Chapter 9 - Alternative measures of performance

Question 1

What is a fixed budget?

Answer 1

Budget produced for a single level of activity

Question 2

What is a flexible budget?

Answer 2

Designed to change as volume of activity changed

Question 3

What are controllable costs?

Answer 3

Costs which can be influenced by the budget holderW

Question 4

What are uncontrollable costs?

Answer 4

Costs that cannot be influenced by management action

Question 5

What are the problems with using traditional financial performance metrics?

Answer 5

Limited period in the immediate past
No indication of what is going to happen in the future
Vulnerable to manipulation and to choice of accounting policy
short-termism

Question 6

What are Non-financial performance indicators?

Answer 6

Measures of performance based on non-financial information that may originate in, and be used by, operating departments to monitor and control their activities without any accounting input

Question 7

What are the two main problems involved in assessing performance?

Answer 7

Problem of identifying and measuring objectives
Problem of identifying and measuring outputs

Question 8

What is the three E approach of the value for money concept?

Answer 8

Economy - Money spent v Inputs purchased
Efficiency - Inputs purchased V Outputs produced
Effectiveness - Outputs produced V Objectives achieved

Question 9

What are the four parts of the balance scorecard?

Answer 9

Financial perspective
Internal Business process perspective
Learning and growth perspective
Customer perspective