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Chapter 24: Q13RQ (page 1355)

What is a key performance indicator?

Short Answer

Expert verified

Answer

KPI is a quantifiable metric that shows how successfully a corporation is reaching important business objectives.

Step by step solution

01

Meaning of Key performance indicator

An outline performance metric called a key performance indicator (KPI) is employed by directors to decide on the off chance that the association is succeeding in its targets.

02

Explaining a key performance indicator

A quantitative indicator of how successfully a company is completing its core goals is known as a key performance indicator (KPI). Associations use KPIs to measure their progress toward their goals. Low-level KPIs could focus on departmental tasks like sales, marketing, HR, or support, but high-level KPIs might focus on the business鈥檚 overall success.

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Most popular questions from this chapter

Explain the difference between a lag indicator and a lead indicator.

What is the typical focus of responsibility reports for cost centers, revenue centers, and profit centres?

Question: List the four types of responsibility centers, and briefly describe each.

Management by exception is a term often used in performance evaluation. Describe management by exception and how it is used in the evaluation of cost, revenue, and profit centers.

One subunit of Racer Sports Company had the following financial results last month:

Subunit X Actual Results Flexible Budget Flexible Budget % Variance

Variance (F or U) (F or U)

Net Sales

Revenue \( 476,000 \) 451,000

Variable

Expenses 261,000 251,000

Contribution

Margin 215,000 200,000

Traceable

Fixed Expenses 40,000 26,000

Divisional

Segment Margin \( 175,000 \) 174,000

Requirements

1. Complete the performance evaluation report for this subunit (round to two decimal places).

2. Based on the data presented and your knowledge of the company, what type of responsibility center is this subunit?

3. Which items should be investigated if part of management鈥檚 decision criteria is to investigate all variances equal to or exceeding \(8,000 andexceeding 10% (both criteria must be met)?

4. Should only unfavorable variances be investigated? Explain.

5. Is it possible that the variances are due to a higher-than-expected sales volume? Explain.

6. Will management place equal weight on each of the variances exceeding \)8,000? Explain.

7. Which balanced scorecard perspective is being addressed through this performance report? In your opinion, is this performance report a lead or a lag indicator? Explain.

8. List one key performance indicator for the three other balanced scorecard perspectives. Make sure to indicate which perspective is being addressed by the indicators you list.
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