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

Question 1

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

Answer 1

True

Question 2

Cost-leadership strategy usually focuses productivity and efficiency improvements ,elimination of waste along with effective cost control systems.

Answer 2

True

Question 3

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

Answer 3

False
Explanation:Lower selling prices,rather than unique products or services,provide a competitive advantage for the cost leader companies.

Question 4

What is the term that describes 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 5

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 6

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

Question 7

The cost leadership strategy is for products and services that are similar to a competitors products and services.

Question 8

Which of the following focuses on these five factors: competitors,potential entrants to the market,equivalent products,bargaining power of customers,and bargaining power of suppliers?

A)balanced scorecard
B)product differentiation analysis
C)industry analysis
D)business process reengineering

Question 9

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.

Question 10

Magic 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.Magic believes that continuously improving its manufacturing processes and re-engineering processes to downsize and eliminate excess capacity are critical to implementing its strategy.Which of the following best describes Magic's strategy?

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

Question 11

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.Which of the following terms best describes Stewart's strategy?

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

Question 12

What is the term for 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 13

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 14

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 15

An organization that is using the product differentiation approach would most likely do which of the following?

A)focus on tight cost control to create a reputation of saving its customers money
B)use innovative research and development and develop effective promotional campaigns to increase customer loyalty and charge higher prices
C)provide products that are similar to competitors
D)offer products at a lower cost than competitors

Question 16

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 17

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

Question 18

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 19

Which of the following involves a fundamental rethinking and redesign of business processes to achieve improvements in critical measures of performance?

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

Question 20

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 21

Which of the following efforts would most likely yield the greatest re-engineering benefits?

A)focusing on a single activity to determine if it is necessary
B)decreasing quantity of output produced to increase total factor productivity
C)increasing costs of all inputs used to increase total factor productivity
D)focusing on entire processes and elimination of unnecessary activities and task

Question 22

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 23

Successful re-engineering efforts generally involve changing the roles and responsibilities of employees.

Question 24

Which of the following 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 25

Companies which strive to achieve cost leadership should never try to implement business process re-engineering measures.

Question 26

Feedback on how a company is doing from the perspectives of financial,customer,internal business processes,and learning and growth.

A)Master budget
B)Product differentiation
C)Differential report
D)Balanced scorecard

Question 27

________ 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 28

Which of the strategic perspectives 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 29

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 30

Which of the following could be 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 31

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

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

Question 32

In an effective balanced scorecard,________.

A)net income serves as the best indicator for the hard-to measure long-run operational performance
B)the sales budget serves as one of the leading indicator for the hard-to measure short-run financial performance
C)the 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 such as the likelihood of higher sales and income

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

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

Question 35

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 post sales-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 post sales-service process.

Question 36

Which of the following 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 37

What is re-engineering.Can you contrast a re-engineering approach to change with a kaizen approach to change?

Question 38

Which of the following is not correct about the balanced scorecard?

A)profits and value created for shareholders are perspectives revealed on a balance scorecard
B)nonfinancial and operational indicators are reported on a balance scorecard
C)the balanced scorecard reveals information about the success of the company in its target market
D)the balance scorecard increases managements emphasis on short-term results

Question 39

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 40

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

A)How do we streamline operations to lower costs to increase profits?
B)How do we motivate employees so that they can become more productive?
C)How can we increase our market share?
D)How can our processes be executed in such a way as to l increase value to customers?

Question 41

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 42

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 43

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 44

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 45

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

Question 46

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

Question 47

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 48

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 49

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

Question 50

In a strategy map,a strategic objective where many ties spur out from it resulting in the achievement of many strategic objectives is called ________.

A)distinctive objectives
B)trigger point
C)focal points
D)orphan objectives

Question 51

A company's balanced scorecard measures yield,order-delivery time,cycle time,and errors as part of which of the following perspectives?

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

Question 52

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

Question 53

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 54

Balanced scorecards show reveal as many measures as possible to connect objectives with measures and initiatives to help assure the success of the enterprise.

Question 55

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 56

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

Question 57

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 58

The percentage of processes with real-time feedback would be a measure of which perspective?

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

Question 59

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 objective measures as market share,manufacturing yield.
C)Managers using subjective measures in the balanced scorecard.
D)Top management ignoring nonfinancial measures when evaluating employee performance.

Question 60

Balanced scorecards are almost exclusively utilized in profit-seeking organizations as nonprofits cannot benefit from focusing on financial perspectives such as net income and shareholder value.

Question 61

In 2016,Smart Office Systems Inc.(SOSI)used 25,840 pounds of plastic (direct materials)to produce 8000 units as opposed to 2017 when SOSI produced 8500 units using 27,840 pounds of plastic.The type of plastic SOSI uses cost $5 per pound in 2016 and rose to $5.25 per pound in 2017.In comparing results for these two years,what would be the cost effect of growth for the plastic material?

A)$8075 F
B)$8479 U
C)$8075 U
D)$10,000 U

Question 62

________ 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 63

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

Question 64

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 65

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 66

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 67

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 68

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 69

What are the four key perspectives in the balanced scorecard?

Question 70

In the analysis of strategy maps,strong ties are those causal links where the impact of one strategic objective on realization of another is average when compared to the strength of the other ties in the map.

Question 71

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 72

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 73

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 74

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 75

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 76

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 77

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 78

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 79

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 80

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