Planning and Measurement

Question 1

Balanced score card

Answer 1

Four key areas of BSC:

Financial, Customer, Internal business processes, Learning innovation and growth

Question 2

Residual income

Answer 2

Operating income x (investment or asset x required rate of return)

Question 3

Transfer price

Answer 3

Floor is the avoidable outlay cost.

Ceiling is the market price.

Question 4

Static budget

Answer 4

contains budgeted costs for budgeted output

Question 5

y = A + B(x) Flexible budget formula

Answer 5

y is Price and is the dependent varialble
x is quantity and is the independent variable
A is fixed costs
B is variable costs

Question 6

contribution margin

Answer 6

is a product’s price minus all associated variable costs. Generated by an entity represents the total earnings available to pay for fixed expenses and to generate a profit

Question 7

Break even point

Answer 7

The amount of units needed to be produced to break even.

Fixed costs/ ( price per unit - variable unit production costs)

Question 8

Contribution margin ratio

Answer 8

Total contribution margin $ amount / Sales