Deck 12: Strategy, balanced Scorecard, and Strategic Profitability Analysis

Question 1

While doing industry analysis on five forces,which of the following is a force that shapes an organization's profit potential?

A) previous year profit figures
B) current year profit figures
C) bargaining power of suppliers
D) research and development

Answer 1

C

Question 2

Which of the following statements best define strategy?

A) It describes how an organization can create value for its customers while differentiating itself from its competitors.
B) It is an organization's ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control.
C) It is an organization's ability to offer products or services its customers perceive to be superior and unique relative to the products or services of its competitors.
D) It describes how an organization motivates its employees to work for more hours without any increase in their wages.

Answer 2

A

Question 3

Higher selling prices,rather than unique products or services,provide a competitive advantage for the cost leader companies.

Answer 3

False

Question 4

Terbium Corporation manufactures water toys.It plans to grow by producing high-quality water toys that are delivered in a timely manner.There are a number of other manufacturers who produce similar water toys.Terbium believes that continuously improving its manufacturing processes and reengineering processes to downsize and eliminate excess capacity are critical to implementing its strategy.Out of the two basic strategies,Terbium's strategy is ________.

A) product differentiation
B) product leadership
C) cost differentiation
D) cost leadership

Question 5

________ is the fundamental rethinking and redesign of business processes to achieve improvements in critical measures of performance such as cost,quality,service,speed,and customer satisfaction.

A) Strategy
B) Product differentiation
C) Product designing
D) Reengineering

Question 6

In general,profit potential of an organization decreases with ________.

A) lesser competition and stronger potential entrants
B) greater competition and stronger potential entrants
C) lesser competition and weaker potential entrants
D) greater competition and weaker potential entrants

Question 7

One of the five forces of industry analysis is understand the bargaining power of customers.

Question 8

Bosely Corporation is reviewing its business strategy.The first step for Bosely is to perform an industry analysis.You have been hired to help the company go through the strategy formulation process.
Required:
To perform the industry analysis,what areas should Bosely focus on and give at least one example of how Bosely can effectively deal with each area.

Question 9

The cost leadership strategy is best for a company if the engineering staff is more skilled at creatively designing new products than at making process improvements.

Question 10

The cost leadership strategy is for products and services that are similar to competitor's products and services.

Question 11

An organization that is using the product differentiation approach would ________.

A) focus on tight cost control
B) use innovative research and development
C) provide products that are similar to competitors
D) offer products at a lower cost than competitors

Question 12

Which of the following statements best define a product differentiation strategy?

A) It describes how an organization can increase customer base by differentiating its' product prices from its competitors.
B) It is an organization's ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control.
C) It describes how an organization can decrease product prices by differentiating its' raw materials from its competitors.
D) It is an organization's ability to offer products or services its customers perceive to be superior and unique relative to the products or services of its competitors.

Question 13

An organization which uses product differentiation strategy will charge higher prices.

Question 14

________ refers to an organization's ability to achieve lower costs relative to competitors through productivity and efficiency improvements,elimination of waste,and tight cost control.

A) Marketing strategy
B) Product differentiation
C) Cost leadership
D) Competitor differentiation

Question 15

Strategy describes how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its overall objectives.

Question 16

Explain the term cost leadership.What are the possible ways through which a company would try to become a cost leader? How far is it desirable to implement cost reduction measures?

Question 17

Cost-leadership strategy always advocates cuts in personnel to achieve cost reduction.

Question 18

________ is an organization's ability to offer products or services that are perceived by its customers as being superior and unique relative to those of its competitors.

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

Question 19

An organization that is using the cost leadership approach would ________.

A) incur costs for innovative R&D
B) provide products at a higher cost than competitors
C) focus on productivity through efficiency improvements
D) bring products to market rapidly

Question 20

Stewart Corporation plans to grow by offering a sound system,the SS3000,that is superior and unique from the competition.Stewart believes that putting additional resources into R&D and staying ahead of the competition with technological innovations is critical to implementing its strategy.Stewart's strategy is ________.

A) product differentiation
B) downsizing
C) product leadership
D) cost leadership

Question 21

In an effective balanced scorecard,________.

A) net income serves as the best indicator for the hard-to measure long-run nonfinancial performance
B) sales budget serves as one of the leading indicator for the hard-to measure short-run financial performance
C) sales budget serves as a leading indicator for the hard-to measure short-run nonfinancial performance
D) customer satisfaction serves as one of the leading indicator for the hard-to measure long-run financial performance

Question 22

Which of the following statements is true of the internal-business-process perspective of a balanced scorecard?

A) Internal-business-process perspective is composed of three subprocesses: innovation process; learning-and-growth process; and postsales-service process.
B) Internal-business-process perspective evaluates the profitability of the strategy and the creation of shareholder value.
C) Internal-business-process improvement targets are often determined after benchmarking against an organization's main competitors standards.
D) Internal-business-process perspective is composed of three subprocesses: operations process; learning-and-growth process; and postsales-service process.

Question 23

The fundamental rethinking and redesign of business processes to achieve improvements in critical measures of performance,such as cost,quality,service,speed,and customer satisfaction is ________.

A) directing
B) controlling
C) reengineering
D) structuring

Question 24

What is reengineering.Can you contrast a reengineering approach to change with a kaizen approach to change?

Question 25

A ________ is a diagram that describes how an organization creates value by connecting strategic objectives in explicit cause-and-effect relationships with each other in the balanced scorecard perspectives.

A) value diagram
B) balanced scoreboard
C) strategic scorecard
D) strategy map

Question 26

________ is a measure of the balanced scorecard's internal process perspective.

A) Service response time
B) Customer satisfaction
C) Gross profit percentage
D) Cost reduction

Question 27

Which of the following statements best relates to the balanced scorecard's internal business processes perspective?

A) How do we lower costs?
B) How do we motivate employees?
C) How can we obtain greater profits?
D) How processes will increase value to customers?

Question 28

Which of the following statements is true of a balanced scorecard?

A) The balanced scorecard reduces managers' emphasis on long-run financial performance.
B) The balanced scorecard reduces managers' emphasis on short-run financial performance.
C) The primary goal of using the balanced scorecard is to sustain short-run financial performance.
D) The primary goal of using the balanced scorecard is to sustain short-run nonfinancial performance.

Question 29

________ translates an organization's mission and strategy into a comprehensive set of performance measures that provide the framework for implementing its strategy.

A) Performance scoreboard
B) Product differentiation
C) Differential report
D) Balanced scorecard

Question 30

Companies which strive to achieve cost leadership should never try to implement business process reengineering measures.

Question 31

Which of the following statements best relates to the balanced scorecard's financial perspective?

A) How can we obtain greater profits for the current year?
B) How can we increase shareholder value?
C) How will we obtain continuous improvements?
D) How can we secure greater customer satisfaction?

Question 32

Which of the following is an example of process reengineering measure?

A) charging higher prices to increase tax benefit
B) decreasing quantity of output produced to increase total factor productivity
C) increasing costs of all inputs used to increase total factor productivity
D) employing more skilled workers to improve quality

Question 33

Which of the following statements best relates to the balanced scorecard's learning and growth perspective?

A) How will we empower our employees?
B) How do we lower costs?
C) What processes will increase value to customers?
D) How can we obtain greater profits?

Question 34

________ perspective of the balanced scorecard focuses on a company's own operations that create value for customers that,in turn,help achieve financial objectives.

A) Financial
B) Customer
C) Internal-business-process
D) Learning-and-growth

Question 35

________ is a measure of the balanced scorecard's financial perspective.

A) Service response time
B) Number of new patents
C) Operating income
D) Defect rates

Question 36

Reengineering benefits are most significant when they focus on one business function rather than crossing functional lines of the business process.

Question 37

________ is a measure of the balanced scorecard's customer perspective.

A) Number of client complaints
B) Defect rates
C) Number of process improvements
D) Revenue growth

Question 38

The first step to successful balanced scorecard implementation is clarifying 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 39

Successful reengineering efforts generally involve changing the roles and responsibilities of employees.

Question 40

________ is a measure of the balanced scorecard's internal-business-process perspective.

A) Market share
B) Manufacturing downtime
C) Return on investment
D) Number of customer complaints

Question 41

Time taken to replace or repair defective products is a measure of the financial perspective of the balanced scorecard.

Question 42

An effective balanced scorecard helps to communicate the strategy to all members of the organization by translating the strategy into a coherent and linked set of understandable and measurable operational targets.

Question 43

The financial perspective of the balanced scorecard focuses on the profits and value created for shareholders.

Question 44

Which of the following statements is a possible pitfall while implementing a balanced scorecard?

A) Managers using cost-benefit considerations while designing a balanced scorecard.
B) Managers ignoring
C) Managers using subjective measures in the balanced scorecard.
D) Top management ignoring nonfinancial measures when evaluating employee performance.

Question 45

The employee turnover rates is an example of the ________ measure of a balanced-scorecard.

A) internal business process perspective
B) customer perspective
C) learning and growth perspective
D) financial perspective

Question 46

The gross margin percentage is an example of the ________ measure of a balanced-scorecard.

A) internal business process perspective
B) customer perspective
C) learning and growth perspective
D) financial perspective

Question 47

The operating capabilities is an example of the ________ measure of a balanced-scorecard.

A) internal business process perspective
B) customer perspective
C) learning and growth perspective
D) financial perspective

Question 48

The time taken to fulfill clients' requests is an example of the ________ measure of a balanced-scorecard.

A) internal business process perspective
B) customer perspective
C) learning and growth perspective
D) financial perspective

Question 49

The balanced scorecard uses financial and nonfinancial performance measures to evaluate short-run and long-run performance in a single report.

Question 50

Which of the following statements is a benefit of measuring environmental and social performance?

A) It limits the number of performance measures, identifying only the most critical ones.
B) It helps to communicate the strategy to all members of the organization.
C) It enhances the identification of cause-and-effect relationships to evaluate benefits.
D) It uses financial measures to serve as leading indicators of future nonfinancial performance.

Question 51

The customer perspective of the balanced scorecard focuses on the success of the company in its target market.

Question 52

The customer perspective of the balanced scorecard evaluates the profitability of the strategy.

Question 53

Which of the following statements is true of successfully implementing a balanced scorecard?

A) External auditors should design and implement the balanced scorecard.
B) Balanced scorecard should never be communicated to all employees.
C) Balanced scorecard should be formed exclusively by top management.
D) Management accountants should determine the balanced scorecard measures.

Question 54

Terbium Corporation manufactures water toys.It plans to grow by producing high-quality water toys that are delivered in a timely manner.There are a number of other manufacturers who produce similar water toys.Terbium believes that continuously improving its manufacturing processes and reengineering processes to downsize and eliminate excess capacity are critical to implementing its strategy.To further company strategy,measures on the balanced scorecard would most likely include ________.

A) number of process improvements
B) price premium earned
C) longer cycle times
D) an increase in operating income from increased profit margins

Question 55

Which of the following statements is a disadvantage of balanced scorecards?

A) Balanced scorecards ignore short-run objectives.
B) Balanced scorecards may become unwieldy and difficult to understand.
C) Balanced scorecards use a lot of nonfinancial measures.
D) Balanced scorecards are of little use in influencing managerial behavior.

Question 56

The financial perspective of the balanced scorecard identifies targeted customers and market segments and measures the company's success in these segments.

Question 57

________ is a measure of the balanced scorecard's learning-and-growth perspective.

A) Information system availability
B) Economic value added
C) Cost reductions in key areas
D) Customer-retention percentage

Question 58

Eliminating excess capacity is an initiative to achieve the ________ perspective under a balanced scorecard.

A) marketing
B) customer
C) learning and growth
D) internal-business-process

Question 59

To achieve success,it is important to set nonfinancial objectives as well as financial objectives.

Question 60

Stewart Corporation plans to grow by offering a sound system,the SS3000,that is superior and unique from the competition.Stewart believes that putting additional resources into R&D and staying ahead of the competition with technological innovations is critical to implementing its strategy.To further company strategy,measures on the balanced scorecard would most likely include ________.

A) number of process improvements
B) manufacturing quality
C) yield
D) an increase in operating income from productivity gains

Question 61

When analyzing the change in operating income,the strategy component of productivity will increase when ________.

A) capacity is reduced
B) quality is enhanced
C) selling prices are increased
D) more units are produced and sold

Question 62

A good balanced scorecard tells the story of a company's strategy,articulating a sequence of cause-and-effect relationships-the links among the various perspectives that align implementation of
the strategy.

Question 63

Which component of strategy measures the reduction in costs attributable to a reduction in the quantity of inputs used in Year 2 relative to the quantity of inputs that would have been used in Year 1 to produce the Year 2 output?

A) the growth component
B) the price-recovery component
C) the productivity component
D) the cost leadership component

Question 64

Which of the following statements is true of strategic analysis of operating income?

A) Management accountants compare budgeted operating performance over two different periods.
B) Management accountants compare actual and budgeted operating performance over the same time periods.
C) Management accountants compare actual operating performance of one year and budgeted operating performance of another year.
D) Management accountants compare actual operating performance over two different periods.

Question 65

When analyzing the change in operating income,the strategy component of growth ________.

A) calculations are similar to the selling-price variance calculations
B) isolates the change attributed solely to an increase in market share
C) isolates the change attributed solely to an increase in industry growth
D) isolates the change attributed solely to an increase in the quantity of units sold

Question 66

For each of the following measures,identify which perspective of the balanced scorecard it represents: financial,customer,internal-business-process,or learning-and growth.
1.service response time
2.market share
3.gross margin percentage
4.defect rates
5.customer satisfaction
6.information system availability
7.new-product development time
8.revenue growth
9.employee turnover rates
10.setup time

Question 67

The customer perspective under the balanced scorecard approach would include measures on cost reduction.

Question 68

When analyzing the change in operating income,the strategy component of price-recovery ________.

A) calculations are similar to the efficiency-variance calculations
B) compares the change in output price with the changes in input prices
C) will report a large positive amount when a company has successfully pursued the cost leadership strategy
D) isolates the change attributed solely to an increase in production efficiencies

Question 69

What are the four key perspectives in the balanced scorecard?

Question 70

Successful implementation of a cost leadership strategy will result in ________.

A) large favorable growth and price-recovery components
B) large favorable price-recovery and productivity components
C) large favorable productivity and growth components
D) only a large favorable growth component

Question 71

Assuming previous year's production capacity was inadequate to produce current year output,the cost effect of growth for fixed costs is calculated by multiplying the difference between ________ by price per unit of capacity in the previous year.

A) capacity units required to produce previous year output in current year and the current year capacity units
B) capacity units required to produce current year output in previous year and the current year capacity units
C) capacity units required to produce previous year output in current year and the previous year capacity units
D) capacity units required to produce current year output in previous year and the previous year capacity units

Question 72

Heliem Corp.uses the balanced scorecard technique to achieve its long term objectives.Managers of Heliem came to know that all the balanced scorecards objectives were achieved other than financial perspective measures for the previous period.While the learning and growth and internal business processes perspective measures were achieved with relative ease,Heliem had to strive extremely hard to achieve customer oriented measures.The company had failed miserably in achieving its financial measures.
Using the given information,evaluate the strategy of Heliem and its implementation.

Question 73

When analyzing the change in operating income,the strategy component of productivity ________.

A) calculations are similar to the sales-volume variance calculations
B) compares the change in output price with the changes in input prices
C) will report a large positive amount when a company has successfully pursued the cost leadership strategy
D) isolates the change attributed solely to an increase in the quantity of units sold

Question 74

Successful implementation of a product differentiation strategy will result in ________.

A) a large favorable growth and price-recovery components
B) a large favorable price-recovery and productivity components
C) a large favorable productivity and growth components
D) only a large favorable growth component

Question 75

Maloney Corporation manufactures plastic water bottles.It plans to grow by producing high-quality water bottles at a low cost that are delivered in a timely manner.There are a number of other manufacturers who produce similar water bottles.Maloney believes that continuously improving its manufacturing processes and having satisfied employees are critical to implementing its strategy.
Required:
a.Is Maloney's strategy one of product differentiation or cost leadership? Explain briefly.
Identify at least one key element that you would expect to see included in the balanced scorecard:
b.for the financial perspective.
c.for the customer perspective.
d.for the internal business process perspective.
e.for the learning and growth perspective.

Question 76

Buck Corporation plans to grow by offering a computer monitor,the CM3000 that is superior and unique from the competition.Buck believes that putting additional resources into R&D and staying ahead of the competition with technological innovations are critical to implementing its strategy.
Required:
a.Is Buck's strategy one of product differentiation or cost leadership? Explain briefly.
Identify at least one key element that you would expect to see included in the balanced scorecard:
b.for the financial perspective.
c.for the customer perspective.
d.for the internal business process perspective.
e.for the learning and growth perspective.

Question 77

________ are the subdivisions of income that management accountants use for the strategic analysis of operating income.

A) Growth, price-recovery and cost leadership components
B) Growth, price-recovery and productivity components
C) Cost leadership, price-recovery and productivity components
D) Growth, cost leadership and productivity components

Question 78

Which component of strategy measures the changes in operating income attributed solely to an increase in the quantity of output between Year 1 and Year 2?

A) the growth component
B) the price-recovery component
C) the productivity component
D) the cost leadership component

Question 79

Assuming previous year's production capacity was adequate to produce current year output,the cost effect of growth for fixed costs is calculated by multiplying the difference between ________ by price per unit of capacity in the previous year.

A) actual units of capacity in current year and actual units of capacity in previous year
B) capacity units required to produce current year output in previous year and the current year capacity units
C) actual units of capacity in previous year and actual units of capacity in previous year
D) capacity units required to produce previous year output in current year and the previous year capacity units

Question 80

When analyzing the change in operating income,the strategy component of price-recovery will increase when ________.

A) capacity is reduced
B) market share is increased
C) selling prices are increased
D) more units are sold