S-Q Unit 16 Performance Measurement and Process Management 6-13-2023

QUIZ-1 Diagnostic Quiz 16: Performance & Process   Management 6/13 1: (20) Responsibility Centers 16.1 責任中心 分散的組織被劃分為責任中心（ 戰略業務單元，或 SBU ）以促進地方決策。 責任中心通常 分為成本、收入、利潤和投資。 每個責任中心在單個經理的指導下都有一個邏輯操作組。 每個責任中心績效衡量的兩個重要特徵是 可控性和目標一致性。 轉移價格 由組織的一個部門為其提供給同一組織的另一部門的商品和服務收取。 挑戰在於確定一個既能激勵銷售經理又能激勵採購經理的價格。 共同成本 是由兩個或多個成本對象共享的產品、活動、設施、服務或運營的成本。 相關性是管理報告最重要的屬性。 9, Decentralized firms can delegate authority and yet retain control and monitor managers’ performance by structuring the organization into responsibility centers. Which one of the following organizational segments is most like an independent business? Investment center  is the organizational type most like an independent business because it is responsible for its own revenues, costs incurred, and capital invested . The other types of centers do not incorporate all three elements . / Cost center. / Profit center. / Revenue center. 13, The following is a summarized income statement of Carr Co.’s profit center No. 43 for the month just ended: Which of the following amounts would most likely be subject to the control of the profit center’s manager?  $50,000/$37,000 /$33,000 /$ 70,000  A profit center is a segment of a company responsible for both revenues and expenses . A profit center has the authority to make decisions concerning markets (revenues) and sources of supply (costs). However, the profit center’s manager does not control his or her own salary, investment, and the resulting costs (e.g., depreciation of plant assets), or expenses incurred at the corporate level. Consequently, profit center No. 43 is most likely able to control its $70,000 contribution margin (Sales – Variable costs) but not the other items in the summarized income statement. 20, Which of the following attributes of a management report has the greatest impact on management’s ability to make effective decisions?  Summarization/Conciseness. / Exception orientation/ Relevance  Relevance is the most important attribute of management reporting. Relevance is determined by asking the question:  “Does a change to this revenue or cost element depend on my choice?” 2: (65) Performance Measurement - Financial and Nonfinancial Measures 績效衡量 — 財務和非財務衡量標準 - 每類責任中心都有相應的財務績效衡量標準。 非財務措施可以採取任何適當的形式。 績效衡量和企業營銷目標應該聯繫起來。高管薪酬通常包括工資、附加福利和獎金。績效衡量指標包括毛利率、營業利潤率、淨利潤率、投資回報率、 剩 餘收入 Residual income(EVA-Economic value added) 、資產回報率、股本回報率、每股收益、普通股經濟回報率、經濟增加值和內部增長率 . 1, Each of the following will affect a company’s return on investment ,  except   Maintaining the company’s cost of capital at current levels  Return on investment equals operating income over total assets (or average invested capital). Maintaining the company’s cost of capital at current levels will not change the operating income nor the amount of invested capital in the company. Thus, it will not affect the company’s return on investment.  -Decreasing investment in assets. - Raising prices as demand remains unchanged. Decreasing expenses. 2, Residual income is a better measure for performance evaluation of an investment center manager than return on investment because  Desirable investment decisions will not be neglected by high return divisions  A disadvantage of ROI is potential rejection of projects that decrease ROI despite increasing shareholder value . Residual income often is preferable because a firm ultimately is most interested in the total monetary amount of an investment’s return .  --Returns do not increase as assets are depreciated. -- Only the gross book value of assets needs to be calculated.  --The problems associated with measuring the asset base are eliminated. 3, The imputed interest rate used in the residual income approach to performance evaluation can best be described as Target return on investment set by the company’s management .  Residual income is the excess of operating income over a targeted amount equal to an imputed interest charge on invested capital . The rate used ordinarily is set as a target return by management but is often equal to the weighted average cost of capital. Some entities prefer to measure managerial performance in terms of the amount of residual income rather than the percentage ROI because the firm will benefit from expansion as long as residual income is earned.-Historical weighted-average cost of capital for the company. - Average return on investments for the company over the last several years 6, SkyBound Airlines provided the following information about its two operating divisions: Measuring performance using return on investment (ROI), which division performed better ?   The Passenger division, with an ROI of 16%  ROI is equal to operating profit divided by the investment. The ROI for the Passenger division is Contribution margin   70,000 Period expenses:     Manager’s salary 20,000 Facility depreciation 8,000 Corporate expense allocation 5,000 (33,000) Profit center income   37,000 Passenger Cargo Operating profit 40,000 50,000 Investment 250,000 500,000 External borrowing rate 6% 8% ROI 0.16 0.10

16% ($40,000 ÷ $250,000). The ROI for the Cargo division is 10% ($50,000 ÷ $500,000). Thus, the Passenger division performed better. 7, Which of the following methods is best suited for evaluating the performance of a firm’s capital in any given year ? - Economic value-added  (EVA) is the formula for residual income adjusted for the opportunity cost of capital . EVA represents a business unit’s true economic profit primarily because it is determined by subtracting the cost of equity capital. The EVA method is therefore the best method for evaluating the performance of a firm’s capital in any given year. - Net present value  (NPV) is the difference between the present value of the net cash savings or inflows expected over the life of the project and the required investment. If the difference is positive, the project should be accepted. If the difference is negative, it should be rejected. Although the NPV method is useful in determining whether to accept or reject a project, it’s not the best method for evaluating the performance of a firm’s capital in any given year. -   Payback  The payback method merely calculates the number of years required for the net cash savings to equal the original investment. It does not provide feedback for evaluating the performance of a firm’s capital in any given year. - Internal rate of return  (IRR) of a project is the discount rate at which the investment’s net present value equals zero . The IRR method assumes reinvestment at the IRR, but if the project’s funds are not reinvested at the IRR , the ranking calculations obtained may be in error. The IRR method therefore is not the best method for evaluating the performance of a firm’s capital in any given year. 8, The following data pertain to Canova, Inc., for the year ended Dec. 31: What was Canova’s rate of return on assets (ROI) for the year?   6%  Return on assets equals net income divided by average total assets , or 6% {$150,000 ÷ [($2,000,000 + $3,000,000) ÷ 2]}. 10, What is the primary disadvantage of using return on investment (ROI ) rather than residual income (RI) to evaluate the performance of investment center managers?  ROI may lead to rejecting projects that yield positive cash flows  A serious drawback of relying on ROI is the temptation to reject capital projects that would decrease the ROI percentage in spite of the fact that they would increase shareholder wealth. Management tends to reject any capital project that would decrease current ROI even if it would add to the company’s bottom line . Residual income is often considered superior because dealing with absolute dollars rather than percentages forces management to consider all decisions in the light of increasing shareholder wealth, not just historical percentage returns. 14, EVA -A company has two divisions. Division A has operating income of $500 and total assets of $1,000 . Division B has operating income of $400 and total assets of $1,600 . The required rate of return for the company is 10%. The company’s residual income would be which of the following amounts?   $640  The company’s total residual income can be calculated as follows: 17, Galax, Inc., had operating income of $5,000,000 before interest and taxes. Galax’s net book value of plant assets at January 1 and December 31 were $22,000,000 and $18,000,000, respectively. Galax achieved a 25% return on investment for the year, with an investment turnover of 2.5. What were Galax’s sales for the year ?   $50,000,000  The capital (investment) turnover ratio equals sales divided by average invested capital. Sales equals the capital turnover ratio of 2.5 times average invested capital of $20,000,000 [($22,000,000 + $18,000,000) ÷ 2]. Galax’s sales are therefore $50,000,000 . capital turnover ratio (? TIMES) = Total sales / A verage invested capital 4, Charlie’s Service Co. is an automobile service center. Charlie’s had the following operating statistics for Year 6: Charlie’s has a : Residual income of $(6,000)  Residual income is the excess of operating income (a pretax amount) over a targeted amount ( cost of capital-equal to an imputed interest charge on invested capital ) . Using total assets available as the investment base, Charlie’s targeted amount is $56,000 ($700,000 total assets × 8% cost of capital). Subtracting this amount from operating income results in residual income of $(6,000) . Return on investment of 8%/ Return on investment of 6.67%. / Residual income of $(10,000). 5, Listed below is selected financial information for the Western Division of a corporation for last year. If the corporation treats the Western Division as an investment center for performance measurement purposes, what is the before-tax return on investment (ROI) for last year? 16.67% 400 / (625+1775) An Net sales $600,000 Net income 150,000 Total assets, January 1 2,000,000 Total assets, December 31 3,000,000 Residual income =Operating income – Target return on invested capital =($500 + $400) – [($1,000 + $1,600) × 10%]= $900 – $260 = $640 Sales $750,000 Operating income 50,000 Net profit after taxes 6,000 Total assets available 700,000 Shareholders’ equity 300,000 Cost of capital 8% Account (thousands) $$ Average working capital $ 625 General and administrative expenses     75 Net sales 4,000 Average plant and equipment  1,775 Cost of goods sold 3,525

SWOT 分析確定內部因素（優勢和劣勢）和外部因素（機會和威脅）。 每個 CSF 的具體措施應該是相關的並且能夠可靠地陳述。 這記分卡應包括 滯後指標 lagging 和領先指標 leading 。 提供的措施是 非金融和金融、長期 和短期、內部和外部 不強調短期財務結果，而側重於 CSF 。 典型的 平衡計分卡 根據以下觀點對目標進行分類業務： 1) 財務 2) 客戶滿意度 3) 內部業務流程 4) 學習和成長。 3. Which of the following is one of the four perspectives of a balanced scorecard ?  Just in time.  / Benchmarking. / Activity-based costing./ Innovation  The balanced scorecard is an accounting report that connects the firm’s critical success factors determined in a strategic analysis with measures of its performance. The critical success factors (and appropriate measures thereof) are assigned to four perspectives on the business:  financial, customer, internal business processes, and learning and growth . Innovation is a facet of the learning and growth perspective. 4, Which of the following is a financial measure of success in a balanced scorecard ? Sales growth  Sales growth is a financial measure of success under the critical success factor of sales .  Cycle time. / Market share. / Staff morale  nonfinancial measure of success . 6, The balanced scorecard provides an action plan for achieving competitive success by focusing management attention on critical success factors. Which one of the following is   not   one of the perspectives on the business into which critical success factors are commonly grouped in the balanced scorecard ? Competitor business strategies  A typical balanced scorecard classifies critical success factors and measures into one of four perspectives on the business: financial, customer satisfaction, internal business processes, and learning and growth.  /Financial performance. / Employee innovation and learning. / Internal business processes. 11, Which of the following is one of the four perspectives of a balanced scorecard ? Innovation  The balanced scorecard is an accounting report that connects the firm’s critical success factors determined in a strategic analysis with measures of its performance . The critical success factors (and appropriate measures thereof) are assigned to four perspectives on the business:  financial, customer, internal business processes, and learning & growth . Innovation is a facet of the learning and growth perspective .  - Activity-based costing  is a method used to allocate costs to products .  - Benchmarking  Is a tool used in quality management . It involves analysis and measurement of key outputs against those of the best organizations.  - Just in time  Just in time is a method for managing i nventory . 15, Learning curves are most often used to predict __? Unit direct labor costs  Learning curves reflect the increased rate at which people perform tasks as they gain experience. Thus, they are useful in predicting unit direct labor costs. /Unit material costs. / Total unit costs.  / Overhead variances. 16, Benchmarking compares the current performance of operations to which of the following factors related to competing organizations? Current performance measures  Benchmarking involves analysis and measurement of key outputs against those of the best organizations. This procedure also identifies the underlying key actions and causes that contribute to the performance difference . Competitive benchmarking studies an organization in the same industry. Thus, comparing the current performance of operations to the current performance of competing organizations is the most appropriate form of benchmarking. Prior performance measures//Anticipated future performance measures// Standard cost of developing performance measures. 3, Given demand in excess of capacity,  no  spoilage or waste, and full use of a constant number of assembly hours, the number of components needed for an assembly operation with an 80% learning curve should i. Increase for successive periods. II. Decrease per unit of output.   I only  Learning curves reflect the increased rate at which people perform tasks as they gain experience. An 80% learning curve means that the cumulative average time required to complete a unit (or the time required to produce the last unit) declines by 20% when unit output doubles in the early stages of production. Thus, as the cumulative average time per unit (or the time to complete the last unit) declines, the number of units produced per period of time increases. As more units are produced, more components are needed for the production. The number of components per unit of output is not affected by an increase in output. 12, A student aircraft mechanic scored 90% on her midterm exam on electronic systems, but her employer wanted a perfect score on every exam, stating, “Nothing less than perfection works in aviation.” Because the mechanic is required to make a test flight in every airplane she repairs, how would the 10% error rate be classified in a cost of quality analysis?   Nonconformance – internal  Because the mechanic must fly in every aircraft she repairs, the cost of an in-

flight failure of an electrical system could be serious. Thus, the 10% error rate is nonconformance (failure of the system) and internal. The mechanic could incur personal consequences from failure of the electrical system.  Conformance – prevention. / Nonconformance – external. / Conformance – appraisal. 4: (11) Process Management 16.4 過程管理 學習曲線分析反映了人們在獲得收益時執行任務的速度增加經驗 。 在生產的早期階段，執行給定任務所需的時間會逐漸縮短。 該曲線通常表示為累計產量 每增加一倍，完成任務所需時間減少的百分比。 80% 的學習曲線表明產量翻倍將使累計平均單位完成時間減少 20% 。 績效改進流程包括 1. 流程管理驅動的業務 2. 共享服務 3 外包 4 離岸業務 1 process-management-driven business 2 shared services 3 outsourcing 4 off-shore operations 業務流程再造 (BPR) 是對實體執行業務流程的方式進行的完整、自下而上的修訂。 較新的 流程管理方法包括 1. 業務流程再造 2. 精益運營 3. 六西格碼 4. 約束理論 (TOC)5. 價值鏈分析 1).business process reengineering, 2) lean operation, 3) Six Sigma 4) theory of constraints (TOC), and 5) value chain analysis. 18, Which of the following methodologies would be most effective for a company that wants to reduce its rate of defective products? Six Sigma  is a quality improvement approach, goal is to reduce the number of defects in a mass-production process -Sensitivity analysis.-Breakeven analysis.-Variable costing  is a costing method, which assigns only variable manufacturing costs to products . Fixed costs are considered period costs. 8, Which measures would be useful in evaluating the performance of a manufacturing system ? I. Throughput time. II. Total setup time for machines/total production time III. Number of rework units/total number of units completed  I, II, and III  Throughput time is the average amount of time required to convert raw materials into finished goods ready to be shipped . Total setup time as a percentage of total production time provides valuable information for scheduling . The number of rework items as a percentage of total number of units completed provides efficiency and quality control data. These are all important factors in evaluating the performance of a manufacturing system. 5: (15) Tools for Process Management 16.5 過程管理工具 統計過程控制 是一種使用統計方法的質量控制方法。 監測結果以確定它是否在一定限度內或在一定能力範圍內。 統計控製圖是圖形輔助工具 ，用於監視任 何過程在重複操作過程中發生可接受或不可接受的變化的狀態。 控製圖由繪製在水平時間尺度上的三條線組成，使趨勢和周期可 見 。 帕累托圖 - 是一種條形圖，可 幫助 管理 人員 進行 質量控制分析 。 / 直方圖 - 類 似 於 帕累托 圖。 主要區別 在於 直 方圖 顯示 自變量的 連續 統 。 魚骨圖（因果圖） - 是一種 流程改進 技術 ，可用於 研究 因果關 係 （實 際情況與 期 望情況 為何不同）。 這種 格 式組織 了 因果關 係 分析，並有 助 於 識別原 因 之 間可能的相 互 作用。 基準測試 是質量管理中使用的 主要 工具。 它是一種 幫助 組織進行生產力管理和業務流程分析的方法。 遊戲 化是一種 解 決 問題 的方法 ， 涉及 將業務目標視為 遊戲 中的目標。 獎 勵 是給 予達到特 定目標的 玩家 。 獎 勵 可能會 激 發 玩家做出 不 道德 的行為，因 此必須 對 遊戲 進行監控。 2, Fact Pattern: An organization has collected data on the complaints made by computer users and has categorized the complaints in the Pareto diagram below. The chart displays   The absolute frequency of each computer complaint  This Pareto diagram depicts the frequencies of complaints in absolute terms. It displays the actual number of each type of complaint.  -The relative frequency of each computer complaint.  -The arithmetic mean of each computer complaint  帕累托 圖不 顯示 被測變量 的 算術平均 值 -The median 中 位 數 of each computer complaint. 6: (21) Costs of Quality 質量成本（ 合格 或不 合格 ） 必鬚 根據相對成本和收益進行 評估 。 因 此 ，一個組織應該 嘗試最小 化其 總 質量成本。 質 量成本一 般 分為 1. 合規成本， 包括 預防 成本和 評估 成本（內部績效的財務措施），以 及 2. 不合格成本 ，包括內部 失敗 成本（內部績效的財務衡量標準）和外部 失敗 成本（客戶滿意度的財務衡量標準）。 5, To evaluate its performance, the Blankie Co. is comparing its costs of quality from one year to the next. The relevant costs are as follows: Which of the following conclusions can Blankie draw about its quality program?   It has been a success, because conformance 一致 性 costs increased by $25,000 while nonconformance costs decreased by $40,000  Conformance costs increased by $25,000 [($60,000 second year prevention costs – $45,000 first year prevention costs) + ($35,000 second year appraisal costs – $25,000 first year appraisal costs)], and nonconformance costs decreased by $40,000 [($80,000 first year internal failure costs – $50,000 second year internal failure costs) + ($75,000 first year external failure costs – $65,000 second year external failure costs)]. Because total costs of quality decreased by $15,000 ($40,000 decrease in nonconformance costs – $25,000 increase in conformance costs), Blankie’s quality program was a success. First Year Second Year Prevention $45,000 $60,000 Appraisal 25,000 35,000 Internal failure 80,000 50,000 External failure 75,000 65,000

不是 終 點 (3) 讓 每一 位員 工都 參與全面 質量的 追求 。 TQM 的實施不能通過應用 公 式來完成，過程 漫 長而 困難 。 ISO 9000 包 含 11 項 標準和 技術 報告，為 建立 和 維護 質量管理體系 (QMS ) 提供指導。 標準的目的是確 保 過程的質量，而不是產品的質量。 12, Under a total quality management (TQM) approach__ ? Measurement occurs throughout the process , and errors are caught and corrected at the source  emphasizes quality as a basic organizational function . TQM is the continuous pursuit of quality in every aspect of organizational activities. One of the basic tenets of TQM is doing it right the first time. Thus, errors should be caught and corrected at the source.  -A large number of suppliers are used in order to obtain the lowest possible prices.  -Upper management assumes the primary responsibility for the quality of the products and services. -Quality control is performed by highly trained inspectors at the end of the production process  emphasizes discovering errors throughout the process, not inspection of finished goods 13, One of the main reasons that implementation of a total quality management program works better through the use of teams is  Teams are a natural vehicle for sharing ideas, which leads to process improvement  TQM promotes teamwork by modifying or eliminating traditional (and rigid) vertical hierarchies and instead forming flexible groups of specialists. Quality circles, cross-functional teams, and self-managed teams are typical formats. Teams are an excellent vehicle for encouraging the sharing of ideas and removing process improvement obstacles.  -The use of teams eliminates the need for supervision, thereby allowing a company to reduce staffing. 1, Which of the following statements about an organization’s value chain is correct ?   The value chain consists of the major value-added functions for an organization  Value-chain analysis is a strategic analysis tool that allows a firm to focus on those activities that are consistent with its overall strategy. Value-chain analysis allows a firm to decide which parts of the value chain it wants to occupy and how each activity then contributes to the firm’s competitive advantage by adding customer value or by reducing costs. Because the value chain identifies and connects the organization’s strategic activities, value-chain analysis improves the firm’s knowledge of its relations with customers, suppliers, and competitors. It also facilitates the strategic determination of the phase of the industry’s value chain in which the firm should operate. The first step in a value-chain analysis is to identify the firm’s value-creating activities. The second step is to determine how each value-creating activity can produce a competitive advantage for the firm. 11, One of the main reasons total quality management (TQM) can be used as a strategic weapon is that ___? The cumulative improvement from a company’s TQM efforts cannot readily be copied by competitors  Because TQM affects every aspect of the organization’s activities, it permeates the organizational culture. Thus, the cumulative effect of TQM’s continuous improvement process can attract and hold customers and cannot be duplicated by competitors.   14, In which of the following organizational structures does total quality management (TQM) work best?  Hierarchical. / Specialists working individually / Teams of people from the same specialty/ Teams of people from different specialties  TQM advocates replacement of the traditional hierarchical structure with teams of people from different specialties. This change follows from TQM’s emphasis on empowering employees and teamwork. 6. An automobile parts manufacturer has received complaints about declining quality from customers. After a quick review, management realizes the problem has  no  single source. To perform a thorough process of problem identification, the most appropriate tool is a Fishbone diagram  A fishbone diagram (also called a cause-and-effect diagram) is a total quality management process improvement technique. It is useful in studying causation (why the actual and desired situations differ). This format organizes the analysis of causation and helps to identify possible interactions among causes.  Histogram.  Pareto diagram.  ISO 9000 audit. 2. Last year a consulting company that solves computer network problems instituted a total quality management (TQM) program and produced the following summary cost-of-quality report: Which of the following statements regarding the report is most likely correct?   An increase in conformance costs resulted in a decrease in nonconformance costs. Total costs of quality include the conformance costs and nonconformance costs. Conformance costs include costs of prevention (attempt to avoid defective products) and costs of appraisal (embrace such activities as statistical quality control programs, inspection, and testing). Nonconformance costs include internal failure costs (occur when defective products are detected before shipment) and external failure costs (arise when problems occur after shipment). Since the major goal of conformance costs is to prevent defective products, and as evidenced by the chart provided, an increase in conformance costs resulted in a decrease in nonconformance costs .