Lectures 8 - 10

Question 1

Standard costs

Answer 1

a budget for the production of one unit of product or service

Question 2

Actual costs

Answer 2

incurred and recorded in the production of the product or service

Question 3

Cost variance

Answer 3

the difference between the actual cost and the standard cost

Question 4

price variance

Answer 4

the difference between the actual price and the standard price

Question 5

quantity variance

Answer 5

the difference between the actual quantity and the standard quantity

Question 6

price/rate variance =

Answer 6

AQ * AP - AQ * SP

Question 7

Quantity/efficiency variance =

Answer 7

AQ * SP - SQ * SP

Question 8

variances are favourable when

Answer 8

the actual costs are less than the budget

Question 9

variances are unfavourable when

Answer 9

the actual costs are higher than the budget

Question 10

Fixed o/hd budget variance =

Answer 10

actual fixed o/hd - budgeted fixed o/hd

Question 11

fixed o/hd volume variance =

Answer 11

budgeted fixed o/hd - applied fixed o/hd

Question 12

applied fixed o/hd =

Answer 12

predetermined fixed o/hd rate * standard hours allowed

Question 13

cost-benefit decision

Answer 13

the decision to investigate a variance is a cost benefit decision

Question 14

behavioural effects of standard costing

Answer 14

they can influence behaviour when they’re used to determine salary increases and bonuses

Question 15

criticisms of standard costing

Answer 15

reports are given too late to be useful and not applicable to short lived products

Question 16

Decentralisation

Answer 16

assigning of specific responsibilities to sub-units of organisations

Question 17

Goal congruence

Answer 17

when sub-unit managers in the organisation hold a common set of objectives

Question 18

Individual goal congruence

Answer 18

when the members personal goals match that of the organisation as a whole

Question 19

behavioural congruence

Answer 19

when individuals behave in the best interest f the organisation regardless of their own goals

Question 20

responsibility accounting

Answer 20

a system of internal reporting tailored to specific organisational structures

Question 21

centralised

Answer 21

decisions are handed down from the top and subordinates carry them out

Question 22

benefits of decentralisation

Answer 22

shares workload, specialised people focus on depts.

Question 23

costs of decentralisation

Answer 23

some tasks could be duplicated, local managers might make decisions that wont match top managers

Question 24

Return on Investment

Answer 24

the ratio of profits to investment in the assets that generate those profits

Question 25

ROI =

Answer 25

income/ invested capital * 100

Question 26

Weighted average cost of capital

Answer 26

weighted average cost of debt and equity

Question 27

what is the most commonly used measure of business unit performance ?

Answer 27

ROI

Question 28

non financial performance measures

Answer 28

these measures help managers focus on profit drivers and recognise time lags

Question 29

performance measurement in non profit organisations

Answer 29

they may have different controls than those found in business environments

Question 30

transfer prices

Answer 30

TP is one responsibility centres sales price and anothers purchase price

Question 31

balance scorecards are

Answer 31

performance measurement systems or business models that tie together knowledge of strategy, processes, activities and operational and strategic performance measures

Question 32

An incentive system communicates

Answer 32

strategy, motivates employees and reinforces achievement of organisational goals

Question 33

leading indicators

Answer 33

are measures that identify future financial and non financial outcomes to guide managements decisions

Question 34

lagging indicators

Answer 34

are measures of the final outcomes of earlier management pans and their execution

Question 35

organisational learning and performance

Answer 35

employee training, education, satisfaction and turnover

Question 36

business and production process performance

Answer 36

new service development, service costs and process improvements

Question 37

customer performance

Answer 37

customer satisfaction, retention, loyalty and risk

Question 38

financial performance

Answer 38

revenue growth, net interest margin and return on assets

Question 39

benefits of a bsc

Answer 39

works in lots of organisations and makes employees think about their decisions

Question 40

costs of a bsc

Answer 40

choosing and validating measures, training and managing multiple measures

Question 41

relative performance evaluation

Answer 41

compares an individuals performance to that of others

Question 42

absolute performance evaluation

Answer 42

compares individual performance to set objectives or expectations

Question 43

expectancy theory

Answer 43

people are motivated to act in ways that they expect to provide them with desired rewards

Question 44

agency theory

Answer 44

an employee contracts with an employer to perform certain work, incentives must motivate the employee to work.

Question 45

current rewards

Answer 45

are given now, based on current performance (immediate cash bonuses)

Question 46

deferred rewards

Answer 46

rewards given later if sustained performance is desired (cash stocks payable later)

Question 47

Cash bonuses

Answer 47

most liquid and immediate

Question 48

share awards

Answer 48

usually not redeemable right away

Question 49

share appreciation rights

Answer 49

confer a bonus to employees based on increases in stock price for a predetermined number of shares

Question 50

share options

Answer 50

give an individual the right to purchase a number of shares at a specified price of a specified time period

Question 51

incentive plans in non profit organisations

Answer 51

despite NPO's being different they use features of executive incentive plans developed in the private sector

Question 52

financial performance reflects the achievement of financial goals such as

Answer 52

cost control, revenue growth, earnings residual income