Performance Measurement and Control
Test Preparation
Course Introduction
This course explores the principles and practices of measuring and managing organizational performance. Students will examine the selection and use of financial and non-financial performance metrics, the design of control systems, and the alignment of strategic goals with operational activities. Through case studies and practical examples, the course highlights the role of performance measurement in motivating desired behaviors, improving efficiency, and supporting decision-making across various types of organizations. Emphasis is placed on contemporary approaches such as the Balanced Scorecard, key performance indicators (KPIs), and performance dashboards, along with the challenges and ethical considerations in performance management and control.
Recommended Textbook
Horngrens Cost Accounting A Managerial Emphasis16th Global Edition by Srikant M. Datar
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23 Chapters
4103 Verified Questions
4103 Flashcards
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Chapter 1: The Manager and Management Accounting
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Sample Questions
Q1) For each report listed below,identify whether the major purpose of the report is for (1)routine internal reporting, (2)nonroutine internal reporting,or for (3)external reporting to investors and other outside parties.
Item:
a.study detailing sale information of the top-ten selling products
b.weekly report of total sales generated by each store in the metropolitan area
c.annual Report sent to shareholders
d.monthly report comparing budgeted sales by store to actual sales
Answer: a.(2)nonroutine internal reporting
b.(1)routine internal reporting
c.(3)external reporting to investors and other outside parties
d.(1)routine internal reporting
Q2) Performing professional duties in accordance with relevant laws,regulations,and technical standards is a competent responsibility.
A)True
B)False
Answer: True
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Chapter 2: An Introduction to Cost Terms and Purposes
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224 Flashcards
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Sample Questions
Q1) Since costs that are inventoried are not expensed until the units associated with them are sold,a manager can produce more units than are expected to be sold in a period without reducing a firm's net income.
A)True
B)False
Answer: True
Q2) Although unit costs are regularly used in financial reports and for making product mix and pricing decisions,managers should think in terms of total costs rather than unit costs for making decisions.
A)True
B)False
Answer: True
Q3) If a worker is paid for 40 hours,but is idle for 5 of those 40 hours,the 5 hour of idle time would be considered a component of direct labor.
A)True
B)False
Answer: False
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Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) The shorter the time horizon,the lower the percentage of total costs considered fixed.
A)True
B)False
Answer: False
Q2) The classification of costs as variable and fixed depends on the relevant range,the length of the time horizon,and the specific decision situation.
A)True
B)False
Answer: True
Q3) Kanga Company is considering two different production plans.
Option one: Fixed costs of $10,000 and a breakeven point of 500 units.
Option two: Fixed costs of $20,000 and a breakeven point of 700 units.
Which option should Kanga choose if it is expecting to produce 600 units?
A)Option one.
B)Option two.
C)Both options are equally good.
D)It isn't possible to determine from the information given.
Answer: A
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5
Chapter 4: Job Costing
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203 Flashcards
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Sample Questions
Q1) Which account is credited if direct materials of $28,000 and indirect materials of $7,000 are sent to the manufacturing plant floor?
A)Manufacturing Overhead Control for $35,000
B)Work-in-Process Control for $35,000
C)Accounts Payable Control for $21,000
D)Materials Control for $35,000
Q2) Job-costing is likely to be used by________.
A)oil refining companies
B)advertising agencies
C)Mortgage payment processors
D)breakfast cereal producers
Q3) ________ is used to record and accumulate all the costs assigned to a specific job.
A)Job-cost record
B)Materials-requisition record
C)Cost-allocation base
D)Labor-requisition record
Q4) Indirect manufacturing costs are credited to Manufacturing Overhead Control.
A)True
B)False
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Chapter 5: Activity-Based Costing and Activity-Based Management
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Sample Questions
Q1) Indirect labor and distribution costs would most likely be in the same activity-cost pool.
A)True
B)False
Q2) Is it advisable to ignore facility-sustaining cost drivers during product costing?
Q3) Using department indirect-cost rates to allocate costs will result in results similar to ABC if:
A)a single activity accounts for a sizable portion of the costs of the department
B)several activities cause a sizable portion of the costs of the department
C)a single activity accounts for a small portion of the costs of the department
D)several activities cause a small portion of the costs of the department
Q4) Identification of a cost-allocation base is not a critical element when using a strategy that will refine a costing system.
A)True
B)False
Q5) What are the factors that are causing many companies to refine their costing systems to obtain more accurate measures of the costs of their products?
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Chapter 6: Master Budget and Responsibility Accounting
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Sample Questions
Q1) Omitting basic maintenance expenditures out of a budget could be considered unethical if the risks of a breakdown and loss are substantial.
A)True
B)False
Q2) Financial planning software packages assist management with ________.
A)assigning responsibility to various levels of management
B)identifying the target customer
C)sensitivity analysis in their planning and budgeting activities
D)achieving greater commitment from lower management
Q3) To reduce budgetary slack management may ________.
A)incorporate stretch or challenge targets
B)use external benchmark performance measures
C)award bonuses for achieving budgeted amounts
D)reduce projected cost targets by 10% across all areas
Q4) Variances between actual and budgeted amounts inform management about performance relative to the budget.
A)True
B)False
Q5) Describe the benefits of preparing an operating budget to an organization.
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Chapter 7: Flexible Budgets,direct-Cost Variances,and Management Control
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181 Verified Questions
181 Flashcards
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Sample Questions
Q1) A favorable variance should be ignored by management.
A)True
B)False
Q2) Give at least three good reasons why an unfavorable efficiency variance for direct manufacturing labor might be reported.
Q3) A flexible-budget variance is $600 favorable for unit-related costs.This indicates that costs were ________.
A)$600 more than the master budget
B)$600 less than for the planned level of activity
C)$600 more than standard for the achieved level of activity
D)$600 less than standard for the achieved level of activity
Q4) Describe the purpose of variance analysis.
Q5) Goodard Inc.planned to use $155 of material per unit but actually used $147 of material per unit,and planned to make 1,110 units but actually made 1,000 units.
The sales-volume variance for materials is ________.
A)$8,000 favorable
B)$16,170 unfavorable
C)$17,050 unfavorable
D)$8,000 unfavorable
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Chapter 8: Flexible Budgets, overhead Cost Variances, and Management Control
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171 Verified Questions
171 Flashcards
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Sample Questions
Q1) Which of the following is a component of sales-volume variance?
A)Net-income volume variance
B)Operating-income volume variance
C)Taxable-income volume variance
D)Budgeted revenue variance
Q2) The accounting for 3-variance analysis is simpler than the 4-variance analysis,but some information is lost because the variable and fixed overhead spending variances are combined into a single total overhead spending variance.
A)True
B)False
Q3) If the production planners set the budgeted machine hours standards too tight,one could anticipate there would be a favorable variable overhead efficiency variance.
A)True
B)False
Q4) 'Managers should be wary of using the same unitized fixed overhead costs for planning and control purposes'.Do you agree with this argument? Give reasons for your answer.
10
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Chapter 9: Inventory Costing and Capacity Analysis
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Sample Questions
Q1) The only real challenge in planning and controlling capacity costs is with the denominator as the numerator of a budgeted fixed manufacturing cost allocation rate is rarely the issue.
A)True
B)False
Q2) Which of the following inventory costing methods results in the least amount of costs being inventoried?
A)absorption costing
B)variable costing
C)throughput costing
D)direct costing
Q3) Which of the following is true of variable costing?
A)It expenses administrative costs as cost of goods sold.
B)It treats direct manufacturing costs as a product cost.
C)It includes fixed manufacturing overhead as an inventoriable cost.
D)It is required for external reporting to shareholders.
Q4) The unit cost of a product is always higher in variable costing than in absorption costing.
A)True
B)False
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Chapter 10: Determining How Costs Behave
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Sample Questions
Q1) Write a linear cost function equation for each of the following conditions.Use y for estimated costs and X for activity of the cost driver.
a.Direct manufacturing labor is $15 per hour.
b.Direct materials cost $25.60 per cubic yard.
c.Utilities have a minimum charge of $500,plus a charge of $0.25 per kilowatt-hour.
d.Machine operating costs include $250,000 of machine depreciation per year,plus $100 of utility costs for each day the machinery is in operation.
Q2) Quantitative analysis methods estimate cost functions ________.
A)using the time-and-motion studies
B)based on analysis and opinions gathered from various departments
C)using a formal mathematical method to fit cost functions to past data observations
D)using the pooling of knowledge from each value chain function
Q3) Because the cost driver is the same for the fringe benefits of life insurance and pension benefits cost is the same,those costs can be aggregated into one homogeneous cost pool.
A)True
B)False
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Chapter 11: Decision Making and Relevant Information
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Sample Questions
Q1) Under the opportunity cost approach,the cost of each alternative includes the incremental costs and the opportunity cost.
A)True
B)False
Q2) Discontinuing unprofitable products will ________.
A)increase profitability if the resources no longer required by the discontinued product can be eliminated
B)increase profitability if capacity constraints are adjusted
C)decrease profitability if the fixed costs does not change after discontinuing the particular business segment
D)increase profitability when a large portion of the fixed costs are unavoidable
Q3) When capacity is constrained,relevant costs equal incremental costs plus opportunity costs.
A)True
B)False
Q4) If Option 1 costs $120 and Option 2 costs $90,then the differential cost is $30.
A)True
B)False
Q5) Explain the five-step decision process that managers can use to make decisions.
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Chapter 12: Strategy,balanced Scorecard,and Strategic
Profitability Analysis
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Sample Questions
Q1) The financial perspective of the balanced scorecard focuses on the profits and value created for shareholders.
A)True
B)False
Q2) Which of the following involves a fundamental rethinking and redesign of business processes to achieve improvements in critical measures of performance?
A)Strategy
B)Product differentiation
C)Product designing
D)Reengineering
Q3) What is the term that describes an organization's ability to offer products or services that are perceived by its customers as being superior and unique relative to those of its competitors?
A)Strategy
B)Product differentiation
C)Cost leadership
D)The balanced scorecard
Q4) What are the four key perspectives in the balanced scorecard?
Page 14
Q5) Define engineered and discretionary costs and give two examples of each.
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Chapter 13: Pricing Decisions and Cost Management
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Sample Questions
Q1) A graph comparing locked-in costs with incurred costs will have ________.
A)locked-in costs rising much faster initially,but dropping to zero after the product is manufactured
B)the two cost lines running parallel until the end of the process,when they join
C)locked-in costs rising much faster initially than the incurred cost,but joining the incurred cost line at the completion of the value-chain functions
D)no differences unless the product is manufactured inefficiently
Q2) Whether the firm uses the market-based approach or the cost-based approach for pricing decisions,the market forces must be considered.
A)True
B)False
Q3) Which of the following examples would have as its purpose the allocation of costs to motivate employees?
A)deciding on a selling g price for a product
B)encouraging sales representatives to emphasize high-margin products
C)to cost products a a "fair" price under a government contract
D)to cost inventories for reporting to external parties
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Page 15
Chapter 14: Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis
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Sample Questions
Q1) The sales-quantity variance can be decomposed into ________.
A)sales-mix variance and sales-volume variance
B)static-budget variance and flexible-budget variance
C)flexible-budget variance and sales-volume variance
D)market-share variance and market-size variance
Q2) Additional insight can be gained by dividing the sales-volume variance into the sales-mix variance and the sales-quantity variance.
A)True
B)False
Q3) A shift towards a higher proportion of sales of products with a lower contribution margin per unit will most likely result in a(n)________.
A)unfavorable sales-mix variance
B)unfavorable sales-quantity variance
C)favorable sales-mix variance
D)favorable sales-quantity variance
Q4) A customer cost hierarchy may include customer-sustaining costs.
A)True
B)False
Q5) What are the two components of the sales-quantity variance?
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Chapter 15: Allocation of Support-Department Costs, common
Costs, and Revenues
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Sample Questions
Q1) Under the incremental method,the first incremental user receives the largest allocation of the common costs.
A)True
B)False
Q2) The direct allocation method provides key information for outsourcing decisions regarding support services.
A)True
B)False
Q3) Which of the following is not one of the methods used to to allocate the revenues of a bundled product?
A)direct revenue method
B)stand-alone selling prices method
C)Stand-alone physical units method
D)incremental revenue method
Q4) Under which allocation method are one-way reciprocal support services recognized?
A)direct method
B)artificial cost method
C)reciprocal method
D)step-down method
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Chapter 16: Cost Allocation: Joint Products and Byproducts
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Sample Questions
Q1) If the value of a byproduct drops significantly,it could also be viewed as a joint product.
A)True
B)False
Q2) Which of the following statements is true of the sales method of accounting for byproducts?
A)It makes journal entries when the byproducts are produced.
B)It is the preferred method because of the matching principle.
C)It allows a firm to manage its reported earnings by timing the sale of byproducts.
D)This method recognizes the byproduct inventory in the accounting period in which it is produced.
Q3) In joint costing,using physical measures at split-off to allocate costs enables the accountant to obtain individual product costs and gross margins.
A)True
B)False
Q4) Separable costs include manufacturing costs only.
A)True
B)False
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18
Chapter 17: Process Costing
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Sample Questions
Q1) Assembly department of Zahra Technologies had 200 units as work in process at the beginning of the month.These units were 45% complete.It has 300 units which are 35% complete at the end of the month.During the month,it completed and transferred 500 units.Direct materials are added at the beginning of production.Conversion costs are allocated evenly throughout production.Zahra uses weighted-average process-costing method.Calculate the total equivalent units in ending inventory for assignment of conversion costs?
A)200 units
B)105 units
C)195 units
D)300 units
Q2) Ford Motor Company is said to use a hybrid costing system.What is a hybrid costing system,and what would be the advantage to Ford of such a system?
Q3) The cost of units completed can differ materially between the weighted average and the FIFO methods of process costing.
A)True
B)False
Q4) List and describe the five steps in process costing.
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Page 19
Chapter 18: Spoilage, rework, and Scrap
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Sample Questions
Q1) The Duolane Pottery manufactures pottery products.All direct materials are included at the inception of the production process.For April,there was no beginning inventory in the processing plant.Direct materials totaled $180,000 for the month.Work-in-process records revealed that 3,000 tons were started in April and that 2,100 tons were finished;500 tons were spoiled as expected.Ending work-in-process units are complete in respect to direct materials costs.Spoilage is not detected until the process is complete.
Required:
a.What is the cost per equivalent unit?
b.What are the costs assigned to completed units?
c.What are the costs transferred out?
d.What are the amounts allocated to the work-in-process ending inventory?
Q2) Normal spoilage is computed on the basis of the number of ________.
A)good units that pass inspection during the current period
B)units that pass the inspection point during the current period
C)units that are in ending work in process
D)units that started during the particular period
Q3) Explain the meaning of the terms spoilage,scrap,and rework.Provide an example of each.Is it possible for a single firm to have all three from a single productive process?
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Page 20
Chapter 19: Balanced Scorecard: Quality and Time
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Sample Questions
Q1) When evaluating alternatives to improve quality,both the relevant benefits as well as the relevant costs should be considered.
A)True
B)False
Q2) An illustration that resembles the bone structure of a fish and identifies potential reasons why a problem exists is called ________.
A)control chart
B)Pareto diagram
C)cause-and-effect diagram
D)time-series graphs
Q3) Process engineering is an example of ________.
A)prevention costs
B)appraisal costs
C)internal failure costs
D)external failure costs
Q4) The two basic aspects of quality are quality of design and conformance quality.Define and give an example of each.
Q5) What are control charts and how can inferences be drawn from them?
Q6) What are ISO 9000 and ISO 14000?
21
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Chapter 20: Inventory Management, just-In-Time, and Simplified Costing Methods
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Sample Questions
Q1) Companies use safety stock as a buffer against unexpected decreases in demand. A)True
B)False
Q2) Which of the following is not a reason why a company would adopt JIT purchasing practices?
A)high shrinkage costs
B)low ordering costs
C)low carrying costs of inventory
D)reliable supply chains
Q3) The Controller of Nip-it-in-the-Bud Inc.has studied the possibility of implementing a JIT production system.The annual incremental retooling costs of the JIT system is projected to be about $67,000 however,the new system will lower insurance costs by $10,000 and storage costs will drop by $20,000 a year as the company will be able to reuse warehouse space for other strategic purposes.In addition,material handling costs will drop by $10,000 a year and because of a resulting increase in quality and faster delivery,the company's contribution margin on the product will increase by $2.00 on annual sales of 20,000 units.
Required:
Calculate the net incremental benefit of the JIT system implementation.
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Q4) What are the principles of lean accounting? Are there any limitations? Discuss.
Chapter 21: Capital Budgeting and Cost Analysis
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Sample Questions
Q1) A "what-if" technique that examines how a result will change if the original predicted data are NOT achieved or if an underlying assumption changes is called ________.
A)sensitivity analysis
B)net present value analysis
C)internal rate-of-return analysis
D)adjusted rate-of-return analysis
Q2) As cash flows and time value of money are central to capital budgeting decisions,the AARR method is regarded as better than the IRR method.
A)True
B)False
Q3) Explain why the term tax shield is used in conjunction with depreciation.
Q4) Comparison of the actual results for a project to the costs and benefits expected at the time the project was selected is referred to as ________.
A)the audit trail
B)management control
C)a post-investment audit
D)a cost-benefit analysis
Q5) What are the relevant cash inflows and outflows for capital budgeting decisions?
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Page 23
Chapter 22: Management Control Systems, transfer Pricing, and
Multinational Considerations
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Sample Questions
Q1) What is decentralization and what are its benefits?
Q2) "Management control systems consist of formal and informal control systems." Briefly explain the formal and informal management systems and enlist their components.
Q3) An organization should design its management control system independently of its strategies,so that the system is not affected by change of strategies in future.
A)True
B)False
Q4) Division A sells ground veal internally to Division B,which in turn,produces veal burgers that sell for $12 per pound.Division A incurs costs of $5.25 per pound while Division B incurs additional costs of $11.50 per pound.
What is Division A's operating income per burger,assuming the transfer price of the ground veal is set at $7.00 per burger?
A)$1.75
Q5) Briefly explain each of the three methods used to determine a transfer price.
Page 24
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Chapter 23: Performance Measurement, compensation,
and Multinational Considerations
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Sample Questions
Q1) Briefly explain each of the four levels of control.Why does a company need to implement more than a diagnostic control system?
Q2) The Cybertronics Corporation reported the following information for its Cyclotron Division:
\(\begin{array}{ll}
\text { Revenues } & \$ 2,400,000 \\
\text { Operating costs } & 1,300,000 \\
\text { Operating assets } & 1,200,000
\end{array}\)
Income is defined as operating income.
What is the Cyclotron Division's return on sales?
A)91.7%
B)45.8%
C)50.0%
D)92.3%
Q3) Some companies present financial and nonfinancial performance measures for various organization units in a single report called the balanced scorecard.
A)True
B)False
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