Concepts and Techniques for Performance Measurement

Question 1

An accounting system and a managerial control device that involves:

1. Identifying responsibility centres with their corresponding objectives.
2. developing measures of achievement of such objectives
3. preparing/ analyzing reports of such measures by the responsibility centers.

Answer 1

Responsibility Accounting

Question 2

A sub-unit of an organization, such as department, division, plant, business process, or any segment whose manager has authority over, and its responsible and accountable for a specific or defined group of activities.

Answer 2

Responsibility Center

Question 3

A responsibility center where a manager has control over the incurrence of costs but not over revenues or investments.

Answer 3

Cost Center

Question 4

The manager has control over revenues

Answer 4

Revenue center

Question 5

The manager has control over both costs and revenues.

Answer 5

Profit Center

Question 6

The manager has control over both costs and revenues, as well as over investment in plant and equipment, receivable, inventory, and other assets

Answer 6

Investment Center

Question 7

Usually operates as a cost center. It exists primarily and sometimes solely to provide specialized support to the other segments or subunits of the organization.

Answer 7

Service Center

Question 8

Top management makes most decisions and controls most activities of the organizational segments from the firm’s central office.

Answer 8

Centralized Organization

Question 9

There is employee empowerment; top management grants subordinate managers a significant degree of autonomy and independence in operating and making decisions relating to their sphere of responsibility.

Answer 9

Decentralized Organization

Question 10

One purpose of a responsibility accounting system; It is a condition where employees, working on their own personal interests or the interest of their responsibility center, make decisions that help meet the overall goals of the firm.

Answer 10

Goal Congruence

Question 11

The exertion of effort by the decision-makers to reach a common goal or objective; thus include all conscious actions such as planning and supervising.

Answer 11

Managerial effort

Question 12

Motivation
A drive toward a goal that creates action and effort to achieve that goal.

Answer 12

Motivation

Question 13

Occurs when one organizational segments takes action that is in its own best interests but is detrimental to the organization as a whole.

Answer 13

Sub-optimization

Question 14

The power to direct and exact performance from others, particularly the subordinate, including the right to prescribe the means and methods by which work must be done.

Answer 14

Authority

Question 15

Refers to the obligation to perform

Answer 15

Responsibility

Question 16

The duty to report performance to one’s superior and the physical means for reporting or being able to substantiate performance.

Answer 16

Accountability

Question 17

The extent to which a manager can influence activities, costs, revenues, or capital.

Answer 17

Controllability

Question 18

A behavioral, communications oriented, responsibility approach where a manager and his/her subordinates agree upon objectives and the means on how such objectives can be attained.

Answer 18

Management by Objectives (MBO)

Question 19

The excess of income earned by an investment center over the desired income or return in invested capital

Answer 19

Residual income

Question 20

A more specific version of residual income. It represents the segment’s true economic point because it measures the benefit obtained by using resources in a particular way.

Answer 20

Economic Value Added (EVA)

Question 21

Delivery cycle time
Length of time between receiving an order from a customer to the time when the completed order is delivered to such customer.

Question 22

Throughput or Manufacturing cycle time
The time required to convert raw materials into finished products. It is composed of the process time, move time, inspection time and queue time

Question 23

Process time
Amount of time in which work is actually done on the product.

Answer 23

Amount of time in which work is actually done on the product.

Question 24

Amount of time spent to check if the product is not defective.

Answer 24

Inspection time

Question 25

Time required to move materials and work in process from one workstation to another.

Answer 25

Move time

Question 26

Amount of time a product spends waiting to be processed, moved, inspected and shipped.

Answer 26

Queue Time

Question 27

The objective is to reduce or eliminate non-value added time in the delivery cycle time.

Answer 27

Manufacturing cycle efficiency (MCE)

Question 28

A goal congruence tool or a performance measurement system that strikes a balance between financial and operating performance measures, links performance to rewards, and gives explicity recognition to the diversity of interests of stakeholders.

Answer 28

Balance Scorecard

Question 29

It translates an organization's mission and strategy into operational objectives and performance measures for four different perspectives.

Answer 29

Balance Scorecard

Question 30

Describes the economic consequences of actions taken in customer, internal business process, and learning and growth perspectives.

Answer 30

Financial Perspective

Question 31

Identifies and defines the customer and market segments in which the firm will compete.

Answer 31

Customer Perspective

Question 32

Describes the internal process that will provide value for the firm's customers and owners.

Answer 32

Internal Business Process Perspective

Question 33

Identifies and defines the capabilities that an organization needs to create long-term growth and improvement.

Answer 33

Learning and growth perspective

Question 34

The time required to produce a unit of output

Answer 34

Cycle time

Question 35

The number of units that can be produced in a given period of time

Answer 35

Velocity

Question 36

The relationship between output and inputs.

Answer 36

Productivity

Question 37

The ratio of output to the quantity of a single factor of production

Answer 37

Partial Productivity

Question 38

The ratio of quantity of output produced to the cost of all relevant inputs used based on the current period prices.

Answer 38

Total Productivity

Question 39

The amount charged by one segment of the organization for goods/services transferred/ provided to another segment of the same organization

Answer 39

Transfer Price

Question 40

What are the factors that must be considered in selecting a transfer pricing policy?

Answer 40

1. Goal Congruence 2. Segmental Performance 3. Negotiation 4. Capacity 5. Cost Structure 6. Taxes

Question 41

This transfer price includes materials, labor and allocated fixed factory overhead.

Answer 41

Full Absorption Cost

Answer 42

Full Absorption Cost