Question 1

Which of the following is a lagging indicator?
A) Operational performance
B) Customer satisfaction
C) Financial performance
D) Employee training

Accepted Answer

Lagging indicators are metrics that measure the results of past events, which means they will only show up after the occurrence of certain events. Out of the given options, financial performance is a lagging indicator, meaning it reflects past business operations and decisions. Operational performance, customer satisfaction, and employee training are all leading indicators, as they provide insight into potential future outcomes.

Question 2

When measuring a company's performance, which of the following is NOT a lag indicator?
A) Operating income for the last month
B) Ratio analysis
C) Variance analysis
D) The expected growth in future demand for a company's products

Accepted Answer

Lag indicators refer to past performance, while future growth is a leading indicator. Choices A, B, and C all have a historical component, making them lag indicators.

Question 3

Customer satisfaction, operational efficiency, and employee excellence are the three primary considerations when using the balanced scorecard approach.

Accepted Answer

The balanced scorecard approach focuses on four perspectives: financial, customer, internal business processes, and learning and growth.

Question 4

Based on the variances shown on responsibility performance reports, management must take corrective action on all variances, including favorable, unfavorable, controllable, and uncontrollable variances.

Accepted Answer

Management typically focuses on significant variances, especially those that are unfavorable and controllable, as these indicate areas where performance can be improved. Not all variances require corrective action, especially if they are minor, favorable, or result from factors beyond management's control.

Question 5

Which of the following is a relevant performance indicator for the balanced scorecard's learning and growth perspective?
A) Earnings per share growth
B) Revenue growth
C) Employee access to customer information
D) Percentage of on-time deliveries

Accepted Answer

Employee access to customer information is a relevant performance indicator for the Balanced Scorecard's learning and growth perspective, as it measures the organization's ability to provide their employees with the necessary tools and skills to improve their performance and meet customer needs. Earnings per share growth and revenue growth are typically associated with the financial perspective, while the percentage of on-time deliveries is more relevant to the internal business process perspective.

Question 6

Manufacturing cycle time is a measure pertaining to the balanced scorecard's:
A) learning and growth perspective.
B) internal business perspective.
C) financial perspective.
D) customer perspective.

Accepted Answer

Manufacturing cycle time is a measure of the efficiency of the internal business processes. It measures the time it takes to transform raw materials into finished products, and therefore falls under the internal business perspective of the balanced scorecard.

Question 7

Which of the following statements BEST describes the purpose of the balanced scorecard approach?
A) The goal of the balanced scorecard approach is to maximize profits.
B) The goal of the balanced scorecard approach is to maximize operational efficiency.
C) The goal of the balanced scorecard approach is to develop a set of organizational performance measures to assist the organization in implementing its strategies.
D) The goal of the balanced scorecard approach is to maximize shareholder wealth.

Accepted Answer

The balanced scorecard approach aims to develop a set of performance measures that can help an organization implement its strategies effectively. It considers a range of perspective, including customer, internal processes, learning and growth, and financial. While financial performance is one of the perspectives, the ultimate goal is not just to maximize profits or shareholder wealth, but rather to ensure a balanced approach to performance measurement.

Question 8

In a balanced scorecard system, if financial profitability was one of the critical factors, which of the following would be a relevant KPI?
A) Revenue growth
B) Production yield rate
C) Market share
D) Employee training hours

Accepted Answer

Revenue growth directly relates to financial profitability as it is a key component of generating profits. Production yield rate and employee training hours are more relevant to operational efficiency, while market share is more reflective of competitiveness.

Question 9

When companies use the management by exception approach, ONLY unfavorable variances are investigated.

Accepted Answer

Management by exception involves investigating both unfavorable and favorable variances to understand why they occurred and to improve future performance.

Question 10

Revenue center performance reports highlight ONLY flexible budget variances, whereas cost center performance reports include sales volume variances.

Accepted Answer

Cost center performance reports also only include flexible budget variances, and do not include sales volume variances. Sales volume variances are only included in profit center performance reports.

Question 11

Real-time feedback on quality is a measure pertaining to the balanced scorecard's:
A) learning and growth perspective.
B) internal business perspective.
C) financial perspective.
D) customer perspective.

Accepted Answer

Real-time feedback on quality is a measure pertaining to the balanced scorecard's learning and growth perspective.

Question 12

A critical function of the performance report is to focus on which managers must take blame for unfavorable variances.

Accepted Answer

The purpose of a performance report is not to assign blame, but to identify areas where improvement can be made and to facilitate decision-making. It is important to analyze both favorable and unfavorable variances and work with managers to develop strategies to improve performance. Focusing solely on blame can create a negative work environment and detract from the overall goal of improving performance.

Question 13

Managers of profit centers are responsible for generating revenue and controlling costs, so their performance reports include both revenues and expenses.

Accepted Answer

Profit centers are responsible for generating profits, which is the difference between revenues and expenses. Therefore, their performance reports include both revenues and expenses.

Question 14

Waycross Construction Company has a pipeyard operation which is run as a cost center. They are preparing a performance report for the month of March and have provided the data below:
$\begin{array}{|l|r|r|r|r|r|r|}
\hline \text { Cost Center } & & \text { Flexible } & \text { Flexible Budget } \
\hline \text { Performance Report } & \text { Actual } & \text { Budget } & \text { Variance } & \text { U/F } & \% \text { variance } & \text { U/F } \
\hline \text { Wages \& benefits } & \$ 81,200 & \$ 80,000 \
\hline \text { Office lease expense } & 42,060 & 45,000 \
\hline \text { Depreciation expense } & 39,600 & 42,000 \
\hline \text { Insurance expense } & 33,490 & 30,000 \
\hline \text { Other expense } & 7,120 & 8,000 \
\hline & \$ 203,470 & \$ 205,000 \
\hline
\end{array}$
-
How much is the percentage variance for Wages and benefits?
A) 2.2 % F
B) 2.2 % U
C) 1.5% F
D) 1.5% U

Accepted Answer

The percentage variance for Wages and benefits is calculated as: $(\$81,200 - \$80,000) / \$80,000 \times 100 = 1.5\%$. Since the actual cost is higher than the budgeted cost, it is unfavorable (U).

Question 15

Waycross Construction Company has a pipeyard operation which is run as a cost center. They are preparing a performance report for the month of March and have provided the data below:
$\begin{array}{|l|r|r|r|r|r|r|}
\hline \text { Cost Center } & & \text { Flexible } & \text { Flexible Budget } \
\hline \text { Performance Report } & \text { Actual } & \text { Budget } & \text { Variance } & \text { U/F } & \% \text { variance } & \text { U/F } \
\hline \text { Wages \& benefits } & \$ 81,200 & \$ 80,000 \
\hline \text { Office lease expense } & 42,060 & 45,000 \
\hline \text { Depreciation expense } & 39,600 & 42,000 \
\hline \text { Insurance expense } & 33,490 & 30,000 \
\hline \text { Other expense } & 7,120 & 8,000 \
\hline & \$ 203,470 & \$ 205,000 \
\hline
\end{array}$
A) 11.6 % U
B) 11.6 % F
C) 12.5 % U
D) 12.5% F

Accepted Answer

The total actual cost is $203,470, and the flexible budget is $205,000. The variance is $1,530 favorable (F). The percentage variance is calculated as ($1,530 / $205,000) * 100 = 0.75% F. However, the question seems to have an error in the choices, as none match this calculation. Assuming a typo, the closest choice is 11.6% U, but it should be 0.75% F.

Question 16

Union Company's corporate payroll department is a cost center, and prepares monthly performance reports. Union uses the management by exception approach, based on the dollar amounts of the variances. Based on the performance report for the payroll department shown below, on which of the following variances would the company focus first for investigation and explanation?
$\begin{array}{|c|c|c|c|c|c|c|}
\hline \text { Cost Center } & & \text { Flexible } & \text { Flexible Budget } \ 
\hline \text { Performance Report } & \text { Actual } & \text { Budget } & \text { Variance } & \mathrm{U} / \mathrm{F} & \% \text { variance } & \mathrm{U} / \mathrm{F} \
\hline \text { Salary \& benefits } & \$ 46,000 & \$ 44,500 & \$ 1,50 & \text { U } & 3.4 & \mathrm{U} \
\hline \text { Rent expense } & 12,750 & 11,900 & 850 & \text { U } & 7.1 \% & \mathrm{U} \
\hline \text { Depreciation expense } & 8,900 & 9,080 & 180 & & 2.0 \% & \text { F } \
\hline \text { Supply expense } & 1,890 & 2,200 & 310 & \bar{F} & 14.1 \% & \text { F }  \
\hline \text { Miscellaneous expense } & 4,320 & 4,120 & 200 & \text { U } & 4.9 \% & \text { U } \
\hline&\$73,860&\$71,800&\$2,060&\text { U } &2.9\%&\text { U } \
\hline
\end{array}$

A) Rent expense
B) Miscellaneous expense
C) Salary and benefits
D) Depreciation expense

Accepted Answer

The largest variance is in the salary and benefits category, which represents the largest expense for the payroll department. Therefore, Union Company would focus first on investigating and explaining this variance.

Question 17

Which of the following is NOT a relevant performance indicator for the balanced scorecard's financial perspective?
A) Earnings per share
B) Revenue growth
C) Return on investment
D) Number of repeat customers

Accepted Answer

The number of repeat customers is not a relevant performance indicator for the financial perspective of the balanced scorecard. It would be more relevant to the customer perspective. A, B, and C are all common financial indicators that would be relevant for this perspective.

Question 18

Westhaven Company has a warehousing unit which operates as a cost center. They prepare monthly performance reports.
The report for February is shown here:
$\begin{array}{|l|r|r|r|r|r|r|}
\hline \text { Cost Center } & & \text { Flexible } & \text { Flexible Budget } \
\hline \text { Performance Report } & \text { Actual } & \text { Budget } & \text { Variance } & \text { U/F } & \% \text { variance } & \text { U/F } \
\hline \text { Salary \& benefits } & \$ 119,000 & \$ 120,000 & \$ 1,000 & F & 0.8 \% & F \
\hline \text { Rent expense } & 94,500 & 90,000 & 4,500 & U & 5.0 \% & U \
\hline \text { Depreciation expense } & 23,200 & 24,000 & 800 & F & 3.3 \% & \text { F } \
\hline \text { Depreciation expense } & 23,200 & 24,000 & 800 & F & 3.3 \% & \text { F } \
\hline \text { Supply expense }  & 11,890 & 12,000 & 110 & \text { F } & 0.9 \% & \text { F } \
\hline \text { Other expense } & 8,120 & 8,000 & 120 & \mathrm{U} & 1.5 \% & \mathrm{U} \
\hline& \$ 256,710 & \$ 254,000 & \$ 2,710 & \mathrm{U} & 1.1 \% & \mathrm{U} \
\hline
\end{array}$

Westhaven uses the management by exception approach. On which of the following variances would the company focus first for investigation and explanation?
A) Supply expense
B) Rent expense
C) Other expense
D) Depreciation expense

Accepted Answer

The company would focus on the Rent expense variance first because it has the largest unfavorable variance both in dollar amount ($4,500) and percentage (5.0%). Management by exception focuses on significant variances that could impact the overall performance.

Question 19

Which of the following is FALSE about a balanced scorecard?
A) It communicates the company's strategy to employees.
B) It monitors how well the company's employees are realizing the company's business strategy.
C) It provides a starting point for creating company strategies.
D) It provides benchmarks to encourage employees to carry out the company's strategy.

Accepted Answer

The balanced scorecard is not meant to provide a starting point for creating company strategies. Rather, it is a tool to help ensure that the company's existing strategies are being effectively communicated and executed by employees.

Question 20

New product development time is a measure pertaining to the balanced scorecard's:
A) learning and growth perspective.
B) internal business perspective.
C) financial perspective.
D) customer perspective.

Accepted Answer

New product development time is a metric that falls under the internal business perspective of the balanced scorecard as it measures the efficiency and effectiveness of the company's internal processes and operations in bringing new products to market.

Quiz 24: Performance Evaluation and the Balanced Scorecard

Which of the following is a lagging indicator?

When measuring a company's performance, which of the following is NOT a lag indicator?

Customer satisfaction, operational efficiency, and employee excellence are the three primary considerations when using the balanced scorecard approach.

Based on the variances shown on responsibility performance reports, management must take corrective action on all variances, including favorable, unfavorable, controllable, and uncontrollable variances.

Which of the following is a relevant performance indicator for the balanced scorecard's learning and growth perspective?

Manufacturing cycle time is a measure pertaining to the balanced scorecard's:

Which of the following statements BEST describes the purpose of the balanced scorecard approach?

In a balanced scorecard system, if financial profitability was one of the critical factors, which of the following would be a relevant KPI?

When companies use the management by exception approach, ONLY unfavorable variances are investigated.

Revenue center performance reports highlight ONLY flexible budget variances, whereas cost center performance reports include sales volume variances.

Real-time feedback on quality is a measure pertaining to the balanced scorecard's:

A critical function of the performance report is to focus on which managers must take blame for unfavorable variances.

Managers of profit centers are responsible for generating revenue and controlling costs, so their performance reports include both revenues and expenses.

Which of the following is NOT a relevant performance indicator for the balanced scorecard's financial perspective?

Which of the following is FALSE about a balanced scorecard?

New product development time is a measure pertaining to the balanced scorecard's: