Performance Management

Question 1

Cost centre

Answer 1

Any part of an organisation that incurs costs

Question 2

Revenue centre

Answer 2

A section of an organisation which creates revenue but has no responsibility for production

Question 3

Profit centre

Answer 3

Any section of an organisation, for example, a division of a company, which earns revenue and incurs costs

Question 4

Investment centre

Answer 4

A section of an organisation whose manager has some say in investment policy in their area of operations as well as being responsible for costs and revenues

Question 5

Shared service centre

Answer 5

A centre responsible for operational tasks such as accounting, for multiple
parts of the same organisation

Question 6

Cloud accounting

Answer 6

An application of cloud computing where accountancy software is provided in the cloud by a service provider

Question 7

Return on investment (ROI)

Answer 7

It is calculated as (profit/capital employed) × 100% and it shows how much profit has been made in relation to the amount of resources invested.

Question 8

Residual income

Answer 8

Profit less a notional interest charge for invested capital

Question 9

Balanced scorecard approach

Answer 9

It emphasises the need to provide the user with a set of information which addresses all relevant areas of performance in an objective and unbiased fashion

Question 10

Fixed budget

Answer 10

A budget which is set for a single activity level

Question 11

Flexible budget

Answer 11

A budget which, by recognising different cost behaviour patterns, is designed to change as volume of activity changes