ACCT 201 B Exam 3 QUESTIONS WITH
CORRECT ANSWERS!!
CH 9: Cost Center - ANSWERManager has control over costs but not over revenues
and investment funds
ex: service departments such as accounting legal, and personnel, manufacturing
facilities
Profit Center - ANSWERManager has control over both costs and revenue but not
over investment
ex: In charge of income statement
ex: Sales department (manager)
-profit watchers
Investment Center - ANSWERManager has control over cost, revenue, and
investments in operating assets
ex: TV and movies, amusement parks, retail
-Different investment centers for each
-CEO is in charge of investment center
Advantages - ANSWER-Making power is done by a lot of people
-Middle, lower, and upper management are all making decisions
Disadvantages - ANSWER-Lower-level managers don't see the big picture
-Hard to communicate and spread ideas
Return on Investment (a percentage) - ANSWERNet operating income / average
operating assets
or
Margin x Turnover
(the higher the better)
Margin - ANSWERNet operating Income/sales
Screening decisions - ANSWERMeeting preset standard
Preference decisions - ANSWERSelecting from among several competing courses
of action
Cash Outflows: - ANSWERRepairs and maintenance, Initial investment, incremental
operating costs, working capital (current assets - current liabilities)
Cash Inflows: - ANSWERSalvage value, reduction o costs, incremental revenues,
release of working capital
, Turnover - ANSWERSales/Average operating assets
Net book value vs Gross cost - ANSWERMost companies use net book value of
depreciable to calculate operating assets
Difference is: depreciate assets
Net book value = acquisition cost - depreciation
Gross cost is original
ex: 1,000,000 (gross) - 100,000 (depreciation) = 900,000 (net book value)
Criticisms of ROI - ANSWER-Managers may not know how to increase ROI with no
balanced scorecard
-Managers inherit committed costs which they have no control
-Managers evaluated on ROI may reject profitable investment opportunities
Residual Income
(a number) - ANSWERNet operating income - (average operating assets x minimum
required rate of return)
*has to be a positive number
-Encourages managers to make profitable investments that would be rejected by
managers using ROI
Disadvantage - ANSWERIt cannot be used to compare the performance of divisions
of different sizes
ex: Disney movies may be huge compared to their retail
Delivery Cycle - ANSWEROrder receive -> (wait time) --> prodction started - >
throughput time --> goods shipped
*Process time is the only value-added item
Delivery Cycle Time - ANSWERWait time + process time + inspection time + move
time + queue time
Throughout Time - ANSWERProcess Time + inspection time + move time + queue
time
Manufacturing Cycle Efficiency - ANSWERValue-added time/throughput time
Balanced Scorecard
(KPI = Key performance indicators) - ANSWER-Management translates its strategy
into performance measures that employees understand and influence
CORRECT ANSWERS!!
CH 9: Cost Center - ANSWERManager has control over costs but not over revenues
and investment funds
ex: service departments such as accounting legal, and personnel, manufacturing
facilities
Profit Center - ANSWERManager has control over both costs and revenue but not
over investment
ex: In charge of income statement
ex: Sales department (manager)
-profit watchers
Investment Center - ANSWERManager has control over cost, revenue, and
investments in operating assets
ex: TV and movies, amusement parks, retail
-Different investment centers for each
-CEO is in charge of investment center
Advantages - ANSWER-Making power is done by a lot of people
-Middle, lower, and upper management are all making decisions
Disadvantages - ANSWER-Lower-level managers don't see the big picture
-Hard to communicate and spread ideas
Return on Investment (a percentage) - ANSWERNet operating income / average
operating assets
or
Margin x Turnover
(the higher the better)
Margin - ANSWERNet operating Income/sales
Screening decisions - ANSWERMeeting preset standard
Preference decisions - ANSWERSelecting from among several competing courses
of action
Cash Outflows: - ANSWERRepairs and maintenance, Initial investment, incremental
operating costs, working capital (current assets - current liabilities)
Cash Inflows: - ANSWERSalvage value, reduction o costs, incremental revenues,
release of working capital
, Turnover - ANSWERSales/Average operating assets
Net book value vs Gross cost - ANSWERMost companies use net book value of
depreciable to calculate operating assets
Difference is: depreciate assets
Net book value = acquisition cost - depreciation
Gross cost is original
ex: 1,000,000 (gross) - 100,000 (depreciation) = 900,000 (net book value)
Criticisms of ROI - ANSWER-Managers may not know how to increase ROI with no
balanced scorecard
-Managers inherit committed costs which they have no control
-Managers evaluated on ROI may reject profitable investment opportunities
Residual Income
(a number) - ANSWERNet operating income - (average operating assets x minimum
required rate of return)
*has to be a positive number
-Encourages managers to make profitable investments that would be rejected by
managers using ROI
Disadvantage - ANSWERIt cannot be used to compare the performance of divisions
of different sizes
ex: Disney movies may be huge compared to their retail
Delivery Cycle - ANSWEROrder receive -> (wait time) --> prodction started - >
throughput time --> goods shipped
*Process time is the only value-added item
Delivery Cycle Time - ANSWERWait time + process time + inspection time + move
time + queue time
Throughout Time - ANSWERProcess Time + inspection time + move time + queue
time
Manufacturing Cycle Efficiency - ANSWERValue-added time/throughput time
Balanced Scorecard
(KPI = Key performance indicators) - ANSWER-Management translates its strategy
into performance measures that employees understand and influence
