Performance Measurement and Control
Chapter Exam Questions
Course Introduction
Performance Measurement and Control explores the systems and processes organizations use to assess, monitor, and guide their operations toward strategic objectives. The course examines key performance indicators (KPIs), budgeting, variance analysis, balanced scorecards, and both financial and non-financial measures. Students learn how to design and implement effective performance measurement frameworks, analyze results, and apply controls that support organizational improvement. Emphasis is placed on integrating performance management with decision-making and aligning individual and departmental goals with overall business strategy, while considering ethical implications and the challenges of measuring intangible factors.
Recommended Textbook
Cost Accounting A Managerial Emphasis 7th Canadian Edition by Charles T. Horngren
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Chapter 1: The Accountants Vital Role in Decision Making
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Q1) Briefly explain the planning and control activities in management accounting.How are these two activities linked to each other?
Answer: Planning business operations relates to designing,producing,and marketing a product or service.This includes preparing budgets and determining the prices and cost of products and services.A company must know the cost of each product and service to decide which products to offer and whether to expand or discontinue product lines. Controlling business operations includes comparing actual results to the budgeted results and taking corrective action when needed. Feedback links planning and control.The control function provides information to assist in better future planning.
Q2) Managers typically receive reports on cost planning and controls that should be considered for internal use only.
A)True
B)False
Answer: True
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Chapter 2: An Introduction to Cost Terms and Purposes
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Q1) What is the unit cost for the direct materials for 2016 assuming direct materials are for the production of 507,000 units?
A)$0.80
B)$0.95
C)$2.00
D)$1.08
E)$1.10
Answer: C
Q2) Which one of the following is a variable cost for an insurance company?
A)rent
B)president's salary
C)sales commissions
D)property taxes
E)amortization on the office equipment
Answer: C
Q3) Conversion costs include all direct manufacturing costs.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) An expected value is the weighted-average of the outcomes based on the percentage combinations of the incomes.
A)True
B)False
Answer: False
Q2) In cost-volume-profit analysis (CVP)it is assumed that both the product mix and the volume sold are dynamic variables.
A)True
B)False
Answer: False
Q3) Which option provides the least amount of risk?
A)Option one
B)Option two
C)Both options provide the same amount of risk.
D)Neither option has risks.
E)Without probability assignments it is not possible to determine the riskier option.
Answer: A
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Chapter 4: Job Costing
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Sample Questions
Q1) What is the budgeted indirect cost allocation rate per unit of the allocation base for the professional liability insurance?
A)$16.67
B)$25.00
C)$1.67
D)$26.67
E)$12.50
Q2) For each cost pool,the indirect cost rate equals the indirect cost pool divided by the cost allocation base.
A)True
B)False
Q3) Direct costs are allocated to the cost object using a cost-allocation method.
A)True B)False
Q4) The cost driver of an indirect cost is often used as the cost allocation base. A)True B)False
Q5) Provide examples of three companies that would likely use job costing,and three companies that would likely use process costing.
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Chapter 5: Activity-Based Costing and Management
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Sample Questions
Q1) If the cost of an activity increases with each hour of machine time,it is which of the following?
A)market-sustaining cost
B)output unit-level cost
C)batch-level cost
D)product-sustaining (service-sustaining)costs
E)facility-sustaining cost
Q2) A four-part cost hierarchy includes
A)market-sustaining costs.
B)research and development costs.
C)manufacturing-level costs.
D)output unit-level costs.
E)period costs.
Q3) Product-sustaining (service-sustaining),and facility-sustaining costs are equivalent terms in ABC systems.
A)True
B)False
Q4) How are cost drivers selected in activity-based costing systems?
Q5) Explain how traditional (simple)cost systems,using a single unit-level cost rate,may distort product costs.
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Chapter 6: Master Budget and Responsibility Accounting
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Q1) What is the ending balance of accounts receivable for September,assuming uncollectible balances are written off during the second month following the sale?
A)$99,500
B)$48,500
C)$44,900
D)$46,500
E)$54,500
Q2) Benchmarks encourage the setting of stretch goals.
A)True
B)False
Q3) How much cash will be collected from customers in March?
A)$92,000
B)$90,000
C)$100,000
D)$86,000
E)$66,000
Q4) Describe some of the drawbacks of using the operating budget as a control device.
Q5) Describe the concept of kaizen budgeting.
Q6) List and describe the four approaches to budgeting.
Page 8
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Chapter 7: Flexible Budgets,variances,and Management
Control: I
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Sample Questions
Q1) June's direct material rate variance is
A)$980 unfavourable.
B)$1,000 favourable.
C)$680 favourable.
D)$980 favourable.
E)$1,000 unfavourable.
Q2) A standard is usually expressed on a per-unit basis and communicates an average amount indicating what should be achieved by any similar process each time period that performance measures are taken.
A)True
B)False
Q3) A standard is
A)usually expressed on a per unit basis.
B)consistently calculated in manufacturing companies.
C)always the same as a budgeted amount.
D)only set within the company.
E)never expressed on a per unit basis.
Q4) An unfavourable variance is conclusive evidence of poor performance.
A)True
B)False
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Chapter 8: Flexible Budgets,variances,and Management
Control: II
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Sample Questions
Q1) The production-volume variance
A)only pertains to variable overhead costs.
B)only pertains to fixed overhead costs.
C)is not applicable in analysis of inventory costs.
D)pertains to both fixed and variable overhead costs.
E)equals the rate variance minus the efficiency variance.
Q2) Brown Company makes watches.The budgeted fixed overhead costs for 2016 total $324,000.The company uses direct labour-hours for fixed overhead allocation and anticipates 10,800 hours during the year for 540,000 units.An equal number of units are budgeted for each month.
During October,48,000 watches were produced and $28,000 was spent on fixed overhead.
Required:
a.Determine the fixed overhead rate for 2016 based on the units of input.
b.Determine the fixed overhead static-budget variance for October.
c.Determine the production-volume overhead variance for October.
Q3) Managers have found that non-financial measures provide useful information for their planning and control decisions.
A)True
B)False
Page 10
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Chapter 9: Income Effects of Denominator Level on Inventory Valuation
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Sample Questions
Q1) Using ________ capacity fixes the cost of capacity at the cost of supplying the capacity regardless of the demand for capacity.
A)practical
B)theoretical
C)supply
D)demand
E)master-budget
Q2) What is the cost per statue if throughput costing is used?
A)$11.00
B)$9.50
C)$7.50
D)$5.00
E)$6.50
Q3) What is the break-even point in units using absorption costing if the units produced are actually 2,250?
A)1,330 units
B)1,000 units
C)887 units
D)584 units
E)875 units
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Chapter 10: Analysis of Cost Behaviour
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Sample Questions
Q1) What is the cost function derived from using the high-low method?
A)y = $43,191 + $0.19x
B)y = $4,875 + $4.28x
C)y = $41,900 + $0.23x
D)y = $2,430 + $4.28x
E)y = -$4,875 + $5.25x
Q2) The standard error of the estimated coefficient indicates whether a relationship exists between the predictor variable and the outcome variable that cannot be attributed to chance alone.
A)True
B)False
Q3) A nonlinear cost function
A)has two constants and a single slope.
B)does not effectively describe the behaviour of outside the relevant range.
C)never describes the behaviour of costs in relation to the cost driver.
D)always describes the behaviour of costs in relation to the cost drivers.
E)means the relevant range cannot be determined for that cost.
Q4) Discuss how a manufacturer of personal computers such as Dell Computer can benefit from the introduction of a quality improvement program.
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Chapter 11: Decision Making and Relevant Information
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Sample Questions
Q1) Each item included in the relevant-cost analysis should differ according to the alternative being considered and be an expected future revenue or cost.
A)True
B)False
Q2) Anticipated future costs that differ with alternative courses of action are known as relevant costs.
A)True
B)False
Q3) The greatest possible contribution margin per unit of the constraining factor will ensure which of the following?
A)minimum total variable costs
B)zero imputed costs
C)minimum fixed cost per unit of production
D)minimum variable costs per unit of production
E)maximum operating income
Q4) Quantitative factors are relevant,and qualitative factors are irrelevant,in making outsourcing decisions.
A)True B)False
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Chapter 12: Pricing Decisions, product Profitability
Decisions, and Cost Management
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Sample Questions
Q1) Warthog Avionics currently sells radios for $3,600.It has costs of $2,800.A competitor is bringing a new radio to market that will sell for $3,200.Management believes it must lower the price to $3,200 to compete in the market for radios.Marketing believes that the new price will cause sales to increase by 10%,even with a new competitor in the market.Warthog's sales are currently 1,000 radios per year.
Required:
a.What is the target cost if target operating income is 25% of sales?
b.What is the change in operating income if marketing is correct and only the sales price is changed?
c.What is the target cost if the company wants to maintain its same income level,and marketing is correct?
Q2) Explain the difference between locked in costs and costs incurred.Which of these types of costs does a traditional accounting system emphasize? At which stage of the value chain are most costs locked-in? At which stage of the value chain are most costs incurred? What implication does this have for good cost management?
Q3) A business that engages in predatory pricing violates Canadian law.
A)True B)False
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Chapter 13: Strategy,balanced Scorecard,and Profitability Analysis
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Sample Questions
Q1) The ratio of the quantity of output produced divided by the quantity of a single input used,is called
A)total factor productivity.
B)partial productivity.
C)productivity.
D)product yield variance.
E)productivity variance.
Q2) ________ measures the reduction in costs attributable to a reduction in the quantity of inputs used in year two relative to the quantity of inputs that would have been used in year one to produce the year two output.
A)The growth component
B)The price-recovery component
C)The productivity component
D)The cost leadership component
E)The strategy component
Q3) Can a company identify unused capacity and,if so,how can unused capacity be managed?
Q4) Identify and explain Porter's Five Forces model.
Q5) What are the four key perspectives in the balanced scorecard?
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Chapter 14: Period Cost Allocation
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Sample Questions
Q1) If a single-rate cost allocation method is used,what amount of copying facility costs will be budgeted for the Marketing Department?
A)$9,000
B)$1,800
C)$7,200
D)$28,500
E)$24,600
Q2) To discourage excessive use of a support department,management might
A)not allocate any costs of the support departments.
B)allocate costs based on user department usage.
C)allocate a fixed amount to each department regardless of use.
D)expense fixed costs of support departments directly to the income statement.
E)create special accounting records for the support department.
Q3) What is a "common cost"? What are two methods that a manager can use to allocate common costs to two or more users?
Q4) Full product costing requires the recovery of all costs generated by all business functions in the value chain.
A)True
B)False
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Chapter 15: Cost Allocation: Joint Products and Byproducts
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Sample Questions
Q1) Processes that yield joint products always yield byproducts as well.
A)True
B)False
Q2) Distinguish between the two principal methods of accounting for byproducts,the production byproduct method and the sale byproduct method.Briefly discuss the relative merits (or lack thereof)of each.
Q3) If joint products end up with the same gross margin percentage,which of the following is TRUE?
A)The cost allocation method assigned the same cost per unit to each product.
B)The physical measure method must have been used.
C)The gross margin percentage NRV method must have been used.
D)The estimated net realizable method must have been used.
E)If all products are sold at the splitoff point,and there were no opening inventories,the sales value at splitoff method could have been used.
Q4) Byproducts are recognized in the general ledger either at the time of production or at the time of sale.
A)True
B)False
Q5) What are separable costs?
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Chapter 16: Revenue and Customer Profitability Analysis
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Q1) Which of the following statements is TRUE?
A)Managers often find the bar chart presentation to be the most accurate way to analyze customer profitability.
B)Managers find customer-profitability analysis useful because it frequently highlights how vital a small set of customers is to total profitability.
C)Managers find customer-profitability analysis useful because when a customer is ranked in the loss category,they can focus their resources on this type of customer.
D)The 80/20 rule means that 80% of the customers provide 80% of the profit and 20% of the customers provide the remainder.
E)Managers can ensure that low profitability customers receive high priority.
Q2) ________ occurs where revenues,related but not traceable to individual products (service,customer,and so on),are assigned to those individual products.
A)Revenue tracing
B)Revenue allocation
C)A bundled product
D)Joint product costing
E)Revenue shedding
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Chapter 17: Process Costing
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Sample Questions
Q1) Compare and contrast process costing and job order costing.
Q2) Transferred-in costs are an allocated indirect cost in process costing. A)True
B)False
Q3) Unit costs do not fluctuate between periods.
A)True
B)False
Q4) What is the unit cost for February in the Assembly Department?
A)$1,000
B)$1,750
C)$3,500
D)$3,750
E)$3,900
Q5) Process costing is extremely useful when there are a variety of products produced,as compared to the production of a single product.
A)True
B)False
Q6) Standard costing can be used in process costing systems. A)True
B)False
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Chapter 18: Spoilage, rework, and Scrap
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Q1) The standard-costing method
A)adds a layer of complexity to the calculation of equivalent-unit costs in a process-costing environment.
B)makes calculating equivalent-unit costs unnecessary.
C)requires an analysis of the spoilage costs in beginning inventory.
D)requires an analysis of the spoilage costs in ending inventory.
E)requires a calculation of the cost allocation rate.
Q2) Costs incurred due to spoilage in a job order costing system,may be treated in all of the following ways,EXCEPT
A)added to abnormal spoilage and written off.
B)added to the total cost of that particular job.
C)allocated equally to all units at an inspection point.
D)added to all jobs through manufacturing overhead.
E)allocated between normal and abnormal spoilage.
Q3) Spoilage can be attributed to a particular job in a process costing system.
A)True B)False
Q4) IFRS/ASPE permits normal spoilage costs to be part of cost of goods sold.
A)True B)False
Page 20
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Chapter 19: Inventory Cost Management Strategies
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Q1) A positive aspect of backflush costing is the presence of a continuous inventory audit trail.
A)True
B)False
Q2) Primary components that manufacturers would use to evaluate suppliers under a just-in-time system would include all of the following EXCEPT
A)on-time delivery.
B)production lead time.
C)purchase price.
D)quality costs.
E)long-term partnerships.
Q3) Factors that are relevant in a JIT system,but not for the EOQ model,include
A)quality of materials.
B)timeliness of deliveries.
C)stockout costs.
D)carrying costs.
E)quality of materials,timeliness of deliveries,and stockout costs.
Q4) What are five features of a just-in-time manufacturing system?
Q5) What are the principles of lean accounting? Are there any limitations? Discuss.
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Chapter 20: Capital Budgeting: Methods of Investment Analysis
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Q1) What is the net present value of the investment,assuming the required rate of return is 12%? Would the hospital want to purchase the new machine?
A)$(97,340);no
B)$51,430;no
C)$ 97,340;yes
D)$166,830;yes
Q2) Which of the following is TRUE concerning capital budgeting analysis?
A)The IRR and AARR consider the time value of money.
B)The payback method and the AARR both consider profitability.
C)NPV and IRR consider accruals.
D)The payback method and the AARR both consider profitability,and NPV and IRR do not consider accruals.
E)NPV and IRR do not consider accruals,and the IRR considers the time value,but AARR does not.
Q3) The half-year rule assumes that all net additions are purchased in the middle of the year,and thus only one-half of the stated CCA rate is allowed in the first year.
A)True
B)False
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Chapter 21: Transfer Pricing and Multinational Management
Control Systems
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Q1) An advantage of decentralization is that it
A)creates greater responsiveness to local needs.
B)focuses manager's attention on the organization as a whole.
C)does not result in a duplication of activities.
D)reduces the cost of gathering information.
E)leads to decision making consistent with company goals.
Q2) Briefly describe the arm's length principle and how it applies to transfers among international divisions.
Q3) Transfer prices among divisions within Canada are irrelevant.Do you agree with this statement? Explain.
Q4) Under what conditions would transferring products or services at market prices lead to optimal decisions within the organization?
A)when the immediate market is a monopoly
B)when there is interdependence between subunit divisions
C)when there is excess capacity
D)when the immediate market is not perfectly competitive,and there is interdependence between subunit divisions
E)when the immediate market is only somewhat competitive and there is excess capacity
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Chapter 22: Multinational Performance Measurement and Compensation
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Q1) Pay for performance measures in the best interests of shareholders would,logically,exclude long-term achievement and deferred compensation.
A)True
B)False
Q2) The timing of feedback depends on the level of management that receives the information and on the complexity of the organization's information technology.
A)True
B)False
Q3) What is EVA for Ottawa?
A)$218,200
B)$362,200
C)$163,200
D)$480,000
E)$140,000
Q4) Most Canadian and U.S.companies use the Sarbanes-Oxley Act (SOX)as a framework for evaluating their internal control.
A)True
B)False
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