Video: Performance Management Metrics - Practice Questions

In this lesson, Nick Palazzolo, CPA, tackles practice questions on performance management metrics with a focus on the just-in-time inventory system. He unpacks the essentials of efficient inventory management, showcasing the benefits and potential pitfalls of employing a just-in-time approach, such as decreased storage costs and the risk of supplier delays. Nick also dives into the concept of opportunity cost through an engaging comparison of two hypothetical projects, fostering a deeper understanding of financial decision-making. Furthermore, by examining benchmarking through the lens of a manufacturer looking to improve processes, Nick clarifies strategic performance comparison tools. Throughout this lesson, Nick's explanations aim to clarify complex concepts while providing practical insights into effective performance management.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Let's run through some questions on performance management metrics. To begin, which of the following characteristics is a primary benefit of a just-in-time inventory system for raw materials? Let's talk about just-in-time systems a little bit. Just-in-time systems, that's a management strategy that aligns your orders with production schedules, meaning you get your materials just as you need them, just in time. Why would you do this? You would do this to minimize your storage costs, right? Because you can order a bunch of raw materials and store them for when you need them, but that might cost a lot of money because you need to pay for a warehouse, you need to pay to insure those things. So if you have just-in-time inventory, that means you get it as you need it. Now, obviously, if there's a delay in your suppliers, if they have their own problems, then that's a problem for you. There are pros and cons to all possible inventory management systems and performance management systems. So take it as you will. Companies employ the just-in-time system to increase efficiency, decrease waste, again, because you are only getting things as you really need them. Because maybe in another scenario, you would have ordered a bunch of inventory and maybe you didn't ever end up needing it, which would be waste. Okay, so which is a primary benefit here? Does it increase total number of suppliers to ensure competitive bidding? I would not say this is the case. If anything, it would probably decrease the number of suppliers because you're just going to say, hey, you're my one supplier and you're going to keep supplying me with these goods as I need them. And if anything, more suppliers is generally more of a headache. That's not really a

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Performance Analysis & Cost Accounting

Module: 4 Concepts, 44 Videos

Performance Management Metrics Overview and Objectives

1:43

Introduction to Performance Management Metrics

2:13

Productivity Ratios

4:20

Benchmarking