

Cost Accumulation for Job-Shop and Batch Production Operations

Activity-Based Costing Systems

Activity-Based Management

Managing Customer Profitability

Managing Quality and Time to Create Value

Process-Costing Systems

Joint-Process Costing

Managing and Allocating Support-Service Costs

Cost Estimation

Financial and Cost-Volume-Profit Models

Cost Management and Decision Making

Strategic Issues in Making Long-Term Capital Investment Decisions

Budgeting and Financial Planning

Standard Costing, Variance Analysis, and Kaizen Costing

Flexible Budgets, Overhead Cost Management, and Activity-Based Budgeting

Organizational Design, Responsibility Accounting, and Evaluation of Divisional Performance

Transfer Pricing

Filters