Exam 3

Question 1

Strategic planning

Answer 1

Long term goals and strategies set for 5-10 years

Question 2

Budget

Answer 2

A formal written statement of managements financial plan for the future

Question 3

Rolling budget

Answer 3

A 12 month budget

Question 4

Goal congruence

Answer 4

The managers personal goals are congruent with firms goals

Question 5

Participating budgeting

Answer 5

Bottom up

Many levels of management create budget

Question 6

Dysfunctional behaviour

Answer 6

Manager’s behaviour is conflicting with firms goals

Question 7

Budgetary slack

Answer 7

A manager padding the budget deliberately

Question 8

Master budget

Answer 8

A financial plan of action consisting of operating and financial budgets

Question 9

Operating budgets

Answer 9

Budgets concerned with income generating activities

Question 10

Flexible budget

Answer 10

The master budget flexed to different levels of activity

Question 11

Zero based budgeting

Answer 11

Firm builds budgets from scratch

Question 12

Safety stock

Answer 12

Extra inventory of finished goods kept on hand in case demand is higher than predicted

Question 13

Responsibility accounting

Answer 13

A system for evaluating the performance of each responsibility Center and manager

Question 14

Direct fixed costs

Answer 14

Directly traceable to one Center and controllable by Center manager

Question 15

Segment margin

Answer 15

Operating income before subtracting common fixed costs

Question 16

Management by exception

Answer 16

Only investigate variances that are large

Question 17

Master budgets are prepared in ?

Answer 17

The beginning of the period

Question 18

Volume variance measures?

Answer 18

How effective management is at meeting sales goals

Question 19

Standard costs

Answer 19

Costs that should be incurred under efficient operations

Question 20

Benefits of budgets

Answer 20

Requires managers to plan ahead
Provides objectives for evaluating performance
Creates an early warning system
Coordination of activities
Greater management awareness of operations
Motivates personnel

Question 21

Advantages of decentralised operations

Answer 21

Management specialisation
Focusing of central management
Motivating managers
Competition between managers

Question 22

Disadvantages of decentralised operations

Answer 22

Potential to duplicate resources

Managers make decisions that are only good for themselves

Question 23

Advantages of ROI

Answer 23

Cost efficiency
Operating asset efficiency
Helps management decide how to invest funds
Compared oerformance overtime

Question 24

ROI disadvantages

Answer 24

Focuses only on short run
Managers make decisions only good for their Center
Lagging indicator

Question 25

Advantages of residual income

Answer 25

Encouragers managers to accept any project that earns above minimum rate of return

Question 26

Disadvantages of RI

Answer 26

Focus on short run Not a relative measure of profitability Lagging indicator

Question 27

Financial perspective measures

Answer 27

``` ROI Ri Average stock price Sales revenue Profit ```

Question 28

Consumer perspective measures

Answer 28

Customer retention Customer satisfaction Market share

Question 29

Learning and growth perspective

Answer 29

Employee skills and satisfaction Employee education/training Research and development

Question 30

Internal business perspective

Answer 30

Product development Product production On time delivery Quality

Question 31

Advantages of standard costs

Answer 31

Cost benchmarks Usefulness in budgeting Employee motivation Simplify bookkeeping