Performance Management Practice
Questions
Course Introduction
Performance Management explores the strategies, processes, and tools used by organizations to assess, improve, and sustain employee and organizational performance. The course covers goal setting, performance appraisal methods, feedback mechanisms, coaching, and development planning to align individual objectives with broader organizational goals. Emphasis is placed on designing effective performance management systems, addressing challenges in implementation, and leveraging performance data to drive continuous improvement and engagement. Through case studies and practical exercises, students will develop the skills necessary to manage performance ethically and effectively in diverse workplace settings.
Recommended Textbook Management Accounting for Business 6th Edition by Colin Drury
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Page 2
Chapter 1: Introduction to Management Accounting
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Sample Questions
Q1) Financial accounting is primarily concerned with providing financial reports to all of the following EXCEPT
A) creditors such as banks and other financial institutions.
B) creditors such as suppliers.
C) shareholders of the company.
D) management of the firm.
Answer: D
Q2) The value chain includes which of the following activities?
A) designing and developing products and services
B) producing products and services
C) marketing and delivering products and services
D) all of the above
Answer: D
Q3) Principles of personal ethical behaviour that are essential to an ethical life include A) integrity.
B) respect for others.
C) accountability.
D) all of the above.
Answer: D
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Page 3
Chapter 2: An Introduction to Cost Terms and Concepts
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Sample Questions
Q1) Which of the following is an example of a fixed cost?
A) power cost in the machining department
B) wood in the manufacture of furniture
C) labour cost paid on a piece basis
D) lease payments on machinery
Answer: D
Q2) Classify the following costs incurred by a step railing manufacturing company as direct materials, direct labour, factory overhead, or period costs:
a. Wages paid to production workers
b. Utilities in the office
c. Depreciation on machinery in plant
d. Steel
e. Accountant's salary
f. Rent on factory building
g. Rent on office equipment
h. Maintenance workers' wages
i. Utilities in the plant
j. Maintenance on office equipment
Answer: 11ea86f5_e8eb_d394_a652_5332b7dd4958_TB3532_00
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4
Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) Dirth Company sells only one product at a regular price of £7.50 per unit. Variable expenses are 60 percent of sales and fixed expenses are £30,000. Management has decided to decrease the selling price to £6.00 in hopes of increasing its volume of sales. What sales pound level is needed to obtain a before-tax profit of £60,000 when the selling price is £6.00 per unit?
A) £360,000
B) £120,000
C) £72,000
D) £90,000
Answer: A
Q2) Which of the following equations is CORRECT?
A) Sales revenues = Variable expenses - (Fixed expenses + Operating income)
B) Sales revenues - Variable expenses - Fixed expenses = Operating income
C) Sales revenues + Variable expenses + Fixed expenses = Operating income
D) Sales revenues - Fixed expenses = Variable expenses - Operating income
Answer: B
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Chapter 4: Measuring Relevant Costs and Revenues for Decision-Making
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Sample Questions
Q1) If there is excess capacity, the minimum acceptable price for a special order must cover
A) variable costs associated with the special order.
B) variable and fixed manufacturing costs associated with the special order.
C) variable and incremental fixed costs associated with the special order.
D) variable costs and incremental fixed costs associated with the special order plus the contribution margin usually earned on regular units.
Q2) Zandy Beverage Company plans to eliminate a branch that has a contribution margin of £50,000 and fixed costs of £75,000. Of the fixed costs, £55,000 cannot be eliminated. The effect of eliminating this branch on net income would be a(n)
A) decrease of £25,000
B) increase of £25,000
C) decrease of £30,000
D) increase of £30,000
Q3) _____ are future costs that differ across alternatives.
A) Relevant costs
B) Irrelevant costs
C) Sunk costs
D) Past costs
Page 6
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Chapter 5: Pricing Decisions and Profitability Analysis
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Sample Questions
Q1) Which of the following statements is TRUE about the equilibrium price, P, and equilibrium quantity, Q?
A) If the price is set at P, then more than Q will be sold.
B) If the price is set above P, then less than Q will be sold.
C) If the price is set below P, then more than Q will be sold.
D) Both b and c are true.
Q2) Refer to Multiple Products Co. What is the markup on manufacturing costs needed to break even?
A) 100 percent
B) 40 percent
C) 140 percent
D) 280 percent
Q3) Refer to Multiple Products Co. What is the manufacturing cost markup needed to obtain a target profit of £100,000?
A) 100 percent
B) 67 percent
C) 50 percent
D) 25 percent
Q4) List some of the pros and cons of target costing.
Q5) Discuss the limitation of profit measurement.
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Chapter 6: Capital Investment Decisions
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Sample Questions
Q1) Projects that, if accepted or rejected, will not affect the cash flows of another project are
A) priority projects
B) mutually exclusive projects
C) independent projects
D) equity projects
Q2) What are the steps normally undertaken in an effective capital budgeting process?
Q3) Refer to Figure 5. The present value of the annual net cash inflows from operations is
A) £101,416
B) £101,897
C) £102,168
D) £104,618
Q4) _____ are capital budgeting models that identify criteria for accepting or rejecting projects without considering the time value of money.
A) Net present value models
B) Nondiscounting models
C) Discounting models
D) Capital return models
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Chapter 7: Cost Assignment
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Sample Questions
Q1) Examples of producing departments include all of the following EXCEPT
A) mixing.
B) molding.
C) packaging.
D) accounting.
Q2) Which of the following is a key consideration in selecting an allocation base?
A) The allocation base should have an indirect association with the cost objective.
B) The allocation base should be difficult to measure.
C) There should be logical association between the allocation base and the incidence of costs.
D) The allocation base should be out of the control of management.
Q3) Explain the key considerations in establishing cost pools and in selecting an allocation base.
Q4) What is the rationale for the use of departmental rates rather than plantwide rates?
A) less overapplied or underapplied overhead
B) easier to apply than plantwide rates
C) applying overhead more equitably because plantwide rates are average rates
D) none of the above
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9
Chapter 8: Activity-Based Costing
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Sample Questions
Q1) If activity-based costing is used, materials handling would be classified as a A) unit-level activity.
B) batch-level activity.
C) product-level activity.
D) facility-level activity.
Q2) If activity-based costing is used, electricity usage would be an example of a A) unit-level activity.
B) batch-level activity.
C) product-level activity.
D) facility-level activity.
Q3) _____ is(are) the cost of acquiring activity capacity.
A) Joint costs
B) Resource spending
C) Absorption costing
D) Variable costing
Q4) All of the following are unit-based activity drivers EXCEPT
A) machine hours.
B) number of setups.
C) number of units.
D) direct labour hours.
Page 10
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Chapter 9: The Budgeting Process
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Sample Questions
Q1) Which of the following is an example of a discretionary fixed expense?
A) direct labour
B) depreciation on a factory building
C) insurance on a building
D) property taxes on a factory building
Q2) Which of the following is an advantage of the budgeting process?
A) Budgeting provides resource information for decision making.
B) Budgeting provides a standard for performance evaluation.
C) Budgeting improves communication and coordination within the organization.
D) all of the above
Q3) Which of the following expenses is an example of a discretionary fixed expense?
A) investment in production equipment
B) investment in the factory
C) electricity costs
D) employment costs
Q4) A budget based on additions and subtractions from last year's budget is
A) a zero-base budget.
B) a continuous budget.
C) an incremental budget.
D) none of these.
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Chapter 10: Management Control Systems
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Sample Questions
Q1) When budgets are used for control,
A) budgeted amounts from different years are compared.
B) actual amounts from different years are compared.
C) budgeted amounts are compared to actual amounts.
D) None of these is correct.
Q2) The functional-based responsibility accounting model is appropriate for
A) relatively stable environments
B) dynamic environments
C) both stable and dynamic environments
D) neither stable nor dynamic environments
Q3) Refer to Figure 1. Which of the following describes the flexible budget variance for March?
A) The fixed overhead variance is £100 F.
B) The variable overhead variance is £1,000 U.
C) The variable overhead variance is £1,100 F.
D) both a and c
Q4) Why should motivational considerations be a part of budget planning and utilization? List several ways to motivate employees with budgets.
Q5) Define responsibility accounting and describe four types of responsibility centres.
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Chapter 11: Standard Costing and Variance Analysis
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Sample Questions
Q1) Refer to Figure 6. The variable overhead spending (expenditure) variance would be
A) £2,000 favorable
B) £1,200 favorable
C) £400 favorable
D) £200 favorable
Q2) Refer to Figure 7. Orient's variable overhead efficiency variance would be
A) £1,200 unfavorable
B) £3,600 unfavorable
C) £4,800 unfavorable
D) £4,800 favorable
Q3) Refer to Figure 4. Shannon's labour efficiency variance was
A) £4,625 unfavorable
B) £4,000 unfavorable
C) £27,750 unfavorable
D) £24,000 unfavorable
Q4) Discuss the advantages and disadvantages of both ideal or currently attainable standards.
Q5) How are standards developed? What is the difference between ideal and currently attainable standards?
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Chapter 12: Divisional Financial Performance Measurement
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Sample Questions
Q1) Compare and discuss the advantages and disadvantages of the following performance measures: ROI, EVA, and Residual Income.
Q2) Which of the following departments would NOT be a cost centre?
A) advertising department
B) city police department
C) building and grounds department
D) sales department
Q3) Decentralization occurs when
A) the firm's operations are located over a large geographic area to reduce risk
B) authority for important decisions is delegated to lower segments of the organization
C) important decisions are made at the upper levels and the lower levels of the organization are responsible for implementing the decisions
D) None of the above are correct.
Q4) Refer to Figure 5 above. Return on investment for the Candy Division is
A) 30.0%
B) 16.0%
C) 12.0%
D) 15.83%
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Chapter 13: Transfer Pricing in Divisionalized Companies
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Sample Questions
Q1) Discuss the advantages of decentralization in a multinational company.
Q2) Refer to Figure 2. Assume the Fahl Division can sell 800 units at £120 each. Any excess capacity will be unused unless the units are purchased by the Melton Division, which could use up to 100 units. The minimum transfer price that the Fahl Division would be willing to accept would be
A) £120
B) £110
C) £100
D) £40
Q3) A transfer pricing system should satisfy which of the following objectives?
A) accurate performance evaluation
B) goal congruence
C) preservation of divisional autonomy
D) all of the above
Q4) If it is available, the correct transfer price is
A) the market price from a perfectly competitive market
B) the negotiated transfer price
C) the variable production costs of the firm
D) none of the above
Q5) What is the role of transfer pricing in a decentralized firm?
Page 15
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Chapter 14: Cost Management
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Sample Questions
Q1) A company has 20 days of finished goods inventory on hand to avoid stockouts. The carrying costs of the inventory average £5,000 per day. The value-added costs would be
A) £100,000.
B) £10,000.
C) £5,000.
D) £-0-.
Q2) The demand-pull system requires goods to be manufactured based on the A) current demand
B) anticipated demand
C) previous year's demand
D) average of the next five years' demand
Q3) A time-and-motion study revealed that it should take 3 hours to produce a product that currently takes 7.5 hours to produce. labour is £18 per hour. The nonvalue-added costs are
A) £27.
B) £54.
C) £81.
D) £0.
Q4) Explain process value analysis.
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Chapter 15: Strategic Performance Management
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Sample Questions
Q1) Cycle time is the time it takes to
A) collect the account after the sale
B) turn inventory over
C) deliver the product after it is sold
D) produce one unit of product
Q2) Objectives for increasing revenue growth include
A) adopting a new pricing strategy.
B) reducing the cost per unit.
C) eliminating nonvalue-added activities.
D) reducing distribution channel cost.
Q3) Cycle time is calculated as
A) Total production time/Number of units sold
B) Total production time/Number of units produced
C) Total production time/Number of units in inventory
D) Total production time/Number of direct labour hours used
Q4) _____ are outcome measures that relate to customers.
A) Objective measures
B) External measures
C) Financial measures
D) Lag measures
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