Performance Measurement and Control
Test Preparation
Course Introduction
This course explores the principles and techniques of performance measurement and control within organizations. Students will examine frameworks for setting objectives, measuring outcomes, and evaluating the efficiency and effectiveness of operations. Topics include the design and use of financial and non-financial performance indicators, budgeting systems, variance analysis, benchmarking, and the balanced scorecard. The course also addresses behavioral and strategic aspects of control systems, illustrating how measurement and control processes influence decision-making, motivate employees, and align activities with organizational goals. Real-world case studies and practical applications provide students with the tools to implement effective performance measurement and control systems in diverse business contexts.
Recommended Textbook
Management Accounting 2nd Edition by Leslie G. Eldenburg
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20 Chapters
1520 Verified Questions
1520 Flashcards
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Chapter 1: The Role of Accounting Information in Management Decision Making
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81 Verified Questions
81 Flashcards
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Sample Questions
Q1) Activities in the value chain are classified as value-added or non-value-added in many organisations.
A)True
B)False
Answer: True
Q2) Textbook costs are an opportunity cost of earning a university degree.
A)True
B)False
Answer: False
Q3) Biases
A) Inhibit anticipating all future conditions
B) Assist in the identification of relevant information
C) Do not affect the ability to identify irrelevant information
D) Are not a problem in ethical decision making
Answer: A
Q4) Accounting information is used to monitor operations by comparing actual results to planned results.
A)True
B)False Answer: True
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Chapter 2: Cost Concepts, Behaviour and Estimation
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88 Verified Questions
88 Flashcards
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Sample Questions
Q1) Simple regression analysis output produces a variety of statistics. Which of the following statistics provides information for variable costs?
A) Adjusted R-square
B) P-values for alpha and beta coefficients
C) T-statistic and p-value for the beta coefficient
D) T-statistics for alpha and beta coefficients
Answer: C
Q2) Mixed costs
A) Vary with production in direct proportion to volume
B) Vary with production but not in direct proportion to volume
C) Do not vary with production
D) Include only different types of fixed costs
Answer: B
Q3) Fixed costs per unit
A) Vary inversely with changes in volume
B) Change regardless of changes in volume
C) Will not change over the relevant range
D) Increase with an increase in volume
Answer: A
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Chapter 3: A Costing Framework and Cost Allocation
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45 Verified Questions
45 Flashcards
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Sample Questions
Q1) A cost driver provides a measure of activity that explains the cost object's use of a direct cost.
A)True
B)False
Answer: False
Q2) Which of these statements concerning the determination of the full cost of a cost object is not true?
A) direct costs are traced via source documentation
B) full cost includes only manufacturing costs
C) indirect costs are allocated via the use of a cost driver
D) none of the statements is untrue
Answer: B
Q3) The cost driver that is a volume based cost driver is:
A) labour hours
B) number of set-ups
C) number of employees
D) all are volume based cost drivers
Answer: A
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5
Chapter 4: Cost-Volume-Profit Cvp Analysis
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93 Flashcards
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Sample Questions
Q1) An assumption needed for CVP analysis in multiple-product companies is that the sales mix remains constant.
A)True
B)False
Q2) For companies with multiple products, the sales mix should be stated as a proportion of units when performing CVP computations in units.
A)True B)False
Q3) The breakeven point is often expressed as a cost per unit.
A)True
B)False
Q4) SXF Corporation sells its single product for $14 per unit, and its variable cost per unit is $4. Total fixed costs are $800. Its CVP graph is as follows: Area D is best described as A) Fixed cost
B) Margin of safety
C) Estimated profit at actual volume
D) Breakeven point
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Chapter 5: Job Costing Systems
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45 Flashcards
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Sample Questions
Q1) Under a job costing system rework costs are often not tracked.
A)True
B)False
Q2) The true statement is:
A) Period costs are expensed in the period the product is sold
B) Period costs are initially inventoried, then expensed
C) Product costs are expensed as the product is produced
D) Product costs are expensed in the period the product is sold
Q3) In job costing the allocation of overhead results in a debit to:
A) the overhead control account
B) the work in process inventory account
C) the finished goods inventory account
D) the cost of goods sold account
Q4) In a job costing system the accounting entry made at the time job 664 is delivered to the customer is:
A) debit to cost of goods sold; credit to finished goods inventory
B) debit to finished goods inventory; credit to work in process
C) debit to sales; credit to work in process
D) debit to cost of goods sold; credit to work in process
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Chapter 6: Process Costing Systems
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93 Flashcards
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Sample Questions
Q1) Macey Ltd uses a weighted-average process costing system. Beginning inventory consists of 6,000 units, 40% complete. Units started are 14,000, completed are 10,000, and ending inventories are 9,000 units, 70% complete. Normal spoilage is 5% of the units inspected. Direct material is added at the 75% point and spoilage inspection occurs at the 80% point. The cost per equivalent unit for materials was $1.00 and $3.00 for conversion costs. Assume actual spoilage was 500 units and ending work in process was 9,500 units. The equivalent units of conversion costs would be
A) 17,130
B) 17,150
C) 17,050
D) 17,200
Q2) Hendrix Ltd employs a process costing system. Direct materials are added at the beginning of the process. Here is information about July's activities: Using the weighted average method, the cost of the goods completed and transferred out was
A) $225,150
B) $225,060
C) $213,300
D) $213,000
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Page 8
Chapter 7: Absorption, Variable and Throughput Costing
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102 Verified Questions
102 Flashcards
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Sample Questions
Q1) Theoretical capacity is a supply-based capacity measurement.
A)True
B)False
Q2) Absorption costing
A) Is used for external reporting purposes
B) Includes variable and fixed period costs in inventory
C) Is the method in which the fixed overhead cost is not included in inventory
D) Treats production costs as expenses in the period in which they are incurred
Q3) Absorption costing will produce a larger operating profit than variable costing if
A) Fixed production overhead increases
B) Fixed production overhead decreases
C) Units produced exceed units sold
D) Units sold exceed units produced
Q4) Absorption costing statements conform to generally accepted accounting principles.
A)True
B)False
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9
Chapter 8: Activity Analysis: Costing and Management
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96 Verified Questions
96 Flashcards
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Sample Questions
Q1) Which of these is not a benefit of Activity Based Costing?
A) Increased awareness of cause and effect relationships
B) Identification of non-value-added activities
C) Modifications to the accounting system
D) All of the above are benefits. i.e. none of the items is not a benefit
Q2) Generally speaking, activity-based costing traces direct costs more accurately than traditional costing.
A)True
B)False
Q3) ABC systems are similar to traditional costing systems in the way they
A) Allocate direct costs to cost objects
B) Define cost allocation bases
C) Trace direct costs to cost objects
D) Trace indirect costs to activities
Q4) The terms "cost driver" and "allocation base" are interchangeable.
A)True
B)False
Q5) Each cost pool in an ABC system has its own cost allocation rate.
A)True
B)False
10
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Chapter 9: Relevant Costs for Decision Making
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122 Verified Questions
122 Flashcards
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Sample Questions
Q1) In the decision to drop a product line, fixed costs are often classified as
A) Avoidable or sunk
B) Sunk or opportunity
C) Product or period
D) Incremental or avoidable
Q2) Which of the following would be considered joint products?
A) DVD players and DVDs
B) timber and sawdust
C) handbags and shoes
D) all of the above would be considered joint products
Q3) The general rule for make or buy decisions is to choose the option with the lowest total cost.
A)True
B)False
Q4) One way to deal with constrained resources is to spend money to alleviate them. A)True
B)False
Q5) Uncertainties about future revenues affect all non-routine operating decisions. A)True
B)False
11
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Chapter 10: Standard Costs, Flexible Budgets and Variance Analysis
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104 Verified Questions
104 Flashcards
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Sample Questions
Q1) Intentional worker damage is most likely to result in which type of variance?
A) Direct materials price variance
B) Direct materials efficiency variance
C) Direct labor price variance
D) Variable overhead spending variance
Q2) During the period Richeleau produced 1,000 units of product. The flexible budget for standard costs is: The actual cost of direct labor incurred was
A) $66,200
B) $66,400
C) $66,600
D) $67,400
Q3) A variance that is considered immaterial should be closed to the cost of goods sold account.
A)True
B)False
Q4) The standard cost of direct materials is computed as the standard price per unit of input times the standard quantity per unit of input.
A)True
B)False
12
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Chapter 11: Operational Budgets
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87 Verified Questions
87 Flashcards
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Sample Questions
Q1) Kelita Ltd, projects sales for its first three months of operation as follows: Inventory on 1<sup>st</sup> October is $40,000. Subsequent beginning inventories should be 40% of that month's cost of goods sold. Goods are priced at 140% of their cost. 50% of purchases are paid for in the month of purchase; the balance is paid in the following month. It is expected that 50% of credit sales will be collected in the month following sale, 30% in the second month following the sale, and the balance the third month. A 5% discount is given if payment is received in the month following sale. What is the projected cost of purchases for October?
A) $80,000
B) $93,333
C) $120,000
D) $180,000
Q2) The cash budget is included in an organisation's operating budget.
A)True
B)False
Q3) In a production budget, beginning inventory plus budgeted production equals sales plus targeted ending inventory.
A)True
B)False
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Page 13
Chapter 12: Strategy and Control
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35 Flashcards
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Sample Questions
Q1) Contemporary management accounting topics include all of these, except:
A) risk management control
B) sustainable accounting
C) central planning versus an unplanned economy
D) none of the above, i.e. all of these topics are covered by contemporary management accounting
Q2) Which of these is an informal control mechanism as opposed to a formal mechanism?
A) the influence of the owner/founder
B) social work settings
C) one-on-one consultations between senior managers
D) all are informal control mechanisms
Q3) Management control systems have one main role; to facilitate decisions by providing relevant and timely information to support decision making.
A)True
B)False
Q4) Strategic management accounting is essentially theoretical in nature.
A)True
B)False
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Chapter 13: Planning and Budgeting for Strategic Success
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Sample Questions
Q1) 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
Q2) 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
Q3) Zero-based budgeting
A) Requires justification for any new increases in requested amounts
B) Means that managers will have less work to prepare their budget requests
C) Requires managers to justify all funds requested
D) Is used as a means of reducing the paperwork involved with the budgeting process
Q4) The Beyond Budgeting philosophy means managing without budgets.
A)True
B)False
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Chapter 14: Capital Budgeting and Strategic Investment
Decisions
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93 Flashcards
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Sample Questions
Q1) Which of the following is the best example of a capital budgeting decision?
A) Deciding the price of a product for the next six months
B) Forecasting accrual basis profits for the next five years
C) Purchasing a piece of equipment with an expected life of eight years
D) Deciding which product to emphasise when there are constrained resources
Q2) Which of the following statements regarding NPV analysis is true?
A) Uncertainties increase as the dollar value of an investment increases
B) The discount rate can be calculated with certainty if it is based on the weighted average cost of capital
C) Managers should generally accept projects with an NPV greater than zero
D) The timing of incremental revenues and costs is irrelevant in NPV analysis
Q3) Bern & Sons invested in a project that cost $100,000. It had a net present value of $15,975 and a useful life of 8 years. The firm uses a 14% discount rate, and the project has an internal rate of return of 16%. What are the annual cost savings provided by the project?
A) $25,000
B) $26,698
C) $9,263
D) $8,600
Page 16
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Chapter 15: The Strategic Management of Costs and Revenues
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) Kaizen costing is concerned with continuous improvement in product cost, quality, and functionality.
A)True
B)False
Q2) In target costing, managers can
A) Focus on motivating customers to pay a higher price
B) Push some cost reductions to suppliers
C) Try to establish their product as a commodity
D) Justify higher costs by making production processes more complex
Q3) Kaizen costing and target costing are two names for the same thing.
A)True
B)False
Q4) In kaizen costing, after targeted cost reduction goals are set, each department is assigned responsibility for specific cost reduction amounts.
A)True
B)False
Q5) Life cycle costing is used when a product is initially sold at a high profit.
A)True
B)False
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Chapter 16: Strategic Management Control: a Lean Perspective
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Sample Questions
Q1) A limitation of the theory of constraints and throughput costing is that:
A) Management's attention is too focused on long-term results
B) Labour and overhead costs may be built up to excessive levels
C) Any product mix changes would not generate immediate cash flow effects
D) a and b are limitations
Q2) It is correct that under a successful just-in-time production and inventory control system:
A) there must be only one supplier
B) distance from the supplier is not an issue as long as the supplier is reliable
C) suppliers will normally make frequent deliveries of small lots of materials
D) all of the above are correct
Q3) Physical inspections at every point of the value chain is the key principle underlying TQM.
A)True
B)False
Q4) Lean accounting embraces full absorption costing.
A)True
B)False
18
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Chapter 17: Responsibility Accounting, Performance
Evaluation and Transfer Pricing
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63 Verified Questions
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Sample Questions
Q1) Division A of a firm produces a single product, which is sold only to Division B. Division A has a total investment of $1,000,000, while Division B has a total investment of $2,000,000. Division A annually sells 100,000 units of its product to Division B for $5 per unit and earns $150,000 in operating profit. Division B currently earns $250,000. If Division A raises its selling price to $6 per unit and nothing else changes,
A) Division A's ROI will increase to 20%
B) The firm's overall ROI will rise
C) The firm's overall ROI will fall
D) The firm's overall ROI will remain unchanged
Q2) The price used to record exchanges of goods and services inside an organisation is called a
A) Transfer price
B) Exchange price
C) Full price
D) Suboptimal price
Q3) Technical details about complex manufacturing processes are examples of specific knowledge.
A)True
B)False
Page 19
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Chapter 18: The Balanced Scorecard and Strategy Maps
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Sample Questions
Q1) The balanced scorecard implementation process begins with
A) Selecting an implementation team.
B) Developing measures for each perspective.
C) Hiring an outside consultant.
D) Clarifying organisational vision.
Q2) The steps for implementing a balanced scorecard
A) Are different in for-profit and not-for-profit organisations.
B) Should be customised for individual organisations.
C) Should not vary if the implementation is to be effective.
D) Begin with developing measures in each perspective.
Q3) Steps in the post-sales service cycle of the value chain include
A) Identifying customer preferences
B) Designing products and services
C) Building products and services
D) Providing customer service
Q4) The basis of a balanced scorecard is continuous strategic analysis from as many perspectives as possible.
A)True
B)False
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Chapter 19: Rewards, Incentives and Risk Management
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Sample Questions
Q1) Which of these is correct concerning agency theory? Normally the
A) Chief Executive Officer (CEO) is a principal and an agent
B) Chief Executive Officer (CEO) is a principal only
C) Chief Executive Officer (CEO) is an agent only
D) None of the above is correct
Q2) "Reduce costs by 5%" is an example of a(n)
A) measurement
B) agency cost
C) benchmark
D) reward
Q3) Relative performance evaluation (RPE), in relation to incentive systems, is about the comparison of company performance, using suitable measures, against the performance of a peer group.
A)True
B)False
Q4) From a business owner's perspective, which of the following is an agency cost?
A) Losses from poor economic conditions
B) Costs to provide appropriate incentive contracts for top management
C) General supplier price increases
D) Insufficient executive pay
21
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Chapter 20: Sustainability Management Accounting
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Sample Questions
Q1) The process of implementing sustainability is:
A) generally well understood
B) requires new thinking
C) can be copied from another organisation
D) is similar for most industries
Q2) Research has shown that if an organisation pursues sustainability, in the long-run this will lead to a drop in its profitability.
A)True
B)False
Q3) Ethical behavior is required of every employee within an organisation.
A)True
B)False
Q4) When is the most appropriate time to identify ethical problems in organisations?
A) When they are discovered by legal authorities
B) As they arise
C) After they arise
D) When they are discovered by shareholders
Q5) Life cycle analysis ends with the sale of the product.
A)True
B)False
22
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