Performance Measurements

Question 1

Return on Investment

Answer 1

ROI = Net Operating Income / Average Operating Income

ROI = Margin * Turnover

Question 2

Margin

Answer 2

Margin = Net Operating Income / Sales

Question 3

Turnover

Answer 3

Turnover = Sales / Average Operating Assets

Question 4

Net Operating Income

Answer 4

NOI = Sales - Operating Expenses

Expenses:

• Cost of Goods Sold
• Selling& Administrative Expenses

Question 5

Average Operating Assets

Answer 5

AOA = Current Assets + Non-current Assets

Current Assets:

• Cash
• Accounts Receivables
• Inventories

Non-current Assets:

• Plant and Equipment
• Other Assets

Question 6

Residual Income

Answer 6

RI = Net Operating Income - (Average Operating Income * Minimum Required Rate of Return)

Question 7

Delivery Cycle Time

Answer 7

Everything

Question 8

Throughput (Manufacturing Cycle) Time

Answer 8

Everything except wait time

Question 9

Valued-Added Time

Answer 9

Process Time

Question 10

Manufacturing Cycle Efficiency

Answer 10

MCE = Valued-Added Time (process time) / Throughput (manufacturing cycle) Time

Question 11

Purchaser’s Perspective

Answer 11

Transfer Price < Cost of buying from outside supplier

Transfer Price < Profit to be Earned per unit Sold (not including transfer price)

Question 12

Seller’s Perspective

Answer 12

Transfer Price > Variable Cost per Unit + Total CM on Lost Sales / Number of Units Transferred

Question 13

Four Strategies to Performance Measures

Answer 13

Vision and Strategy
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Learning and Growing
Internal Business Processes
Customer
Financial