Chapter 1

Question 1

What does Strategic Management Accounting (SMA) focus on?

Answer 1

Providing both financial and non-financial information to support strategic decision-making

SMA emphasizes external factors and long-term performance.

Question 2

How does SMA differ from traditional management accounting?

Answer 2

SMA emphasizes external factors and long-term performance, while traditional management accounting is internally focused

Traditional management accounting primarily deals with internal operations.

Question 3

What are the three performance levels organizations operate at?

Answer 3

• Corporate level: Overall mission and strategic objectives
• Strategic business unit level: Competitive strategies to achieve corporate goals
• Operational level: Day-to-day activities and short-term targets

Question 4

What is the purpose of alignment in performance levels?

Answer 4

To ensure operational activities support strategy at all levels

This alignment is crucial for effective strategic management.

Question 5

What are the types of control systems in performance management?

Answer 5

• Strategic control: Focused on long-term goals
• Tactical control: Managing resources to achieve strategic goals
• Operational control: Monitoring short-term processes and performance

Question 6

What is feedback control?

Answer 6

Corrective action from past results

It helps organizations adapt based on previous performance.

Question 7

What is feedforward control?

Answer 7

Preventing problems in advance

It focuses on proactive measures rather than reactive ones.

Question 8

How does decentralization affect divisional performance measures?

Answer 8

It increases divisional autonomy, requiring measures like ROI and RI

ROI: Return on Investment, RI: Residual Income.

Question 9

Why is transfer pricing important in decentralized organizations?

Answer 9

To evaluate inter-divisional performance

Transfer pricing affects how performance is assessed across different divisions.

Question 10

What do shared service models aim to improve?

Answer 10

Efficiency

However, they complicate performance measurement across multiple business units.

Question 11

What do ESG factors measure?

Answer 11

Sustainability through environmental impact, social responsibility, and governance practices

ESG factors are increasingly important in strategic management.

Question 12

What does the Triple Bottom Line expand success measurement to include?

Answer 12

• Profit
• People
• Planet

This expands beyond just financial metrics.