[Chapter 9] Flashcards
Activity-based responsibility accounting focuses on processes and uses both operational and financial measures.
TRUE
Activity-based responsibility accounting employs dynamic standards and emphasizes and supports continuous improvement.
TRUE
A strategic-based responsibility accounting system transforms the strategy of a company into operational objectives and measures.
TRUE.
On the other hand, activity-based responsibility accounting focuses on processes and uses both operational and financial measures.
The most common form of strategic-based responsibility accounting system is the worksheet.
FALSE.
One of the most common form of a strategic based control system (SBCS) is the BALANCED SCORECARD.
In a strategic-based responsibility accounting system, stretch targets are established for individual performance measures.
TRUE
The balanced scorecard is a strategic-based performance management system that identifies four perspectives.
TRUE
Strategy translation means specifying objectives and percentage of revenues from sale of products.
FALSE
Strategy translation means specifying objectives, measures, targets, and initiatives for each perspective.
The customer perspective defines the customer and market segments in which the business unit will compete.
TRUE
Customer value is the sum of realization and sacrifice what the customer gives up and receives.
FALSE.
Customer value is the DIFFERENCE between realization and sacrifice.
Strategic information availability include processes with real-time feedback.
TRUE
Performance measures are derived from a company’s vision, strategy, and objectives.
TRUE
To link measures to a strategy, they must be derived from management and be balanced.
FALSE
To link measures to a strategy, they must be derived from STRATEGY.
Double-loop feedback occurs when managers get information about the effectiveness and the validity of the strategy.
TRUE
Single-loop feedback emphasizes only the effectiveness of implementation, not the validity of the assumptions.
The strategy map connects the balanced scorecard strategy with an organization’s administration.
FALSE
A strategy map is a useful tool that graphically illustrates the cause-and-effect relationships and connects the Balanced Scorecard strategy with an organization’s OPERATING ACTIVITIES.
A testable strategy is a set of linked objectives aimed at an overall goal.
TRUE
In order for the balanced scorecard to succeed, the entire organization must be behind it.
TRUE
Articulation of the balanced scorecard should not be made to individuals within the organization.
FALSE
The scorecard objectives and measures, once developed, become the means for articulating and communicating the strategy of the organization to its employees and managers.
Incentives must be structured and resources allocated to support the strategy chosen.
TRUE
Performance expectations must be established once objectives and measures have been executed and advertised.
FALSE
Once objectives and measures have been DEFINED and COMMUNICATED, performance expectations must be established.
Compensation should be based on performance and paid based on percentage of objective achieved.
TRUE
Outcome measures that are a result of past efforts are called __________ measures.
LAG
Outcome measures that are expressed in monetary terms are called __________ measures.
FINANCIAL
Dissatisfied customers are an example of a __________ measure
NONFINANCIAL
The targets aimed at transforming the organization within a period of 3 to 5 years are called __________ targets.
STRETCH
Choosing general goals, customer segment, and nature of a business are all concern of strategy __________ .
TRANSLATION
Strategy translation involves the following concerns:
- choosing general goals
- choosing customer segment
- defining the nature of a business
Setting balanced objectives, target values, and rewards are steps in developing the __________ .
BALANCED SCORECARD
Training hours is an example of a(n) __________ measure.
LEAD
A set of linked objectives aimed at an overall goal is the definition of a __________ strategy.
TESTABLE
For strategic alignment, incentive compensation should be based on __________ performance, compared to target values.
ACTUAL
In a balanced scorecard, performance expectations are communicated by setting __________ .
TARGETS
Activity-based responsibility accounting adds which of the following to the financial-based responsibility accounting perspective?
a. consumer perspective
b. functional perspective
c. process perspective
d. learning perspective
process perspective
A competitive environment means that organizations will be
a. producing increasingly high-volume, low-variety products and services.
b. focused internally on efficiency.
c. managing cause and effect linkages to customer satisfaction.
d. viewing their actions independent of competitors, suppliers, and customers.
managing cause and effect linkages to customer satisfaction.
Which of the following responsibility accounting systems translates the STRATEGY of an organization into operational objectives and measures?
a. Financial-based responsibility accounting
b. Operational-based responsibility accounting
c. Activity-based responsibility accounting
d. Strategic-based responsibility accounting
Strategic-based responsibility accounting
Which of the following is NOT true about activity-based responsibility accounting?
a. The emphasis changes from cost reduction through change to cost control.
b. The emphasis includes financial results as well as how things are done.
c. Responsibility moves from one dimension to two dimensions.
d. It moves from a control system to a performance management system.
The emphasis changes from cost reduction through change to cost control.
What are the two additional perspectives that are added to the activity-based approach to achieve strategic-based responsibility?
a. a customer perspective and a learning and growth perspective
b. an infrastructure perspective and a process perspective
c. a customer perspective and a financial perspective
d. a financial perspective and a process perspective
a customer perspective and a learning and growth perspective
Which of the following is true about a strategic-based responsibility accounting system?
a. It fails to connect with an organization’s overall mission and strategy.
b. It expands the number of responsibility dimensions from one to two.
c. It does not work for firms operating in dynamic environments.
d. It can take the form of a Balanced Scorecard.
It can take the form of a Balanced Scorecard.
Directed continuous improvement is accomplished by linking initiatives to
a. processes.
b. strategy and mission.
c. financial outcomes.
d. measures.
strategy and mission.
Which of the following is NOT an advantage of strategic-based responsibility accounting?
a. It includes perspectives that serve as a source of competitive advantage.
b. Responsibility is centralized within the organization.
c. Change efforts are directed by the mission and strategy.
d. All are advantages of strategic-based responsibility accounting.
Responsibility is centralized within the organization is NOT one of the advantages of strategic-based responsibility accounting.
Advantages of strategic-based responsibility accounting:
- It includes perspectives that serve as a source of competitive advantage.
- Change efforts are directed by the mission and strategy.
Which of the following is a perspective of strategic-based responsibility accounting but is NOT a perspective of activity-based responsibility accounting?
a. financial perspective
b. process perspective
c. customer perspective
d. all of the above
customer perspective
Strategic-based responsibility accounting brings both customer perspective and learning and growth perspective—both of which are absent in activity-based responsibility accounting.
The most common strategic-based performance management system is
a. variance analysis with standard costs as benchmarks.
b. the balanced scorecard.
c. financial budgets.
d. all of the above.
the balanced scorecard.
Which of the following is true of a Balanced Scorecard?
a. It fails to connect with an organization’s overall mission and strategy.
b. It is the most common form of an activity-based responsibility accounting system.
c. It does not work for firms operating in dynamic environments.
d. It is a strategic-based performance management system that identifies objectives and measures for four different perspectives.
It is a strategic-based performance management system that identifies objectives and measures for four different perspectives.
It is a form of SBCS, not an activity-based responsibility accounting system.
Lead measures are critical to strategy because
a. they are based on actual activity.
b. they are an independent part of the system.
c. there should be a causal linkage with strategy.
d. they are outcome measures.
there should be a causal linkage with strategy.
A major difference between activity-based responsibility accounting and strategic-based responsibility accounting is
a. only strategic-based responsibility accounting is linked to strategy.
b. only strategic-based responsibility accounting is focused on systemwide efficiency.
c. only strategic-based responsibility accounting includes the process perspective.
d. only strategic-based responsibility accounting reinforces team accountability.
only strategic-based responsibility accounting is linked to strategy.
Which feature is related solely to strategic-based responsibility and not to activity-based responsibility?
a. financial perspective
b. process perspective
c. team accountability
d. customer perspective
customer perspective
Which is a major difference between activity-based measures and strategic-based measures?
a. Strategic-based measures are linked to strategy.
b. Strategic-based measures are used to align objectives.
c. Strategic-based measures are balanced measures.
d. all of the above.
All of the above:
a. Strategic-based measures are linked to strategy.
b. Strategic-based measures are used to align objectives.
c. Strategic-based measures are balanced measures.
Which of the following statements is true regarding lag measures?
a. lag measures are measures that relate to customers
b. lag measures are factors that drive future performance
c. lag measures are performance drivers
d. lag measures include measures such as customer profitability
lag measures include measures such as customer profitability
The outcome measures that are expressed in monetary terms are called:
a. Objective measures
b. External measures
c. Lag measures
d. Financial measures
Financial measures
For a firm to have balanced measures, the measures selected must be balanced between
a. lag and lead measures.
b. objective and subjective measures.
c. financial and non-financial measures.
d. all of the above.
All of the above:
a. lag and lead measures.
b. objective and subjective measures.
c. financial and non-financial measures.
The outcome measures that are a result of past efforts are called:
a. Objective measures
b. External measures
c. Lag measures
d. Financial measures
Lag measures
The outcome measures that can be readily quantified and verified are called:
a. External measures
b. Objective measures
c. Financial measures
d. Lag measures
Objective measures
The outcome measures that relate to customers are called:
a. External measures
b. Objective measures
c. Financial measures
d. Lag measures
External measures
Which of the following would be a non-financial measure?
a. customer profitability
b. dissatisfied customers
c. return on investment
d. cost per unit
dissatisfied customers
Which of the following would be an external measure?
a. return on investments
b. employee satisfaction
c. process efficiency
d. all of the above
return on investments
Which of the following would be a subjective measure?
a. employee capabilities
b. market share
c. return on investment
d. cost per unit
employee capabilities
Which of the following would NOT be an objective measure?
a. customer profitability
b. employee capabilities
c. return on investment
d. cost per unit
employee capabilities
Which of the following would be a lead measure?
a. customer profitability
b. cost per employee
c. return on investment
d. employee training hours
employee training hours
Lead measures
a. are the measures with the highest priority.
b. are generic to different strategies.
c. are based on performance drivers.
d. represent the desired outcomes.
are based on performance drivers.
Which of the following would be a lag measure?
a. budget forecasts
b. sales per employee
c. plant investment
d. employee training hours
sales per employee
Which of the following features make stretch targets feasible?
a. The targets are set in isolation by top management.
b. The measures are linked by causal relationships.
c. The measures are based on currently attainable standard costs.
d. The targets are set at desired levels for twenty years to ensure long-term performance.
The measures are linked by causal relationships.
Communicating strategy through measurements requires both scope and flexibility. Which of the following statements is true?
a. Flexibility requires subjective and objective measurement, as well as non-financial measures.
b. Flexibility requires that measures be optimal and dynamic.
c. Scope implies that internal and external measures are needed.
d. Both a and c are true.
Both a and c are true.
a. Flexibility requires subjective and objective measurement, as well as non-financial measures.
c. Scope implies that internal and external measures are needed.
Which of the following statements comparing activity-based performance and strategic-based performance evaluation is NOT true?
a. Strategic-based performance evaluation expands the set of metrics.
b. Only strategic-based performance evaluation leads to cost reductions.
c. Only strategic-based performance standards set stretch targets for all four perspectives.
d. Both systems encourage quality improvements.
Only strategic-based performance evaluation leads to cost reductions.
Stretch targets are
a. aimed at stretching the firm’s resources.
b. aimed at static standards.
c. aimed at transforming the organization within three to five years, if achieved.
d. aimed at transforming the organization immediately.
aimed at transforming the organization within three to five years, if achieved.
Which of the following is not a strategic theme of the financial perspective?
a. revenue growth
b. asset utilization
c. employee capability
d. risk management
employee capability
Business strategy is concerned with
a. choosing market and customer segments.
b. identifying critical internal and business processes.
c. selecting individual and organizational properties required.
d. all of the above.
All of the above:
a. choosing market and customer segments.
b. identifying critical internal and business processes.
c. selecting individual and organizational properties required.
Strategy translation means:
a. choosing the market and customer segments a business unit intends to serve.
b. identifying the critical internal and business processes that a unit must excel at to deliver value propositions to customers in the targeted market segments.
c. specifying objectives, measures, targets, and initiatives for the four responsibility dimensions: the financial perspective, the customer perspective, the internal business process perspective, and the learning and growth perspective.
d. selecting the individual and organizational capabilities required for internal, customer, and financial objectives.
specifying objectives, measures, targets, and initiatives for the four responsibility dimensions: the financial perspective, the customer perspective, the internal business process perspective, and the learning and growth perspective.
Which of the following is NOT a step in developing the Balanced Scorecard?
a. setting balanced objectives
b. outlining control procedures
c. setting target values
d. rewards
outlining control procedures
In the financial perspective, economic value added would be an appropriate measure for
a. revenue growth.
b. cost reduction.
c. improving asset utilization.
d. risk management.
improving asset utilization.
Objectives for increasing revenue growth include
a. adopting a new pricing strategy.
b. reducing the cost per unit.
c. eliminating non-value-added activities.
d. reducing distribution channel cost.
adopting a new pricing strategy.
Which of the following is NOT a measure commonly used to evaluate asset utilization?
a. return on investment
b. economic value added
c. market share
d. all of the above
market share
Diversifying customers and product lines are initiatives important to
a. revenue growth.
b. cost reduction.
c. asset utilization.
d. risk management
risk management
In the customer perspective, objectives and measures that drive the creation of customer value are
a. customer survey ratings.
b. post-purchase cost.
c. on-time deliveries.
d. all of the above.
All of the above drive the creation of customer value:
a. customer survey ratings.
b. post-purchase cost.
c. on-time deliveries.
On-time delivery performance is calculated as
a. orders delivered on time/total number of orders delivered.
b. orders delivered on time/total sales dollars.
c. orders delivered on time/total production.
d. orders delivered/orders delivered on time.
orders delivered on time/total number of orders delivered.
Increasing customer value occurs when
a. the customer receives more benefits.
b. the customer perceives a greater gap between benefits and sacrifice.
c. customer costs are reduced.
d. none of the above.
the customer perceives a greater gap between benefits and sacrifice.
In the Balanced Scorecard system, CORE objectives and measures
a. are common across all organizations.
b. are common across all scorecard perspectives.
c. are common across departments.
d. none of the above.
are common across all organizations.
From the customer perspective, which of the following might be considered a core objective rather than a performance value?
a. decrease price
b. increase customer retention
c. improve image
d. improve product quality
increase customer retention
From the customer perspective, which of the following might be an appropriate measure for improving product quality?
a. customer profitability
b. cost per customer
c. percentage of returns
d. number of patents pending
percentage of returns
An operational measure of quality is
a. defects per unit.
b. number of defective units.
c. pounds of scrap.
d. all of the above.
All of the above:
a. defects per unit.
b. number of defective units.
c. pounds of scrap.
The formula for computing Manufacturing Cycle Efficiency (MCE) is
a. Processing Time / (Processing time + Move time + Inspection time + Waiting time + Other non-value-added time).
b. Theoretical Capacity / Production hours available.
c. Cycle time per unit × velocity.
d. none of the above.
Processing Time / (Processing time + Move time + Inspection time + Waiting time + Other non-value-added time).
The time it takes to produce one unit of product is called
a. velocity.
b. delivery time.
c. cycle time.
d. turnover.
cycle time.
Cycle time is
a. the time it takes to collect the account after the sale.
b. the time it takes to turn inventory over.
c. the time it takes to deliver the product after it is sold.
d. the time it takes to produce one unit of product.
the time it takes to produce one unit of product.
The number of units that can be produced in a given period of time is called
a. turnover.
b. cycle time.
c. velocity.
d. efficiency.
velocity
Delivery performance can be improved by
a. decreasing cycle time.
b. increasing cycle time.
c. decreasing velocity.
d. increasing turnover.
decreasing cycle time.
Which of the following might be a measure of employee motivation, empowerment, and alignment?
a. process efficiency
b. suggestions per employee
c. customer satisfaction
d. units product cost
suggestions per employee
Which of the following is NOT a major enabling factor of the learning and growth perspective?
a. customer attributes
b. information system capabilities
c. employee attitudes
d. employee capabilities
customer attributes
Which of the following would NOT be a core outcome measure for employee capabilities?
a. employee satisfaction ratings
b. number of employees
c. employee turnover
d. employee productivity
number of employees
The learning and growth perspective has three major objectives. Which of the following is an objective of the learning and growth process?
a. increase the number of new products
b. increase customer acquisition
c. increase motivation and alignment
d. improve asset utilization
increase motivation and alignment
Which of the following is true of double-loop feedback?
a. It is the foundation for strategic learning.
b. It occurs whenever managers receive feedback information from two information sources.
c. It is provided in a traditional performance management system.
d. It emphasizes only the effectiveness of implementation.
It is the foundation for strategic learning.
Which of the following would not be an outcome measure?
a. net income
b. market share
c. return on investment
d. training hours
training hours
Training hours is a lead measure.
The critical performance measures of the Balanced Scorecard have some special properties. Which of the following is NOT one of those properties?
a. scorecard measures are linked by cause-and-effect relationships
b. performance measures are derived from strategy
c. benchmarking plays a critical role
d. performance measures should be balanced between outcome and lead measures
benchmarking plays a critical role
Failure of a strategy might be due to
a. incorrect calculations.
b. incorrect feedback.
c. implementation problems.
d. invalid controls.
implementation problems.
Which of the following statements is true of a testable strategy?
a. It is not suitable for firms operating in dynamic environments.
b. It is a set of personal goals aimed at short-term results.
c. It is a set of linked objectives aimed at an overall goal.
d. It aims at integrating financial and process measures to allow managers achieve individual goals.
It is a set of linked objectives aimed at an overall goal.
A testable strategy can be constructed
a. by prioritizing objectives.
b. by sequencing if-then statements.
c. by creating alternative scenarios.
d. by creating lead measures.
by sequencing if-then statements.
A strategy map
a. links the cause-and-effect relationships in the proposed strategy, creating a testable strategy.
b. maps the organization’s strategies over time.
c. documents the performance results of an organization.
d. strategizes about the organization’s competitors.
links the cause-and-effect relationships in the proposed strategy, creating a testable strategy.
Double-loop feedback can be defined as
a. feedback that deals with both the effectiveness of strategy implementation and the validity of the assumptions underlying the strategy.
b. feedback that emphasizes the effectiveness of strategy implementation and the costs of implementation.
c. feedback that emphasizes the validity and assumptions underlying the strategy and the costs of the strategy.
d. feedback on lead indicators and lag indicators.
feedback that deals with both the effectiveness of strategy implementation and the validity of the assumptions underlying the strategy.
If only the return on investment were used to measure performance, it would be considered
a. double-loop feedback.
b. triple-loop feedback.
c. a testable strategy.
d. single-loop feedback.
single-loop feedback.
A balanced scorecard is designed to bring about organizational change. Which of the following is a means of alignment?
a. Employees must share ownership of objectives, measures, targets, and initiatives.
b. Incentives must be structured to support strategy.
c. Resources must be allocated to support strategy.
d. all of the above.
All of the above:
a. Employees must share ownership of objectives, measures, targets, and initiatives.
b. Incentives must be structured to support strategy.
c. Resources must be allocated to support strategy.
A Balanced Scorecard becomes a means of communicating the strategy of an organization to its employees and managers. Which of the following is a downside of communicating this information?
a. The expanded set of metrics for performance evaluation will not be followed.
b. The alignment of performance measures to the objectives of an organization gets neglected.
c. Sensitive information may end up in the hands of competitors.
d. The reward system gets tied just to traditional financial measures
Sensitive information may end up in the hands of competitors.
Which of the following is NOT a condition that must be present for a strategy to become attainable?
a. budgetary process must provide the resources necessary to carry out the initiatives
b. resources must be allocated to strategic initiatives
c. the organization must decide how much of the strategic targets will be achieved for the coming year
d. all are conditions that must be met for strategy to become actionable
All are conditions that must be met for strategy to become actionable:
a. budgetary process must provide the resources necessary to carry out the initiatives
b. resources must be allocated to strategic initiatives
c. the organization must decide how much of the strategic targets will be achieved for the coming year
Performance expectations are communicated by setting
a. new initiatives.
b. targets.
c. a strategic vision.
d. activity measures
targets
A Balanced Scorecard framework, to ensure that balanced attention is given to all measures, incentive compensation is paid when:
a. expected operational performance of a company meets the actual performance.
b. expected financial performance of a company meets the actual performance.
c. each strategic measure exceeds a prespecified minimum threshold value.
d. each strategic measure equals a prespecified minimum threshold value.
each strategic measure exceeds a prespecified minimum threshold value.
Identify the perspective appropriate for each measure and the possible strategic objective.
Satisfaction of customer
SATISFACTION OF CUSTOMER
Customer (duh)
Increase customer repeat business
Identify the perspective appropriate for each measure and the possible strategic objective.
Satisfaction of employees
SATISFACTION OF EMPLOYEES
Learning and Growth
Increase motivation and alignment
Identify the perspective appropriate for each measure and the possible strategic objective.
Cycle time
CYCLE TIME
Process
Decrease production time
Identify the perspective appropriate for each measure and the possible strategic objective.
Product cost per unit
PRODUCT COST PER UNIT
Financial
Decrease product costs
