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

Short Answer

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Answer

A lag indicator measures past performance while a lead indicator forecasts future performance.

Step by step solution

01

Meaning of Lag indicator

For instance, the frequency of accidents on a construction site is a lagging safety indicator. Lagging indicators are output measurements in this case.

02

Difference between a lag indicator and a lead indicator

The distinction between the two is that a leading indicator may affect change, but a trailing indicator can only reflect what has already occurred.

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Most popular questions from this chapter

Preparing a financial budgetโ€”budgeted income statement and balance sheet

Bradley Company has the following post-closing trial balance on December 31, 2018:

The companyโ€™s accounting department has gathered the following budgeting information for the first quarter of 2019:

Budgeted total sales, all on account $ 305,000 Budgeted direct materials to be purchased and used 32,000 Budgeted direct labor cost 12,500 Budgeted manufacturing overhead costs:

Variable manufacturing overhead 2,100 Depreciation 1,300 Insurance and property taxes 1,350 Budgeted cost of goods sold 72,000 Budgeted selling and administrative expenses:

Salaries expense 7,000 Rent expense 2,000 Insurance expense 1,100 Depreciation expense 550 Supplies expense 15,250 Budgeted cash receipts from customers 263,500 Budgeted income tax expense 41,000 Budgeted purchase and payment for capital expenditures (additional equipment) 43,000

Additional information:

a. Direct materials purchases are paid 70% in the quarter purchased and 30% in the next quarter.

b. Direct labor, manufacturing overhead, selling and administrative costs, and income tax expense are paid in the quarter incurred.

c. Accounts payable at December 31, 2018 are paid in the first quarter of 2019. Requirements

1. Prepare Bradley Companyโ€™s budgeted income statement for the first quarter of 2019.

2. Prepare Bradley Companyโ€™s budgeted balance sheet as of March 31, 2019

Refer to the data in Exercise E24-17. Calculate each divisionโ€™s RI. Interpret your results.

What does ROI measure?

Consider the following key performance indicators, and classify each indicator according to the balanced scorecard perspective it addresses. Choose from the financial perspective, customer perspective, internal business perspective, and the learning and growth perspective.

a. Number of customer complaints

b. Number of information system upgrades completed

c. Residual income

d. New product development time

e. Employee turnover rate

f. Percentage of products with online help manuals

g. Customer retention

h. Percentage of compensation based on performance

i. Percentage of orders filled each week

j. Gross margin growth

k. Number of new patents

l. Employee satisfaction ratings

m. Manufacturing cycle time (average length of production process)

n. Earnings growth

o. Average machine setup time

p. Number of new customers

q. Employee promotion rate

r. Cash flow from operations

s. Customer satisfaction ratings

t. Machine downtime u. Finished products per day per employee

v. Percentage of employees with access to upgraded system

w. Wait time per order prior to start of production

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