Performance Management Exam Review
Course Introduction
Performance Management explores the strategies, tools, and techniques organizations use to assess, guide, and improve employee performance in alignment with organizational goals. The course covers the development and implementation of performance appraisal systems, setting objectives, providing effective feedback, and fostering continuous improvement. Students will examine the legal, ethical, and psychological aspects of performance management, as well as current trends such as the use of technology and data analytics in performance tracking. By analyzing case studies and engaging in practical exercises, students will develop the skills needed to design, evaluate, and manage performance systems that motivate employees and enhance organizational effectiveness.
Recommended Textbook Management Accounting 2nd Edition by Leslie G.
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Eldenburg
Page 2
Chapter 1: The Role of Accounting Information in Management Decision Making
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Q1) Incremental cash flows are relevant for decision making.
A)True
B)False
Answer: True
Q2) Accounting information cannot be used to motivate employee behavior.
A)True
B)False
Answer: False
Q3) Uncertainties and biases do not affect external financial reports, because these reports are based on objective standards.
A)True
B)False
Answer: False
Q4) Activities in the value chain are classified as value-added or non-value-added in many organisations.
A)True
B)False
Answer: True
Page 3
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Chapter 2: Cost Concepts, Behaviour and Estimation
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Q1) When estimating future costs, information quality is higher when A) Costs must be allocated
B) The accounting system can trace relevant costs to a cost object
C) The regression Adjusted R-square is near zero
D) Most costs are fixed, rather than variable
Answer: B
Q2) Liva Company wants to develop a cost function for its maintenance costs to estimate such costs for the coming year. The following data are available:
A) $500 + $1.00 per direct labor hour
B) $300 + $1.50 per direct labor hour
C) $100 + $0.20 per direct labor hour
D) $200 + $0.10 per direct labor hour
Answer: C
Q3) A scatter plot is especially useful when managers wish to
A) Compute a cost function
B) Update a past cost function for future changes
C) Study the relationship between a cost and a potential cost driver
D) Analyse cost behavior when only one period of data is available
Answer: C
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Chapter 3: A Costing Framework and Cost Allocation
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Q1) The distinction between direct costs and indirect costs depends on their traceability to
A) a cost object
B) a manufacturing operation
C) an activity
D) a product
Answer: A
Q2) Which statement concerning the step-down method of allocating support department costs is not correct?
A) The method allocates costs one department at a time
B) The cost object in the allocation exercise is the support departments and the operating departments
C) The method recognises that support departments provide support for other support departments
D) The allocation process begins with the support department that provides the least service to the other support departments
Answer: D
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Chapter 4: Cost-Volume-Profit Cvp Analysis
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Q1) In CVP analysis, managers usually assume that the cost function is linear. Which of the following equations best represents a linear function for total cost if the cost is a mixed cost?
A) y = $200 + $60x
B) y = $60x2
C) y = $60x
D) y = $200
Q2) If the total contribution margin decreases and fixed costs do not change, pretax profit
A) Decreases by an equal amount
B) Increases by an equal amount
C) Does not change
D) Increases by some other amount
Q3) Which of the following techniques examine changes in profits in response to changes in volume, costs, and prices?
A) Activity-based costing
B) Financial statement analysis
C) Cost-volume-profit analysis
D) Balanced scorecard
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Chapter 5: Job Costing Systems
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Q1) The statement concerning job costing that is untrue is:
A) Under normal costing overhead is allocated to jobs using the estimated overhead allocation rate
B) Under normal costing overhead is allocated to jobs using the estimated volume of usage of the allocation base
C) Actual job costs will almost certainly be different from estimated job costs
D) Managers monitor operations by comparing actual job costs to the original estimate
Q2) Generally all the costs assigned to a job are incremental, i.e. they would not be incurred if the job was not done.
A)True
B)False
Q3) The accounting standard dealing with inventories is AASB 102. A)True B)False
Q4) Inspection for spoilage should always be carried out at the end of the production process and not at an earlier period.
A)True
B)False
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Chapter 6: Process Costing Systems
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Q1) Assume there were 6,000 units in beginning work in process, 60% complete. 20,000 units were completed during the month. Ending work in process is 40% complete, which is equivalent to 3,200 units for conversion costs. Materials are added at the beginning of the process. The standard cost method is used. The number of equivalent units of conversion costs is
A) 23,200
B) 17,680
C) 19,600
D) 21,280
Q2) Xeno Ltd operates a process costing system and uses the FIFO method. Beginning work in process consists of 1,000 units, 30% complete. Ending work in process is 15% complete, and direct materials are added at the 20% point. The equivalent units of production for materials are 14,000 and for conversion costs are 18,000. The number of units in ending work in process was
A) 37,000
B) 14,000
C) 18,000
D) 22,000
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Chapter 7: Absorption, Variable and Throughput Costing
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Q1) During its first year of operations, Kima Ltd. experienced the following: The cost of goods sold under absorption costing would be
A) $585,000
B) $735,000
C) $945,000
D) $900,000
Q2) In variable costing
A) Only variable production costs are considered product costs
B) All non-variable production costs are treated as product costs
C) Direct costs are considered to be period costs
D) All variable costs are considered product costs
Q3) Budgeted capacity is always greater than normal capacity.
A)True
B)False
Q4) Absorption costing systems subtract inventoried costs from revenues at the time of production.
A)True
B)False
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Chapter 8: Activity Analysis: Costing and Management
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Q1) Each cost pool in an ABC system has its own cost allocation rate.
A)True
B)False
Q2) The managers of HRY are analysing some of their corporate costs to determine the costs of each department's use of administrative services. The accountant wants to allocate the costs of payroll processing using an activity-based costing system. The most appropriate cost driver for the payroll processing cost pool is the
A) Number of pay periods per month
B) Number of employees
C) Average hourly wage for all employees
D) Maximum number of deductions from an individual employee's pay-cheque
Q3) ABC systems are typically associated with
A) Higher quality and improved cycle time
B) Manufacturing firms, but not service firms
C) Service firms, but not manufacturing firms
D) Higher profitability for all firms that implement them
Q4) Each cost pool in an ABC system has at least one cost driver.
A)True
B)False
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Chapter 9: Relevant Costs for Decision Making
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Q1) Mr. Bigletter is employed at an annual salary of $25,000. He plans to start his own business and estimates that he can gross $30,000 annually. If he chooses to open the new business, his foregone salary is a (an)
A) Irrelevant cost
B) Sunk cost
C) Opportunity cost
D) Incremental cost
Q2) Which of these is an opportunity cost associated with dropping a business segment?
A) The revenue given up
B) The avoidable fixed costs
C) The benefits from using excess capacity for something else
D) The increase in employee morale
Q3) Non-routine operating decisions rarely require analysis of qualitative factors.
A)True
B)False
Q4) One way to deal with constrained resources is to spend money to alleviate them.
A)True
B)False
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Chapter 10: Standard Costs, Flexible Budgets and Variance Analysis
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Q1) Because managers use estimates in calculating overhead allocation rates, they are likely to experience
A) Fixed overhead production volume variances
B) No fixed or variable overhead variances
C) Direct labor price variances
D) Lower than expected profits
Q2) Mason Ltd uses a standard costing system. Overhead costs are allocated based on direct labor hours. The standard variable overhead and fixed overhead rates are $1 and $5 per direct labor hour, respectively. Data relevant for the current period include: The cost of direct materials added to work in process would be
A) $540,000
B) $585,000
C) $600,000
D) $650,000
Q3) Calculating variances is a necessary, but not sufficient, step for completing a variance analysis.
A)True
B)False
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Chapter 11: Operational Budgets
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Q1) In a production budget, beginning inventory plus budgeted production equals sales plus targeted ending inventory.
A)True
B)False
Q2) Intentionally understating revenues and / or overstating costs during a budgeting process is called
A) Budgetary slack
B) Zero-based budgeting
C) Fraudulent financial reporting
D) Participative budgeting
Q3) One objective of budgeting is motivating managers to
A) Eliminate all variances.
B) Use resources efficiently.
C) Lessen the need for communication.
D) Establish prices for external sales of goods and services.
Q4) A formalised financial plan for organisational operations is called a long-term strategy.
A)True B)False
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Chapter 12: Strategy and Control
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Q1) Porter classifies strategy into either cost leadership or product differentiation.
A)True
B)False
Q2) Strategy can be viewed at which level?
A) Corporate level
B) Business unit level
C) Task level
D) both a and b
Q3) The 'lean' accounting principle is:
A) just in time inventory management
B) cost volume profit
C) capital budgeting
D) all are lean accounting principles
Q4) The author of many works that attempt to define strategy is:
A) Porter
B) Friedman
C) Johnson
D) Kaplan
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Chapter 13: Planning and Budgeting for Strategic Success
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Q1) The Beyond Budgeting philosophy means managing without budgets.
A)True
B)False
Q2) A type of budgeting that is used to develop cost and time budgets for information technology projects is:
A) Extreme programming
B) Flexible programming
C) Extreme activity-based budgeting
D) Rolling programming
Q3) Which of these is a contemporary approach to budgeting?
A) flexible budgeting
B) static budgeting
C) incremental budgeting
D) none are contemporary approaches to budgeting
Q4) Planning this year's expenditure based solely on last year's expenditure is generally an efficient form of budgeting.
A)True
B)False
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Chapter 14: Capital Budgeting and Strategic Investment Decisions
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Q1) Disquotek is a software manufacturer. Managers are considering a new equipment proposal. The income tax rate is 40%, and the discount rate is 10%. The following data are available: What is the relevant after-tax annual cash operating cost associated with this decision?
A) $8,000
B) $6,000
C) $3,600
D) $2,400
Q2) Under the general quantitative rule, a project with a net present value less than zero should not be accepted.
A)True
B)False
Q3) The nominal method of NPV analysis adjusts future cash flows for the impact of inflation.
A)True
B)False
Q4) Income taxes have a major effect on capital budgeting decisions.
A)True
B)False
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Chapter 15: The Strategic Management of Costs and Revenues
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Q1) Because inventory level information is in a company's internal accounting records, suppliers cannot access it.
A)True
B)False
Q2) Focusing on the customers or clients as the cost object may reveal useful insights for improving organisational performance.
A)True
B)False
Q3) Kaizen costing is a technique aimed at improvement of short-term profitability.
A)True
B)False
Q4) Which of the following immediately follows product and process design in the typical manufacturing value chain?
A) Research and development
B) Supplier and raw material management
C) Distribution management
D) Marketing and sales
Q5) Explain why market-based pricing has increased in recent years. Correct
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Chapter 16: Strategic Management Control: a Lean Perspective
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Q1) Physical inspections at every point of the value chain is the key principle underlying TQM.
A)True
B)False
Q2) A practice associated with lean accounting is:
A) Producing to forecast
B) Vertical reporting
C) Accounting information provided to managers and supervisors only
D) Producing in teams
Q3) NRL's accounting information system reported warranty repair and product replacement costs totaling $120,000 in a recent accounting period. These costs are an example of which type of quality costs?
A) Internal activity costs
B) External activity costs
C) Appraisal activity costs
D) Prevention activity costs
Q4) 'Value' in lean accounting is defined through the eyes of the customer.
A)True
B)False
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Chapter 17: Responsibility Accounting, Performance
Evaluation and Transfer Pricing
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Q1) An advantage of centralised decision making is
A) More motivated employees
B) More rapid decision making in all contexts
C) Greater effectiveness in volatile environments
D) Less monitoring of decisions
Q2) KNY Pty Ltd reported operating profit of $80,000 and average operating assets of $120,000 in a recent accounting period. Which of the following transactions would definitely increase KNY's return on investment?
A) Increasing product prices
B) Switching suppliers for raw materials
C) Collecting accounts receivable
D) Decreasing research and development expense
Q3) Transfer pricing policies can affect a company's tax liability, particularly if it does business internationally.
A)True
B)False
Q4) Investment centre managers are held responsible only for their costs.
A)True
B)False
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Chapter 18: The Balanced Scorecard and Strategy Maps
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Q1) The perspectives in a balanced scorecard
A) Can be adapted to an individual organisation's priorities
B) Cannot be changed because of copyright restrictions
C) Include qualitative and quantitative
D) Are externally focused only in for-profit organisations
Q2) Formulaic approaches for using balanced scorecard results
A) Are an excellent idea because of their objectivity
B) Can lead to suboptimal decisions
C) Are aligned with the overall purpose of the balanced scorecard
D) Ensure that all employees are treated fairly
Q3) In implementing a balanced scorecard, managers should establish performance targets after analysing the first set of scorecard data.
A)True
B)False
Q4) Which of the following are inputs to the development of organisational strategy?
A) Organisational vision and operating plans
B) Operating plans and core competencies
C) Actual operations and operating plans
D) Organisational vision and core competencies
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Chapter 19: Rewards, Incentives and Risk Management
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Q1) A manager under-investing in projects that are in shareholder's best interests but which may reduce the manager's own bonus payment, is classed as which type of agency cost?
A) Loss from a poor decision
B) Monitoring cost
C) Loss from incongruent goals
D) Contracting cost
Q2) A current theme in rewarding senior staff is which of the following?
A) relative performance evaluation
B) pay-for-performance
C) the place of government regulation
D) all of the above are current themes in rewarding senior staff
Q3) Which of these is not a framework available to Australian top management when considering risk management?
A) The Australian assurance standards - AAS 340 -900
B) AS/NZS ISO 31000: 2009 Risk management principles and guidelines
C) The COSO Enterprise risk management framework
D) All of the above are frameworks that are available
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Chapter 20: Sustainability Management Accounting
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Q1) The way that the balanced scorecard should be adapted as a tool for monitoring sustainability which is generally considered to be the most useful approach, is:
A) Integrating environmental and social aspects into the four standard perspectives
B) Adding an additional sustainability perspective
C) Developing a separate, individually derived, sustainability scorecard in conjunction with the existing scorecard
D) There is no opinion as to which is the best option
Q2) Ethical behavior is an individual obligation, not an organisational obligation.
A)True
B)False
Q3) The most effective way for an entity to take into account the external environmental and the sustainability costs of its activities is:
A) for the government to issue fines and penalties for breaches
B) to follow guidelines provided by external parties
C) by voluntary disclosure
D) for the entity to internalise the external costs
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