Business Process Performance MCQs

Companies that adopt just-in-time purchasing systems often experience

A reduction in the number of suppliers
Fewer deliveries from suppliers.
A greater need for inspection of goods as the goods arrive.
Less need for linkage with a vendor�s computerized order entry system.

The benefits of a just-in-time system for raw materials usually include

Elimination of nonvalue-adding operations
Increase in the number of suppliers, thereby ensuring competitive bidding
Maximization of the standard delivery quantity, thereby lessening the paperwork for each delivery.
Decrease in the number of deliveries required to maintain production.

Bell Co. changed from a traditional manufacturing philosophy to a just-in-time philosophy. What are the expected effects of this change on Bell’s i...

Decrease Decrease
Decrease Increase
Increase Decrease
Increase Increase

Which changes in costs are most conducive to switching from a traditional inventory ordering system to a just-in-time ordering system? Cost per Purc...

Increasing Increasing
Decreasing Increasing
Decreasing Decreasing
Increasing Decreasing

A manufacturing company is attempting to implement a just-in-time (JIT) purchase policy system by negotiating with its primary suppliers to accept lo...

Purchasing costs Stockout costs
Purchasing costs Quality costs
Quality costs Ordering costs
Stockout costs Carrying costs

In Belk Co.’s just-in-time production system, costs per setup were reduced from $28 to $2. In the process of reducing inventory levels, Belk found ...

Decrease Increase
Increase Decrease
Increase Increase
Decrease Decrease

The effectiveness of a JIT system is often facilitated by the elimination of some common forms of internal control. The elimination of which internal ...

Preparation of hard copy receiving reports
Voucher approval prior to paying accounts payable.
Two signatures required on large checks.
Locked doors on production areas.

Just-in-time manufacturing practices are based in part on the belief that

High inventory levels provide greater flexibility in production scheduling.
Attempting to reduce inventory to a consistently low level can lead to �panic� situations.
Goods should be �pulled� through the production process, not �pushed.�
Beefed-up internal control in the central warehouse can greatly enhance productivity in the production areas.

If a worker encounters a production kanban at his or her workstation, the worker should

Release the requested item to the next stage in the process.
Seek authorization to begin production of the specified item.
Initiate a purchase order with the supplier of the requested item.
Confirm the amount of the item requested and present the kanban to the production supervisor.

A firm that is deploying just-in-time manufacturing for the first time will

Establish contracts with many suppliers since an interruption in supply is extremely disruptive of the production process.
Establish contracts with a few carefully chosen suppliers since an interruption in supply is extremely disruptive of the production process.
Maintain a carefully calibrated safety stock since interruptions in supply are inevitable.
Acquire considerable computer processing capability to manage the demands of the data-dependent kanban inventory management system.

Which of the following is not a benefit of lean production?

Reduced setup time.
Lower central support costs.
Lower training costs.
Improved on-time delivery.

Which of the following internal controls is not one typically eliminated when a just-in-time inventory system is introduced?

Sophisticated inventory tracking system.
Central receiving dock.
Statistical methods for quality assurance.
Hard copy receiving report.

The physical reconfiguration of equipment that often accompanies the institution of a just-intime manufacturing regime is described as the creation o...

Cells.
Kanbans.
Electronic Data Interchange.
Tickets.

Which of the following terms is not connected with the employment of just-in-time (JIT) manufacturing?

Cells.
Kanban.
Lean production.
Safety stock.

Just-in-time production is also called

Kaizen.
Lean manufacturing.
Activity-based management.
Backflush costing.

Which of the following is not a correct comparison of a just-in-time system with a traditional system? Traditional... Just-in-Time

Longer lead times Shorter lead times
Inventory is an asset Inventory is a liability
Some scrap tolerated Zero defects desired
Lot size based on immediate need Lot size based on formulas

A company manufactures its products in a highly automated, just-in-time environment and uses a standard cost system. The variance that would cause th...

10% unfavorable fixed overhead spending variance caused by an unanticipated raise given to production supervisors.
5% unfavorable material quantity variance caused by low-quality materials that resulted in reworks.
6% unfavorable labor efficiency variance caused by the hiring of lowerskilled part-time workers.
7% unfavorable variable overhead spending variance caused by the parttime workers using more supplies than predicted.

Which one of the following is not an expected benefit of implementing a just-in-time (JIT) production system?

Lower total storage costs.
Lower total setup costs.
Lower manufacturing lead time.
Lower total rework cost.

The work cell concept relates to

A just-in-time production system.
Material requirements planning.
Throughput costing.
Enterprise resource planning.

Abbott Company is considering implementing a just-in-time system and would like to test the system on its packaging materials purchases. An analysis ...

Ordering.
Packaging labor.
Packaging materials.
Stockouts.

In contrast to just-in-time manufacturing, materials requirements planning is a

Push system.
Pull system.
Automated system.
Manual system.

Materials requirements planning (MRP) sometimes results in

Longer idle periods.
Less flexibility in responding to customers.
Increased inventory carrying costs.
Decreased setup costs.

The manufacturing concept that relates demand forecasts to specific dates for completion is

Master production schedule.
Materials requirements planning.
Manufacturing resource planning.
Bill of materials.

Which of the following is not a typical benefit of an outsourcing arrangement?

Reduced costs.
Access to technology.
Avoidance of risk of obsolescence
Increased control over a necessary function.

Which of the following is not a goal of materials requirements planning?

Right part.
Right quantity.
Right customer.
Right time.

One reason to outsource is so a firm can focus on its

Customers.
Suppliers.
Undifferentiated activities
Core competencies.

United Industries manufactures three products at its highly automated factory. The products are very popular, with demand far exceeding the company’...

Gross margin.
Segment margin.
Contribution margin ratio.
Contribution margin per machine hour.

Three of the basic measurements used by the theory of constraints (TOC) are

Gross margin (or gross profit), return on assets, and total sales.
Number of constraints (or subordinates), number of nonconstraints, and operating leverage.
Throughput (or throughput contribution), inventory (or investments), and operational expense.
Fixed manufacturing overhead per unit, fixed general overhead per unit, and unit gross margin (or gross profit).

Under throughput costing, the only cost considered to be truly variable in the short run is

Direct materials.
Direct labor.
Manufacturing overhead.
All manufacturing costs are considered variable.

The immediate goal of a theory of constraints (TOC) analysis is to

Maximize the efficiency of the entire production process.
Minimize direct materials cost.
Maximize contribution margin through the constraint.
Smooth production flow to eliminate backup in the system.

Tocon Company produces two components: A-1 and A-2. The unit throughput contribution margins for A-1 and A-2 are $150 and $300, respectively. Each co...

180 0
45 100
45 75
0 60

In a theory of constraints (TOC) analysis, the bottleneck operation (the constraint) corresponds to which part of the drum-buffer-rope model?

Drum.
Buffer.
Rope
No part of TOC analysis corresponds to the drum-buffer-rope model.

The process model used in a theory of constraints (TOC) analysis is called

Just-in-time.
Drum-buffer-rope.
Materials requirements planning.
Lean production.

Which pairs of systems are considered complementary because they inherently focus on different time frames? Short-term...Long-term

Operation costing Theory of constraints
Activity-based costing Theory of constraints
Theory of constraints Operation costing
Theory of constraints Activity-based costing

The following steps make up the stages of a theory of constraints (TOC) analysis. I. Determine the most profitable product mix given the constraint. ...

III, I, II, V, IV.
III, II, I, V, IV.
III, II, I, IV, V.
III, I, V, II, IV.

A company uses a planning system that focuses first on the amount and timing of finished goods demanded and then determines the derived demand for raw...

An economic order quantity model.
Materials requirements planning.
Linear programming
Just-in-time purchasing

A company is preparing the sales budget for two potential products. Both products require the use of the same manufacturing equipment, which is only a...

Product A because the contribution margin is more per unit than Product B.
Product B because they can produce more units of that product than Product A.
Product A because it will make better use of the equipment than Product B.
Product B because they can produce many units and still save hours for Product A.

Assume that a manufacturing firm maintains its product cost accounting records using throughput costing. At the end of the fiscal year,

Reported net income will be less than would be reported using activitybased costing.
An adjusting entry will be required to restate the inventory accounts for external reporting purposes.
The firm should convert its records to a direct costing basis.
The resulting production volume variance should be closed to cost of goods sold.

When using throughput costing, inventoriable costs would include only

Direct material, direct labor, variable manufacturing overhead, and fixed manufacturing overhead costs.
Direct material, direct labor, and variable manufacturing overhead costs.
Direct material and direct labor costs.
Direct material costs.

Bandito Company sells product XRP for $180 per unit. Overhead is allocated based on direct labor hours. Bandito estimates overhead to be $600,000 per...

$3,240,000
$2,320,000
$1,960,000
$1,864,000

Effective cost capacity management

Minimizes the value delivered to customers
Maximizes required future investments.
Matches the firm�s resources with current and future market opportunities
Is limited to eliminating short-term worth.

What is the key strategic issue when a firm is considering capacity expansion?

Forecasting long-term demand.
Analyzing the behavior of competitors
Identifying options.
Avoiding industry overcapacity

Capacity expansion is also referred to as

Market penetration.
Market development
Product development.
Diversification.

Process value analysis is a key component of activity-based management that links product costing and

Reduction of the number of cost pools.
Continuous improvement.
Accumulation of heterogeneous cost pools.
Overhead rates based on broad averages.

A systematic approach to reaching targeted cost levels during value chain analysis is known as

Value engineering.
Life-cycle costing.
Process value analysis.
Activity analysis.

Gram Co. develops computer programs to meet customers’ special requirements. How should Gram categorize payments to employees who develop these prog...

Yes Yes
Yes No
No No
No Yes

The term referring to the excess of the price of a good over its cost is

Consumer surplus
Profit margin.
Contribution margin.
Value-added transfer.

Which of the following is not a component of the value chain?

Primary activities
Secondary activities.
Support activities.
The product.

The flow of materials and services from their original sources to final consumers is the

Value chain.
Product chain.
Supply chain.
Value process.

Which of the following is not a phase in a value-chain analysis?

Identify activities that are candidates for cost reduction.
Identify ways to generate additional customer value.
Identify means for improving product cost efficiency.
Identify the firm�s competitive advantage.

Which of the following is not an appropriate time measure for use in process analysis?

Product development time.
Breakeven time.
Customer-response time.
Process value time.

An outside consultant has been hired by a manufacturing firm to evaluate each of the firm�s major products, beginning with the design of the products ...

Balanced scorecard study.
Benchmarking analysis.
SWOT (strengths, weakness, opportunities, threats) analysis.
Value-chain analysis.

Value chain analysis can be described as the process of

Comparing levels of performance against the best levels of performance in similar companies.
Tracking business function costs, from initial R&D to final customer support, over several years.
Budgeting on the expectation that labor per unit will decline as units of production increase.
Analyzing the sequence of business functions in which customer usefulness is added to products or services.

In the value creation chain model, the primary activities include

Logistics, operations, marketing and sales, and service.
Procurement, infrastructure, operations, and service.
Procurement, infrastructure, operations, and technology development
Procurement, infrastructure, human resources, and technology development.

Customer relationship management is best defined as

Coordination with members of the firm�s supply chain.
Maximizing short-term sales to customers.
Market sensing.
Maximizing customer loyalty by managing customer �touchpoints.�

Customer satisfaction is related to the degree of customer loyalty. High customer loyalty

Requires a high degree of satisfaction of other stakeholders.
Results when quality, service, and price increase.
Depends on the effectiveness of the firm�s core business processes.
Is directly proportional to customer expectations.

The firm should emphasize customer retention

By creating low switching costs
By maximizing customer churn
Although new customers are less costly than old customers.
Because the customer base is an intangible asset.

Value chain analysis can be described as the process of

comparing levels of performance against the best levels of performance in similar companies.
Tracking business function costs, from initial R&D to final customer support, over several years.
Budgeting on the expectation that labor per unit will decline as units of production increase.
Analyzing the sequence of business functions in which customer usefulness is added to products or services.

Which one of the following best shows the sequence of business functions in the value chain?

Research and Development, Design of Products and Processes, Production, Marketing, Distribution, Customer Service.
Design of Products and Processes, Research and Development, Finance, Production, Distribution, Customer Service.
Design of Products and Processes, Finance, Research and Development, Production, Distribution, Customer Service.
Research and Development, Finance, Design of Products and Processes, Production, Distribution, Customer Service.

For purposes of cost control, process reengineering is most similar to

Activity-based costing.
Kaizen budgeting.
Variance analysis.
Value-chain analysis.

Customer lifetime value for a particular customer is the

Net present value of the cash flows related to a particular customer.
Sum of the customer�s purchases from the firm.
Undiscounted amount of the net cash flows related to a particular customer.
Customer equity.

Which of the following is not a type of process?

Make-to-stock.
Make-to-order.
Buffer.
Hybrid.

Which of the following statements regarding benchmarking is false?

Benchmarking involves continuously evaluating the practices of best-in-class organization and adapting company processes to incorporate the best of these practices.
Benchmarking, in practice, usually involves a company forming benchmarking teams.
Benchmarking is an ongoing process that entails quantitative and qualitative measurement of the difference between the company’s performance of an activity and the performance by the best in the world or the best in the industry.
The benchmarking organization against which a firm is comparing itself must be a direct competitor.

An example of an internal nonfinancial benchmark is the

Labor rate of comparably skilled employees at a major competitor’s plant
Average actual cost per pound of a specific product at the company’s most efficient plant becoming the benchmark for the company’s other plants.
Company setting a benchmark of $50,000 for employee training programs at each of the company’s plants.
Percentage of customer orders delivered on time at the company’s most efficient plant becoming the benchmark for the company’s other plants.

Which of the following statements is false with respect to best practices analysis?

The balanced scorecard facilitates best practice analysis.
Best practice analysis is a way or method of accomplishing a business function or process that is considered to be superior to all other known methods.
Best practices analysis assumes that a lesson learned from one area of a business can be passed on to another area of the business or between businesses.
The concept of benchmarking is incompatible with best practices analysis.

The four categories of costs associated with product quality costs are

External failure, internal failure, prevention, and carrying
External failure, internal failure, prevention, and appraisal.
External failure, internal failure, training, and appraisal.
Warranty, product liability, training, and appraisal.

The cost of scrap, rework, and tooling changes in a product quality cost system is categorized as a(n)

Training cost.
External failure cost.
Internal failure cost.
Prevention cost.

The cost of statistical quality control in a product quality cost system is categorized as a(n)

Internal failure cost.
Training cost.
External failure cost.
Appraisal cost.

Which of the following quality costs are nonconformance costs?

Systems development costs.
Costs of inspecting in-process items.
Environmental costs.
Costs of quality circles

The costs of quality that are incurred in detecting units of product that do not conform to product specifications are referred to as

Preventive costs.
Appraisal costs.
Internal failure costs.
External failure costs.

All of the following are examples of benchmarking standards except

The performance of the unit during the previous year.
The best performance of the unit in comparable past periods.
A comparison with a similar unit within the same company.
The best performance of a competitor with a similar operation.

A company implemented a benchmarking program to compare itself to others in the industry. Through this program, the company management team discovere...

Benchmarking should be performed with companies of similar size and sales.
Fixed overhead is difficult to control and should not be benchmarked.
Cost per unit is just one area of competitiveness; others should be looked at.
Companies operate very differently, and comparisons should not be made.

"A manufacturer of high-technology consumer goods incurred the following quality-related expenses last year." Equipment maint...

$165,000
$35,000
$10,000
$5,000

A manufacturer that wants to improve its staging process compares its procedures against the check-in process for a major airline. Which of the follo...

Total quality management.
Statistical process control.
Economic value added.
Benchmarking.

Which one of the following would be classified as an internal failure cost on a quality cost report?

Depreciation of inspection equipment.
Returns and allowances.
Net cost of scrap.
Final product testing and inspection.

"Hill Stand Company is currently performing a cost of quality analysis of its Memphis facilities. The following are costs compiled ...

$2,080
$2,785
$4,945
$5,955

Which of the following statements are true with respect to continuous improvement? I. Improvements should be made continuously until the goal is reach...

I and II only.
I and IV only.
II and III only.
III and IV only.

Which one of the following is a value-added activity for a company that manufactures bicycles?

Moving a tire to the rework area.
Placing a reworked brake on a bicycle
Reworking a bicycle for the second time.
Inspecting a reworked bicycle.

Which one of the following statements about benchmarking is not correct?

A budget may provide a benchmark that motivates employees to meet a company�s goals.
A company may appropriately use benchmarks to evaluate employee or unit performance.
Benchmarking may include comparing a unit�s achievements against other units within the company.
Comparing a unit�s results against industry benchmarks is not usually considered as useful as comparing results to the budget.

The four factors that derive from a company distinctive competencies and which create competitive advantage are

the value (utility) customers place on the company products, the price it charges for its products, the costs of creating those products, and the profitability of the company.
superior efficiency, quality, innovation, and customer responsiveness.
continuous improvement, continuous learning, prior strategic commitments and absorptive capacity.
employee productivity, capital productivity, product innovation and process innovation.

The four factors that derive from a company distinctive competencies and which create competitive advantage are

Which of the following statements is not true about the application of Theory of Constraints to production called the drum-buffer-rope (DBR) system:

DBR attempts to minimize buildup of inventory at a bottleneck while keeping the bottleneck busy at all times.
The sequence of processes after the constraint is the rope.
The buffer is a minimum amount of work-in-process inventory waiting for completion.
The constrained process is the drum.

In an attempt to improve operations, companies often go through analyses and redesign of the way processes are performed. Which of the following is ...

Technology.
Human performance.
The interaction between technology and human performance.
Strategic goals.

Management of organizations that engage in business process management view business processes as

Requirements for good control over the organization.
Systems that provide information for good management.
Strategic assets that must be understood, managed and improved.
Mechanisms that keep employees from shirking.

At which phase in the business process management lifecycle does management simulate performance of the process in a test environment?

Design.
Modeling.
Execution.
Optimization.

In the theory of constraints, an operation or resource where the work performed approaches or exceeds the available is referred to as

A bottleneck.
A time driver.
Customer-response time.
Manufacturing lead time.

Three of the basic measurements used by the Theory of Constraints (TOC) are

Which statement best describes the objective of the theory of constraints? Throughput contribution . . Investment . . Operating costs

Increase Decrease Decrease
Increase Increase Increase
Decrease Increase Decrease
Increase Increase Decrease

Which of the following statements about a just-in-time system is/are true?

To prepare for fulfilling orders from existing and prospective customers, it is important to maintain high levels of inventory at all times.
A just-in-time system is a push system.
The company’s plant layout must center around supporting mass production.
Cost reduction is an important factor.

Urban Blooms is a company that grows flowering plants and sells them in attractively designed container arrangements to upscale hotels, restaurants a...

Materials resource planning (MRP).
Activity-based costing (ABC).
Outsourcing.
Lean production.

The primary activities or business functions that are considered in the value chain include:

Customer service, production, marketing and sales, and human resources.
Customer service, production, marketing and sales, and information systems.
Infrastructure, human resources, materials management, and R&D.
Customer service, production, marketing and sales, and R&D.

The most important component of quality control is:

Conforming to ISO-9000 specifications.
Determining the appropriate timing of inspections.
Ensuring goods and services conform to the design specifications.
Satisfying upper management.

Of these statements, which is not relevant to the overall benchmarking process?

Management must determine what processes the company uses to convert materials, capital and labor into value-adding products.
Management must use target costing to set standard costs in order to put the focus on the market as well as on what target price to sell the product because the company must attain the target cost to realize its desired profit margin for the product.
Target costing utilizes kaizen to reduce costs in order to attain a desired profit margin.
Management must put in place a program to measure the organization against the products, practices and services of the most efficient competitors in its marketplace.

The management and employees of a large household goods moving company decided to adopt total quality management (TQM) and continuous improvement (CI...

Greater customer satisfaction.
Reduced delivery charges.
Greater employee participation.
Reduced delivery time.

Which of the following is not an objective of a company’s TQM program?

To examine issues relating to creating value for the company’s customers.
To understand the company’s capacity for innovation.
To evaluate environmental issues that may affect the company’s profitability.
To utilize computers in product development, analysis and design modifications.

Which of the following is a characteristic of TQM?

Education and self-improvement.
Management by objectives.
Quality by final inspection.
On-the-job training by other workers

Which of the following statements is/are true?

As it applies to an individual company, the Pareto principle should indicate that management needs to know what 50% of the causes are accounting for 80% of the problems before it can focus on making improvements.
Companies use best practice analysis to cut costs but it is not effective for increasing output.
One of the steps in business process reengineering is the identification of its distinctive competencies.
A TQM system is not compatible with an ABC system because it does not make the costs of quality more apparent.

The cost of scrap, rework and tooling changes in a product quality cost system are categorized as a(n):

External failure cost.
Training cost.
Prevention cost.
Internal failure cost.

Listed below are selected line items from the Cost of Quality Report for Watson Products for last month. .tg {border-collapse:collapse;border-spa...

$2,665
$1,154
$786
$1,940

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Business Process Performance MCQs