Module 5: Performance Measurement

Question 1

Performance measurement aims to establish how well ________ or __________ is doing in relation to a ____

Answer 1

someone; something; plan;

Question 2

When performance is measured, the objective should be to:
- Identify aspects of ___________ that may be cause for _________
- Explain ____________ between ______ performance and the _____ or expectation, or deteriorating performance over time
- Consider ways of taking _______ measures to improve ____________

Answer 2

performance; concern;
differences; actual; plan;
control; performance;

Question 3

Responsibility accounting is a system of accounting that makes _________, ______ and _______ the responsibility of particular ________ so that the performance of each part of the ____________ can be monitored and assessed

Answer 3

revenues, costs; assets; managers; organisation;

Question 4

A R__________ C_____ is a section of an organisation that is headed by a ________ who has direct ____________ for its __________

Answer 4

Responsibility Centre; manager; responsibility; performance;

Question 5

• A cost, or expense centre is any part of the _____________ which incurs _____
• A cost centre is a ___________ centre where the ________ has ________ and __________ over the costs, but not over __________

Answer 5

organisation; costs;
responsibility; manager; authority; influence; revenue;

Question 6

Information about cost centres might be collected in terms of:
- Total _______ costs
- Total _________ costs
- Total _____ __________

The information might be analysed in terms of _____, such as cost per unit produced and hours per unit produced.

Answer 6

actual;
budgeted;
cost variances;
ratios;

Question 7

A revenue centre is a _______ of an __________ which raises __________ but has no _____________ for _____________.
Eg. a sales department

Answer 7

section; organisation; revenue; responsibility; production;

Question 8

A profit centre is any ______ of the ___________ which earns __________ and incurs _____

The _____________ of the section can therefore be measured

Answer 8

section; organisation; revenue; costs;

profitability;

Question 9

The key performance measure of a ________ ________ is _______

Answer 9

profit centre; profit;

Question 10

The manager of the ______ _______ must be able to __________ both _________ and ______.

ie. to have a say in both sales and production policies

Answer 10

profit centre; influence; revenues; costs;

Question 11

An investment centre is a responsibility centre where the ________ has _________ and ________ over _____, ________ and __________ of that centre

Answer 11

manager; authority; influence; costs, revenues; investments;

Question 12

An investment centre manager has some say in ___________ ______ in their area of __________ as well as being responsible for ______ and __________.

Answer 12

investment policy; operations; costs; revenues;

Question 13

The performance of an investment centre is measured by the ________ ____ _______ _________

Answer 13

return on capital employed;

Question 14

Management measure the performance of an organisation in a number of areas to see whether _________ or _______ are being met:
- In the ___________ as a ______
- In each of the main ___-_________ of the ____________
- In __________ __________
- In relationships with _________, the _______, _________ and ____________

Answer 14

objectives; targets;
organisation; whole;
sub-divisions; organisation;
individual activities;
customers; market, suppliers; competitors;

Question 15

The process of performance measurement is carried out using a variety of ___________ ___________

Answer 15

performance indicators;

Question 16

Cost variances can provide assistance to management in a number of ways:
- M__________ the use of __________
- C________ the ____________
- P_________ for the ________

Answer 16

Monitoring; resources;
Controlling; organisation;
Planning; future;

Question 17

Yardsticks against which performance indicators can be compared so as to be useful:
- S________, _______ or ________
- T______ over ______
- The results of ______ _____ of the ___________
- The results of ______ ___________

Answer 17

Standards, budgets; targets;
Trends; time;
other parts; organisation;
other organisations;

Question 18

Qualitative measures are by nature _________ and __________ but this does not mean they are ___ __________.

Answer 18

subjective; judgemental; not valuable;

Question 19

In general, performance indicators are established to measure:
- ____________
- ___________, and
- _____________

Answer 19

Productivity;
Efficiency;
Effectiveness;

Question 20

Productivity measures how _________ resources are being ____

Answer 20

efficiently; used;

Question 21

Indices can be used in order to measure ________

Answer 21

activity;

Question 22

Indices show how a _________ _________ has changed relative to a _____ ______

Answer 22

particular variable; base value;

Question 23

In it’s simplest form, an index is calculated as?

Answer 23

(Current Value / Base Value) * 100%

Question 24

In a sales department, there is a standard target for sales representatives to make 25 customer visits each month. The budget for May might be for 10 sales representatives to make 250 customer visits in total. Actual results in May might be that 9 sales representatives made 234 visits in total.
What is the Actual cost in relation to the Base cost?

Answer 24

Budget = 100
Actual = 104

Question 25

Performance measures for revenue centres: - C________ ______/_____ : total ______ - D________ _____ / __________ on schedule - F_________ _________ - Number of people _______ and ______ of _______ - C_______ __________ questionnaires

Answer 25

Customer rejects/returns; sales; Deliveries late / Deliveries; Flexibility measures; served; speed; service; Customer satisfaction;

Question 26

Profit margin ratio Profit margin is usually calculated using __________ profit O________ profit = Sales revenue - Cost of sales

Answer 26

(Profit / Sales Revenue)*100%

Question 27

The _____ _________ activities of a business can be analysed using the ______ _______ ______ ratio

Answer 27

trading activities; gross profit margin;

Question 28

When target profits are not met, further ratios may be used to shed some light on the problem: - P_________ cost of _____/ S____ __________ - D________ and _________ costs / S_____ ___________ - A____________ costs / S_____ _________

Answer 28

Production; sales; Sales revenue; Distribution; marketing; Sales revenue; Administrative; Sales revenue;

Question 30

For production costs, the following ratios may be used: - M________ costs / Sales value of production - W___ _______ costs / Sales value of production - P________ ________ / Sales value of production

Answer 30

Material; Works labour; Production overheads;

Question 31

Time-based measures that help analyse variances in variable overheads: - M_________ _____ time : total _________ hours - V_____-_____ time : P_________ c____ time

Answer 31

Machine down; machine; Value-added; Production cycle;

Question 32

The standard hour (or standard minute) is the _______ of ____ ___________ at _________ performance, expressed in terms of a __________ unit of ____ ____ in a _________ period of _____

Answer 32

quantity; work achievable; standard; standard; work done; standard; time;

Question 33

Complete Plate / Mugs / Eggcups example on page 230 of study guide

Answer 33

See solution

Question 34

The capacity ratio compares _______ ______ worked and __________ ______, and measures the extent to which ________ ____________ has been _________

Answer 34

actual hours; budgeted hours; planned utilization; achieved;

Question 35

The activity or production volume ratio compares the number of ________ ______ equivalent to the _____ _____ _________ and _________ _____

Answer 35

standard hours; actual work produced; budgeted hours;

Question 36

The _________ _____ measures the _________ of the ______ _____ by comparing equivalent _________ hours for work produced and the ______ hours worked

Answer 36

efficiency ratio; efficiency; labour force; standard; actual;

Question 37

Calculate a capacity ratio, an activity ratio, and an efficiency ratio for the below: Budgeted hours = 1100 standard hours Standard hours produced = 1125 Actual hrs worked = 1200

Answer 37

109%; 102%; 94%

Question 38

Capacity ratio

Answer 38

Actual hrs worked / Budgeted hrs

Question 39

Activity ratio

Answer 39

Std hrs produced / Budgeted hrs

Question 40

Efficiency ratio

Answer 40

Std hrs produced / Actual hrs worked

Question 41

Return on Investment (ROI): - also called R_____ on ________ _________ (_ _ _ _) (P____ ______ _______ and ___) / c_____ ________ Shows how much ______ has been made in relation to the amount of ________ invested

Answer 41

Return; capital employed (ROCE); Profit before interest; tax; capital employed; profit; resources;

Question 42

ROI is generally used for measuring the performance of __________ _______

Answer 42

investment centres

Question 43

Principal comparisons with ROI include: - The _______ in ROI from ____ ______ to the ______ - The _ _ _ being earned by ______ ________

Answer 43

change; one year; next; ROI; other entities;

Question 44

An alternative way of measuring the performance of an investment centre, instead of using ROI, is ________ _________ ( _ _ )

Answer 44

Residual Income (RI);

Question 45

Residual income (RI) is ___-___ ______ less a ________ interest ______ for ________ _______

Answer 45

pre-tax profits; notional; charge; invested capital;

Question 46

A division with average capital employed of $400k currently earns an ROI of 22%. It expects this average investment and ROI to continue next year for its current operations. It has decided to make an additional investment of $50k at the beginning of the year in a new operation generating an annual net profit of $12k after depreciation of $4k on the capital equipment. A notional interest charge amounting to 15% of the average capital invested is to be charged to the division each year. What is the expected residual income of the division in the first year of the new investment?

Answer 46

$32800;

Question 47

What are the four different perspectives to the balanced scorecard approach? - F_______ - C________ - I________ - L_______ and _______

Answer 47

Financial; Customer; Internal; Learning and growth;

Question 48

The balanced scorecard approach is 'balanced', in the sense that ________ are required to think of all ____ perspectives, to prevent ____________ being in made in one area at the __________ of another

Answer 48

managers; four; improvements; expense;

Question 49

Broadbent and Cullen raised the following important features of the balanced scorecard approach: - It looks at both ________ and _________ matters concerning the ___________ - It is related to the ___ _________ of a company's __________ - ___________ and ___-_________ measures are linked together

Answer 49

internal; external; organisation; key elements; strategy; Financial; non-financial;

Question 50

Problems with the balanced scorecard approach: - C__________ measures - S_________ measures - I___________

Answer 50

Conflicting; Selecting; Interpretation;

Question 51

Reward is all of the _________, ___-_________ and ___________ payments that an organisation provides for its _________ in exchange for the ____ they _______

Answer 51

monetary; non-monetary; psychological employees; work; perform;

Question 52

Extrinsic rewards derive from the ___ _______: such rewards include: - R___________ - O_____ __________ benefits - W______ __________ - M_________ style

Answer 52

job context; Remuneration; Other material; Working conditions; Management;

Question 53

Intrinsic rewards derive from ___ _______ and satisfy ______-_____ needs, such as: - S___-_______ - P_______ ___________

Answer 53

job content; higher-level; Self-esteem; Personal development;

Question 54

The effective reward system should facilitate both the: - O___________ ________ goals, and - G____ of the i_________ _________

Answer 54

organisation's strategic; Goals; individual employee;

Question 55

An organisation has to make three basic decisions about monetary reward: - How much to __________ - Whether monetary rewards should be paid on an _________, _______ or __________ basis - How much emphasis to place on monetary reward as part of the ______ ____________ ___________

Answer 55

remunerate; individual, group; collective; total employment relationship;

Question 56

A contingency approach to reward accepts that the ______________ ________ is a fundamental influence on its ________ _________ and that the ________ _________ should support the _______ _________

Answer 56

organisation's strategy; reward system; reward system; chosen strategy;

Question 57

The reward system should pursue three behavioural objectives: - It should support ___________ and _________ - It should _________ employees to ____ ______ of _____________ - It should promote __________ with workplace rules and expectations

Answer 57

recruitment; retention; motivate; high levels; performance; compliance;

Question 58

Material reward may be divided into three categories: - B___ ___________ - P__________-_______ ___________ - I________ ___________

Answer 58

Base remuneration; Performance-related remuneration; Indirect remuneration;

Question 59

Base remuneration is a simply established _______ for the ____ ______ ________. Eg. _______/______ paid at an agreed/set ____

Answer 59

reward; time spent working; salaries/wages; rate;

Question 60

Performance-related remuneration is ______ to _____ ___________ and is intended to reward performance ________ or ___________

Answer 60

added; base remuneration; learning; experience;

Question 61

Indirect remuneration is made up of benefits such as: - H_____ __________ - C_____ _____ - P_____ d_____ care - P______ ____

Answer 61

Health insurance; Child care; Private dental; Pension plans

Question 62

External factors influencing the level of reward at an organisation may include: - The l______ _________ - The pressure for ____ _________ in the relevant _______ - L__________ such as the level of any applicable minimum wage - G__________

Answer 62

labour market; cost efficiency; industry; Legislation; Governments;

Question 63

A common basis for measuring the volume of output of different products is the ___________ ______

Answer 63

standard hours;

Question 64

Operations centres are unlikely to have __________ over which they control, therefore they are most likely to be _____ _______

Answer 64

revenues; cost centres;

Question 65

In calculating the ROI for an investment centre, the most commonly used measure of return is _______ _______ _______ and ___

Answer 65

profit before interest; tax;