Management Accounting — Part 2 MCQs with Explanations

Cost operations such as wages, salaries, depreciation, utilities and rent are summed together to calculate operating costs. Operating costs are expenses associated with the maintenance and administration of a business on a day-to-day basis.

Cost incur for defective products, after their shipment to customers is classified as external failure costs. External failure costs are those costs incurred due to product failures after they have been sold to customers.

Quality aspect, that refers how well product fulfils customer demands, is classified as design quality. Design quality is the value of a design to customers. Design is the root of all quality including the quality of products, services, experiences, systems and processes.

If number of employees who left job is 40, total number of employees are 200, then employee turnover ratio will be 0.2. Employee turnover ratio = Number of employees who left job ÷ Total number of employees = 40 ÷ 200 = 0.2.

Fishbone diagram is an example of cause and effect diagram. It is a more structured approach than some other tools available for brainstorming causes of a problem (e.g., the Five Whys tool). The problem or effect is displayed at the head or mouth of the fish.

Incurred costs to exclude production of goods, that do not meet specification, are called prevention costs. Preventive costs are any expenditures incurred that are intended to minimize the number of defects in products and services.

Number of employees who left company, divided by average number of employees to calculate ratio is called employee turnover ratio. Employee turnover rate is calculated by dividing the number of employees who left the company by the average number of employees in a certain period in time.

Revenues are subtracted from cost of direct materials of sold goods is to calculate throughout contribution.

Carrying costs of inventories and price discounts related to delayed deliveries are examples of financial measures. Financial measures or financial ratios are often used as very simple mechanisms to describe the performance of a business or investment.

Basic aspects of product quality must include the design quality and conformance quality. A product is known as a quality product only when it satisfies various criteria for its functioning for the consumer.

Sum of manufacturing and waiting time for an order is classified as manufacturing cycle time. Manufacturing cycle time refers to the time required or spent to convert raw materials into finished goods. It is also known as throughput time. Technically, it is the length of time from the start of production to the delivery of the final products.

A theory which describes techniques of operating income maximization, facing with non-bottleneck and bottle neck operations is theory of constraints. The Theory of Constraints is a methodology for identifying the most important limiting factor (i.e. constraint) that stands in the way of achieving a goal and then systematically improving that constraint until it is no longer the limiting factor.

A process by which employees can make decisions is divided by total number of processes to calculate employee empowerment ratio. Employee empowerment is a strategy and philosophy that enables employees to make decisions about their jobs. Employee empowerment helps employees own their work and take responsibility for their results, serve customers at the level of the organization where the customer interface exists.

Statistical quality control is also called statistical process control. Statistical process control (SPC) is a method of quality control which employs statistical methods to monitor and control a process.

A product performance in comparison to its features and design is classified as conformance quality. Quality of conformance is the ability of a product, service, or process to meet its design specifications. Design specifications are an interpretation of what the customer needs.

Sum of cost of direct materials, costs of buildings, equipment, research and development costs is classified as investments. An investment is a monetary asset purchased with the idea that the asset will provide income in the future or will later be sold at a higher price for a profit.

Consumed time to deliver a complete order to its customers is termed as delivery time.

Number of employees that indicate high ratings of satisfaction, divided by number of surveyed employees are to calculate employee satisfaction. "Employee satisfaction" is the term used to describe whether employees are happy and fulfilling their desires and needs at work.

Employee empowerment ratio = Employees who can make decisions ÷ Number of processes = 20 ÷ 50 = 0.4.

Time between a customer's order placement till customer receives its delivery is known as customer response time. It is the time between when a customer makes an inquiry about a product or commits to a purchase a good or service and when it is actually received by said customer.

Costs that are incurred to find manufactured products, which does not meet specifications are called appraisal costs. Appraisal costs are a specific category of quality control costs. Companies pay appraisal costs as part of the quality control process to ensure that their products and services meet customer expectations and regulatory requirements. These costs could include expenses for field tests and inspections.

Reduction in setup time, manufacturing cycle efficiency and average time of manufacturing for key products are examples of measures of internal business processes. In other words, internal processes create and deliver the value proposition for customers. Thus objectives in your strategy map's internal process perspective must describe how you intend to accomplish your organization's strategy.

Employees that are trained to manage bottlenecks, during production operations and employee satisfaction are related to measures of growth and learning.

Graph which plots series of successive observations of specific procedure, operation or step at regular time intervals is called control chart. The control chart is a graph used to study how a process changes over time. Data are plotted in time order. A control chart always has a central line for the average, an upper line for the upper control limit, and a lower line for the lower control limit. These lines are determined from historical data.

Timeframe between placement of order until a finished good produces is classified as manufacturing lead time and manufacturing cycle time. The manufacturing lead time is the time period between the placement of an order and the shipment of the completed order to the customer. Manufacturing cycle time refers to the time required or spent to convert raw materials into finished goods. It is also known as throughput time.

Total manufacturing time is multiplied to manufacturing cycle efficiency to calculate value added manufacturing time. Value added time is the processes and activities in the production or manufacturing process that improve the product or add usefulness to it.

Costs incur for defective products, before their shipment to customers can be categorized as internal failure costs. Internal failure costs are those costs of quality associated with product failures that are discovered before a product leaves the factory.

Costs that are incurred to prevent low quality goods production are classified as costs of quality. Cost of quality (COQ) is defined as a methodology that allows an organization to determine the extent to which its resources are used for activities that prevent poor quality, that appraise the quality of the organization's products or services, and that result from internal and external failures.

Employee satisfaction = Employees that indicate higher rating for satisfaction ÷ Total number of employees surveyed × 100 = 195 ÷ 200 × 100 = 97.50%.

On-time performance and customer-response time are examples of customer measures. It is a measure of how products and services supplied by a company meet or surpass customer expectation.

Types of costs of quality consist of appraisal costs, internal and external failure costs and prevention costs.

Throughput contribution = Total revenues - Cost of direct materials use in goods sold = $9000 - $5000 = $4,000.

Time a company takes until a good is produced after order placement is known as manufacturing lead time. The manufacturing lead time is the time period between the placement of an order and the shipment of the completed order to the customer.

Factors identified by cause and effect diagrams include component and material factors, machine-related factors and human factors.

Delivery of goods by time it is contracted to be delivered is known as on-time performance. On time performance, sometimes referred to as on time running, is normally expressed as a percentage, with a higher percentage meaning more vehicles are on time.

Value added manufacturing time is divided by total manufacturing is to calculate manufacturing cycle efficiency. Manufacturing cycle efficiency measures the proportion of production time spent on value-added activities.

Chart which represents how regularly defect occurs in production process is classified as Pareto chart. A Pareto chart is a type of chart that contains both bars and a line graph, where individual values are represented in descending order by bars, and the cumulative total is represented by the line.

Value added manufacturing time = Manufacturing cycle efficiency × Total manufacturing time = 0.725 × 45 = 32.625.

In response to challenges arisen by competitors and new entrants, strategy which must be considered by company does include cost leadership and differentiated products.

Revenue effect of growth = (12500 - 11000) × $50 = $75,000.