Business Performance Management
Study Guide Questions
Course Introduction
Business Performance Management explores the strategies, processes, and tools used to monitor and enhance the effectiveness of organizational operations. The course covers key performance indicators (KPIs), balanced scorecards, benchmarking techniques, and the integration of financial and non-financial metrics to drive informed decision-making. Students will learn how to align business activities with company objectives, identify areas for improvement, and implement performance measurement systems that foster continuous growth and competitive advantage in a dynamic business environment.
Recommended Textbook
Cost Management Measuring Monitoring and Motivating Performance 2nd Canadian Edition by
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Page 2
Chapter 1: The Role of Ethical Accounting Information in Management Decision Making
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Sample Questions
Q1) Avoidable cash flows are:
A)Usually relevant to a decision
B)Cash flows that are incurred no matter which action is taken
C)Ignored in decision-making
D)Are the same as irrelevant cash flows
Answer: A
Q2) Maude is considering opening her own business, now that she has retired from her regular job. Her business idea is a reminder and shopping service, in which clients submit lists of birthdays, anniversaries and other important dates. Maude sends her clients reminders for those dates, and shops for special gifts at the client's request. She plans to do all of the work herself rather than hiring and managing additional employees. Maude's core competencies are most likely to include:
A)An annual budget
B)The ability to deduct business expenses on her tax return
C)The first year's actual results
D)Her knowledge of potential gifts and the local shops
Answer: D
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Chapter 2: Cost Concepts, Behaviour, and Estimation
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Sample Questions
Q1) Managers should be trained in engineering to calculate an engineered cost estimate.
A)True
B)False
Answer: True
Q2) Sunk costs are:
A)The same as opportunity costs
B)Expenditures made in the past
C)Relevant to decisions
D)Difficult to value
Answer: B
Q3) All of the following are true about analysis at the account level except:
A)It is a method for separating fixed and variable costs
B)It uses information from the general ledger
C)It is a qualitative method for separating costs
D)It requires very little judgment to determine cost behaviour
Answer: D
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Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) The contribution margin per unit is calculated as Selling Price per unit minus Variable Cost per unit.
A)True
B)False
Answer: True
Q2) Dixon Snowglobes Inc. manufactures a single product. The product sells for $10. The variable manufacturing cost per unit is $2 and the variable selling cost is $2 per unit. Dixon incurs monthly fixed costs of $100,000 for manufacturing and $140,000 for administration and selling. If Dixon raises its selling price by 10% in response to a 10% increase in variable costs, and income taxes are 40%, its new breakeven point in sales dollars (relative to that of the original data above)will be:
A)Higher
B)Unchanged
C)Lower
D)Cannot be determined
Answer: B
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Chapter 4: Relevant Information for Decision Making
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Sample Questions
Q1) Special order decisions are long-term decisions that may need to include the time value of money.
A)True
B)False
Q2) Financial statement information uses average costs (variable plus average fixed overhead)to calculate cost of goods sold and to value inventory. Are these average costs useful in making nonroutine operating decisions? Explain.
Q3) Effect on brand name recognition is a qualitative factor that managers should consider in:
A)Product line keep and drop decisions
B)Special order decisions
C)Cost prediction decisions
D)Make or buy decisions
Q4) The general rule is to keep any product or service in the short term:
A)That can be sold
B)That covers variable costs
C)That covers variable costs plus any fixed costs that can be avoided if the product or service is dropped
D)If it covers part of the avoidable costs
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Chapter 5: Job Costing
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Sample Questions
Q1) Star Company's accountants estimate total overhead for each month will be $64,000. They will allocate overhead on the basis of direct labour cost. During the current month, 3 jobs were worked on: Job 745 Job 746 Job 747
Direct material $36,000 $56,000 $24,000
Direct labour $56,000 $72,000 $40,000
Job 745 was completed and sold, Job 746 was completed and Job 747 is still in process. Budgeted direct labour cost for the month was $160,000 and actual overhead was $65,800.
Assuming overhead was $2,000 underapplied and that this amount is considered material, the balance of work in process after allocation of the underapplied overhead based on overhead charged to the accounts during the period is:
A)$115,073
B)$80,456
C)$113,727
D)$79,544
Q2) Explain why it is usually inappropriate to use the total job cost per unit of product or service in making short-term decisions.
Q3) Explain the difference between normal and abnormal spoilage.
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Chapter 6: Process Costing
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Sample Questions
Q1) When an organization uses a long-term procurement contract, direct labour costs are normally stable over long periods of time.
A)True
B)False
Q2) Tong, Inc. is a manufacturing company that uses a process costing system. All direct material is added at the start of the process, and spoilage is discovered at the end. During the first period of operations 15,000 units of material were placed into production at a cost of $20 each (ignore conversion costs for this process). Ending work in process was 2,000 units, good units completed totalled 11,000 units, and normal spoilage is 15% of the units surviving inspection. Inspection takes place after the units are completed. The unit cost assigned to the abnormal spoilage is:
A)$-0-
B)$22.61
C)$20.00
D)$24.00
Q3) All spoilage in a process costing system is considered abnormal spoilage.
A)True
B)False
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Chapter 7: Activity-Based Costing and Management
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Sample Questions
Q1) Regarding the use of ABC product cost information for short-term decision making, which of the following is likely to be true?
A)Flexible costs should be excluded from the computation of product cost
B)Committed costs should be excluded from the computation of product cost
C)ABC product cost information should not be used for most short-term decisions
D)ABC product cost information cannot be used for decision making when there are constrained resources
Q2) The steps to assign costs in an ABC system are listed below in random order. Number the steps in the correct order (1 through 6).
____ Assign costs to activity-based cost pools
____ Calculate an allocation rate for each cost pool
____ Choose a cost driver for each cost pool
____ For each ABC cost pool, allocate activity costs to the cost object
____ Identify activities
____ Identify the relevant cost object
Q3) All organizations that use activity-based costing also use activity-based management.
A)True
B)False
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Chapter 8: Measuring and Assigning Support Department
Costs
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Sample Questions
Q1) The step-down method does not recognize services provided between support departments.
A)True
B)False
Q2) To decide the type and number of cost pools to use for support cost allocation, managers should consider the:
A)Reasons for allocating support department costs
B)Ability of operating departments to bear the costs
C)Method they plan to use for the allocation
D)Allocation base
Q3) When preparing financial statements under generally accepted accounting principles, support department costs are generally classified as:
A)Product costs
B)Period costs
C)Nonoperating costs
D)Variable costs
Q4) List two advantages of the dual-rate method.
Q5) List two factors that should be considered when choosing allocation bases.
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Q6) Distinguish between support department costs and manufacturing overhead costs.
Chapter 9: Joint Product and By-Product Costing
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Sample Questions
Q1) J-M Company uses a joint process costing $15,000 to produce three main products. The company had no beginning inventory. Its current period operation data follow: Units Sales Value Separable Sales Value After Units
Product Produced at Split-Off Costs Further Processing Sold
S 500 $5,000 $500 $ 7,000 400
T 450 6,000 650 9,000 300
R 300 9,000 700 10,000 250
If J-M uses the physical output method to allocate joint costs and performs further processing after the split-off point, what is the gross profit for product S?
A)$1,800
B)$500
C)$400
D)$(900)
Q2) The physical output method of joint product cost allocation is:
A)Useful for all product costing
B)Rarely useful
C)Useful when products are packaged and priced similarly
D)Useful when products vary widely in net realizable values
Q3) For what types of products is the physical output method appropriate? Explain.
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Chapter 10: Static and Flexible Budgets
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Sample Questions
Q1) The master budget includes two components: an operating budget and a time budget.
A)True
B)False
Q2) (Appendix 10A)In a cash budget, operating cash receipts include:
A)Repayments of long-term debt
B)Purchases of plant assets
C)Cash receipts from accounts receivable collections
D)Liquidation of investments
Q3) Participative budgeting involves customers and managers at all levels in the organization.
A)True
B)False
Q4) Under which of the following types of budgeting must managers justify their budget requests each year as if prior information did not exist?
A)Activity-based
B)Participative
C)Zero-based
D)Flexible
Q5) How are budgets related to organizational strategies?
Page 12
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Chapter 11: Standard Costs and Variance Analysis
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Sample Questions
Q1) Baldwin, Inc uses a standard job cost system and purchased 25,000 kg. of material at $6 per kg., and used it all. The standard amount allowed for the output achieved is 22,500 kg, and the standard price is $6.50 per kg. The company also incurred 37,500 direct labour hours for $450,000. The standard hourly price was $11 per hour, and 39,000 hours were allowed at standard. Assuming all variances are immaterial, answer the following questions: The entry to record the direct labour variances will include a:
A)Credit to wages payable for $429,000
B)Debit to wages expense for $450,000
C)Debit to work in process inventory for $412,500
D)Credit to direct labour efficiency variance for $16,500
Q2) A contract with a new supplier may cause an unfavourable materials price variance.
A)True
B)False
Q3) An unfavourable price variance may occur because:
A)The price of direct materials increased
B)The price of direct materials decreased
C)The manufacturing process is more efficient
D)The manufacturing process is less efficient
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Chapter 12: Strategic Investment Decisions
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Sample Questions
Q1) Arnold Company is acquiring a new machine with a life of 5 years for use on its production line. The following data relate to this purchase: Cost of new machine $100,000
Annual cost savings in cash expenses 45,000
Terminal value 8,000
Maintenance required in the 4th year 5,000
Book value of the old machine 20,000
The new machine would replace an old fully-amortized machine. The old machine can be sold for $15,000 at the time the new equipment is acquired. The income tax rate is 30%, and the discount rate is 12%. Arnold uses the straight-line method for amortization on all machines (ignore the half-year convention). Note: some amounts are rounded.
The present value of the terminal cash flows is:
A)$8,000
B)$4,536
C)$1,361
D)$3,175
Q2) List one pro and one con for using the payback method.
Q3) (Appendix 12A)Under what conditions would it be most appropriate to use the nominal method for capital budget analysis?
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Chapter 13: Pricing Decisions
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Sample Questions
Q1) A major drawback of cost-based pricing is that it:
A)Ignores the full cost of a product
B)Ignores the relationship between customer demand and price
C)Ignores variable costs and includes only fixed costs
D)Can be used only when all costs have been incurred
Q2) The internet is likely to makes prices more inelastic because substitutes are more easily discovered.
A)True
B)False
Q3) Predatory pricing is illegal in Canada.
A)True
B)False
Q4) What is the basis of the government legislation to restrict a company's ability to shift income via transfer pricing?
A)Transfer prices must higher than those in an arm's length transaction
B)Transfer prices should be the same as those in an arm's length transaction
C)Transfer prices must be lower than those in an arm's length transaction
D)Transfer prices may be at any price approved by both related parties
Q5) Explain why market-based pricing has increased in recent years.
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Chapter 14: Strategic Management of Costs
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Sample Questions
Q1) Which of the following activities is unique to a manufacturing organization's value chain?
A)Distribution management
B)Customer service
C)Product manufacture
D)Marketing and sales
Q2) BBM Corporation's managers are attempting to build a new product, a better mousetrap. They began by determining the features customers wanted and what they would pay for those features. BBM's engineers then reverse-engineered a competitor's product to understand its design and related production processes. Their analysis indicated that customers would pay $10.00 for a better mousetrap. What process did BBM use according to the preceding scenario?
A)Kaizen costing
B)Value chain costing
C)Target costing
D)Life cycle costing
Q3) Production under a value stream analysis system is based on customer demand.
A)True
B)False
Q4) Give a complete but concise explanation of the target costing cycle.
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Chapter 15: Measuring and Assigning Costs for Income Statements
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Sample Questions
Q1) Exeter Mfg. Co. introduced a new mass-produced specialty product early in the year. Production and sales of this product for the first four months are as follows: Month Units Produced Units Sold
1 800 600
2 1,100 800
3 1,200 1,100
4 1,000 1,400
The firm's budgeted fixed overhead is $200,000, and budgeted output is 1,000 units per month. The volume variance, if any, is carried forward month-by-month and closed at the end of the year. When 1,000 units are produced and sold, expected monthly operating income is $40,000.
In which month(s)was variable costing income higher than absorption costing income? A)4
B)l, 2, and 3
C)2 and 3
D)3 and 4
Q2) If inventory physically decreases during the period, income under absorption costing will usually be lower than income using variable costing. Explain.
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Chapter 16: Performance Evaluation and Compensation
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Sample Questions
Q1) Centralized organizations may decide to decentralize their decision-making authority once they begin operations in foreign countries. Explain why this occurs.
Q2) Which of the following best describes "general knowledge" in a decision-making context?
A)Detailed information about manufacturing processes
B)Customer lists and preferences kept by individual departments in retail sales
C)Knowledge that is easily transferred between employees
D)Knowledge that can be obtained only outside the organization
Q3) To protect shareholders from excessive compensation practices, executive compensation packages are best set by:
A)The board of directors
B)A committee of primarily outside members of the board of directors
C)A committee of top management employees
D)The external auditors
Q4) Return on investment can be decomposed into two ratios: investment turnover and return on sales.
A)True
B)False
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Chapter 17: Strategic Performance Measurement
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Sample Questions
Q1) The purpose of a balanced scorecard is to translate organizational vision and strategies into performance objectives that can be monitored over time.
A)True
B)False
Q2) An example of an internal business process is:
A)Surveying customer satisfaction
B)The accounting cycle
C)Implementing a balanced scorecard
D)Emphasizing employee training
Q3) Steps in the innovation cycle of the value chain include:
A)Delivering products and services
B)Designing products and services
C)Building products and services
D)Providing customer service
Q4) How is organizational learning related to the balanced scorecard?
A)Organizational learning is only important in the learning and growth perspective
B)Only learning organizations can be successful in scorecard implementation
C)The balanced scorecard can improve organizational learning
D)Both are important, but they are unrelated
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Chapter 18: Sustainability Management
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Sample Questions
Q1) Direct raw materials, utilities and labour costs are included in which category of costs?
A)Image and relationship costs
B)Conventional costs
C)Contingent costs
D)Hidden costs
Q2) Externalities are costs that an entity imposes on others as a result of its operations, but which the entity typically ignores
A)True
B)False
Q3) Sustainability accounting includes:
I. Financial accounting value systems
II. Environmental value systems
III. Social value systems
A)I and II only
B)II and III only
C)I and III only
D)I, II, and III
Q4) How can companies reduce accusations of greenwashing?
Q5) How do firms generally evaluate organizational sustainability performance?
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