CPM P&L Ownership & Cost Reduction 5

Question 1

A plant manager is benchmarking labor productivity. The best external benchmark source for a US manufacturing plant is typically:

Accepted Answer

Bureau of Labor Statistics (BLS) industry productivity indices

Answer

The plant's own historical trend data only

Answer

Social media industry forums

Answer

Competitor annual reports

Question 2

When a plant manager negotiates a long-term supply agreement with a price escalation clause tied to a commodity index, the primary financial risk being managed is:

Accepted Answer

Commodity price volatility in raw material costs

Answer

Currency exchange rate exposure

Answer

Customer credit default risk

Answer

Interest rate risk on capital equipment loans

Question 3

A plant's return on assets (ROA) declined despite higher revenue. The most likely explanation is:

Accepted Answer

Asset base grew faster than net income due to a capital expansion

Answer

The plant improved its asset utilization rate

Answer

Revenue recognition was accelerated into the current period

Answer

Depreciation expense decreased, inflating asset book value

Question 4

Which cost reduction technique analyzes the functions of a product or process to achieve required performance at the lowest cost?

Accepted Answer

Value engineering (VA/VE)

Answer

Six Sigma DMAIC

Answer

Theory of Constraints (TOC)

Answer

Balanced Scorecard

Question 5

A plant manager reduces finished goods inventory by 20% through improved scheduling. The most direct P&L benefit is:

Accepted Answer

Reduced inventory carrying costs (storage, insurance, obsolescence) and improved cash flow

Answer

Increased gross margin from higher selling prices

Answer

Lower direct material purchase costs due to smaller order quantities

Answer

Reduced depreciation expense on warehouse assets

Question 6

A plant manager is asked to reduce headcount to cut costs. Before approving layoffs, the most financially prudent first step is to:

Accepted Answer

Quantify severance, rehiring, and productivity loss costs versus the projected savings to confirm net benefit

Answer

Immediately issue termination notices to meet the quarterly savings target

Answer

Transfer all impacted roles to a temp agency at full loaded cost

Answer

Seek board approval regardless of the size of the reduction

Question 7

On a plant P&L, which item would appear as a favorable variance that IMPROVES operating income without a corresponding cash inflow?

Accepted Answer

Favorable overhead absorption variance caused by producing above the budgeted volume

Answer

Favorable purchase price variance from a volume discount negotiated with a supplier

Answer

A customer rebate received for early payment

Answer

A tax credit allocated from corporate headquarters