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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Nonfinancial performance measures

 Diamond Inc. is an Internet retailer of woodworking equipment. Customers order woodworking equipment from the company, using an online catalog. The company processes these orders and delivers the requested product from its warehouse. The company wants to provide customers with an excellent purchase experience in order to expand the business through favorable word-of-mouth advertising and to drive repeat business. To help monitor performance, the company developed a set of performance measures for its order placement and delivery process:

 Average computer response time to customer “clicks”

 Dollar amount of returned goods

 Elapsed time between customer order and product delivery

 Maintenance dollars divided by hardware investment Number of customer complaints divided by the number of orders

 Number of misfilled orders divided by the number of orders

 Number of orders per warehouse employee

 Number of page faults or errors due to software programming errors

 Number of software fixes per week

 Server (computer) downtime

 Training dollars per programmer

 a.    For each performance measure, identify it as either an input or output measure related to the “order placement and delivery” process.

 b.    Provide an explanation for each performance measure.

(a)

To determine

Nonfinancial performance measures:

Expressing a performance in terms of measures other than the dollars is known as nonfinancial performance measures. In order to evaluate the time, quality, or quantity of a business activity these measures are used.

To identify: Each performance measures as an input measure or output measure related to the “order placement and delivery” process.

Explanation

The input measure or output measure related to the “order placement and delivery” process of each performance measures is as follows:

Particulars Input measures Output measures
1. Average computer response time to customer “clicks”   X
2. Dollar amount of returned goods   X
3. Elapsed time between customer order and product delivery   X
4. Maintenance dollars divided by hardware investment X  
5...

(b)

To determine

To provide: An explanation for each performance measures.

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