Question 1

A centre that is solely responsible for generating a target level of income is known as a/an:
A) cost centre.
B) profit centre.
C) revenue centre.
D) investment centre.

Accepted Answer

A revenue centre is primarily focused on generating sales or revenue. It is not responsible for cost or profit management, making it distinct from cost, profit, and investment centres.

Question 2

In using the balanced scorecard,which of the four perspectives would most likely apply to the measures of 'customer response time' and 'quality training and documentation'?
A) Financial.
B) Customer.
C) Internal operations.
D) Innovation and improvement activities.

Accepted Answer

Customer response time and quality training and documentation are measures related to the efficiency and effectiveness of internal processes, which fall under the Internal operations perspective of the balanced scorecard.

Question 3

Which of the following could undermine the value of the balanced scorecard to an entity?
A) Using the scorecard as an extra level of top-down management control.
B) Not making available appropriate resources such as training for implementation of the balanced scorecard.
C) Not ensuring that top management are committed to the success of the balanced scorecard.
D) All of the options could undermine the value of the balanced scorecard to an entity.

Accepted Answer

All of the given options could undermine the value of the balanced scorecard. 
A) Using the scorecard as an extra level of top-down management control could cause resistance from employees and hinder successful implementation. 
B) Not providing appropriate resources such as training could result in incorrect usage of the scorecard and inaccurate measurements. 
C) Without commitment from top management, the scorecard may not receive necessary support and endorsement, leading to low adoption rates and ineffective use.

Question 4

When evaluating the performance of divisions:
A) only controllable costs should be identified.
B) both controllable and non-controllable revenues and costs should be identified.
C) only uncontrollable revenues should be identified.
D) none of the options are correct.

Accepted Answer

Evaluating the performance of divisions should include both controllable and non-controllable revenues and costs. Identifying only controllable costs would provide an incomplete picture of the division's performance, while identifying only uncontrollable revenues would not accurately reflect the division's ability to generate income. It is important to consider all sources of revenue and costs to get a comprehensive understanding of the division's performance.

Question 5

A responsibility centre for costs,revenues,and investment in assets is a/an:
A) cost centre.
B) revenue centre.
C) profit centre.
D) investment centre.

Accepted Answer

An investment centre is responsible for costs, revenues, and investments in assets, making it accountable for profitability and efficient use of its assets.

Question 6

In using the balanced scorecard,which of the perspectives would most likely apply to the goals of 'survive','succeed' and 'prosper'?
A) Financial.
B) Customer.
C) Internal operations.
D) Innovation and improvement activities.

Accepted Answer

The goals of survive, succeed, and prosper all have a financial aspect to them. Surviving and succeeding require enough financial stability to cover costs and generate revenue, and prospering involves turning a profit and generating financial growth. Therefore, the Financial perspective would be the most applicable in setting goals and measures for achieving these objectives. The other perspectives may also be relevant, but would likely be secondary to the Financial perspective.

Question 7

Appointing managers to be responsible for the performance of specific divisions of an entity assists in which of the following?
A) Freeing up central management time for strategic long-term planning.
B) Improving the commitment and motivation of managers.
C) Improving the timeliness of and access to information as a result of localised decision making.
D) All of the options are ways in which appointing division managers assists an entity.

Accepted Answer

Appointing division managers helps in all of the ways mentioned in the options. By delegating responsibilities to division managers, central management is able to focus on strategic planning. Division managers are also more committed and motivated when given specific responsibilities. Localized decision making also ensures that relevant information is accessed in a timely manner, leading to better decision making.

Question 8

Which of the following statements regarding the balanced scorecard approach is true?
A) The balanced scorecard uses only short-term performance measures.
B) The balanced scorecard uses only long-term performance measures.
C) The balanced scorecard is used because there is a causal relationship between all of the measures and their economic impact.
D) The balanced scorecard is designed to encourage the use of a wide range of measures to gauge performance.

Accepted Answer

The balanced scorecard is designed to encourage the use of a wide range of measures to gauge performance, which can include both short-term and long-term measures. Additionally, there is not necessarily a direct causal relationship between all of the measures used in the balanced scorecard approach.

Question 9

The balanced scorecard framework implies that:
A) traditional performance measures alone are inadequate to capture the entire performance of the entity.
B) only long-term measures need to be considered.

C) only short-term measures need to be considered.
D) non-financial as well as financial measures need to be considered.

Accepted Answer

The answer of The balanced scorecard framework implies that:
A) traditional...

Question 10

The format generally used when reporting on divisional performance is a:
A) gross profit format.
B) net profit format.
C) contribution margin format.
D) a balance sheet format.

Accepted Answer

The contribution margin format is generally used when reporting on divisional performance as it shows the sales revenues minus variable costs, giving the contribution margin. This format helps to determine the profitability of each division and allows for easier comparison across multiple divisions. The gross profit and net profit formats only show the overall profit, which may not provide enough insight into individual division performance, and the balance sheet format shows the financial position of the company rather than divisional performance.

Question 11

Which one of these perspectives is not used by the balanced scorecard?
A) Employee.
B) Customer.
C) Financial.
D) Innovation and improvement activities.

Accepted Answer

The balanced scorecard consists of four perspectives: financial, customer, internal processes, and innovation and improvement activities. The employee perspective is not included in the balanced scorecard. However, some organizations may choose to add an employee perspective to their own customized version of the balanced scorecard.

Question 12

A statement setting out the entity's overall philosophy and objectives is a/an:
A) financial statement.
B) integrated statement.
C) mission statement.
D) income statement.

Accepted Answer

A mission statement sets out the organization's overall purpose and objectives, outlining its underlying values and philosophy. A financial statement refers to a document or report that outlines the financial performance of an entity, such as a balance sheet or income statement. An integrated statement refers to combining financial and non-financial information into one report, and an income statement specifically lays out an entity's revenues, expenses, and net income (or loss).

Question 13

If profit after tax is $600 000,taxation is $280 000,the required rate of return is 15%,and the investment is $2 000 000,the residual income calculation is:
A) $300 000
B) 15%
C) 44%
D) $580 000

Accepted Answer

Residual income is calculated as follows:

Residual Income = Profit after tax - (Required Rate of Return * Investment)

Substituting the values given in the question, we get:

Residual Income = $600,000 - (15% * $2,000,000) - $280,000
Residual Income = $600,000 - $300,000 - $280,000
Residual Income = $20,000

Therefore, the correct answer is D) $580,000.

Question 14

Which of these is regarded as a disadvantage of return on investment as a performance measure?
A) It links profit with the investment base.
B) It does not take into consideration the different size and type of divisions.
C) It is difficult to calculate.
D) All of the options are disadvantages of return on investment as a performance measure.

Accepted Answer

Return on investment (ROI) focuses mainly on the financial performance of a business unit and does not consider the differences in division size and type. This can lead to unfair comparisons between small, specialized units and large, diversified ones. The other options are not disadvantages of ROI.

Question 15

If the profit margin is 15.5% and investment turnover is 1.3 times,return on investment is:
A) 1.3%
B) 15.5%
C) 20.2%
D) 11.9%

Accepted Answer

To find the return on investment, we need to use the formula ROI = profit margin x investment turnover. Plugging in the given values, we get ROI = 0.155 x 1.3 = 0.2015 or 20.2%. Therefore, the best choice is C.

Question 16

One of the main criticisms of the balanced scorecard is:
A) senior management are seldom committed to its success.
B) it must be introduced without a trial.
C) it only measures financial performance.
D) that the causal relationship between some measures and their economic impact have not been tested.

Accepted Answer

One of the main criticisms of the balanced scorecard is that the causal relationship between some measures and their economic impact have not been tested. This means that some of the measures included in the scorecard may not actually have a direct impact on financial performance, which could undermine the effectiveness of the tool.

Question 17

A term for a division,segment or branch of an organisation is:
A) business unit.
B) entity.
C) corporation.
D) firm.

Accepted Answer

A business unit refers to a separately identifiable division, segment, or branch of an organization that operates independently to achieve specific objectives and is accountable for its performance. The term "entity" is broader and can refer to any distinct unit or organization as a whole. "Corporation" and "firm" refer to the legal structure of the organization rather than a specific division or branch.

Question 18

From the list below,the best financial performance measure for a profit centre would be:
A) cash inflows less cash outflows.
B) budgeted income less actual income.
C) budgeted costs less actual costs.
D) economic value added.

Accepted Answer

Cash inflows less cash outflows is the best financial performance measure for a profit centre because it measures the centre's ability to generate cash, which is essential for its survival and growth.

Question 19

A key performance indicator (KPI)is a:
A) performance measure of profitability.
B) performance measure used only by manufacturing entities.
C) performance measure that is critical for the success of an entity.
D) measure of management performance.

Accepted Answer

A key performance indicator (KPI) is a performance measure that is critical for the success of an entity. It can be used in any industry or sector, and is not limited to manufacturing entities. KPIs can measure a variety of factors, including but not limited to profitability or management performance, but the key characteristic is that they are critical to the success of the business.

Question 20

Reports are prepared on the performance of divisions so as to:
A) help provide a pricing guide for products and services.
B) consider investment levels.
C) evaluate the division's performance.
D) all of the above.

Accepted Answer

Reports on division performance are used to evaluate the division's performance, consider investment levels, and help provide a pricing guide for products and services. Therefore, all of the options are correct, making D the best choice.

Quiz 14: Performance Measurement

A centre that is solely responsible for generating a target level of income is known as a/an:

In using the balanced scorecard,which of the four perspectives would most likely apply to the measures of 'customer response time' and 'quality training and documentation'?

Which of the following could undermine the value of the balanced scorecard to an entity?

When evaluating the performance of divisions:

A responsibility centre for costs,revenues,and investment in assets is a/an:

In using the balanced scorecard,which of the perspectives would most likely apply to the goals of 'survive','succeed' and 'prosper'?

Appointing managers to be responsible for the performance of specific divisions of an entity assists in which of the following?

Which of the following statements regarding the balanced scorecard approach is true?

The balanced scorecard framework implies that:

The format generally used when reporting on divisional performance is a:

Which one of these perspectives is not used by the balanced scorecard?

A statement setting out the entity's overall philosophy and objectives is a/an:

If profit after tax is $600 000,taxation is $280 000,the required rate of return is 15%,and the investment is $2 000 000,the residual income calculation is:

Which of these is regarded as a disadvantage of return on investment as a performance measure?

If the profit margin is 15.5% and investment turnover is 1.3 times,return on investment is:

One of the main criticisms of the balanced scorecard is:

A term for a division,segment or branch of an organisation is:

From the list below,the best financial performance measure for a profit centre would be:

A key performance indicator (KPI) is a:

Reports are prepared on the performance of divisions so as to: