Management Information Flashcards

Environmental management accounting includes:

Answer: Identifying and allocating environmental costs to products and processes

Environmental management accounting (EMA) involves identifying, tracking, and allocating the costs of environmental impacts (energy, waste, emissions) to products and processes to improve decision making.

A rolling budget is one that:

Answer: Is updated and extended by one further period as each period passes

A rolling budget is continuously updated; as one period expires, an additional period is added to the end of the planning horizon, maintaining a constant forward-looking planning period.

In responsibility accounting, a cost centre manager is held accountable for:

Answer: Costs only

A cost centre manager controls only costs, not revenues; therefore their performance is measured and they are held accountable only for the costs incurred in their area.

The principal budget factor (key budget factor) is:

Answer: The factor that limits the organisation's activity in the budget period

The principal budget factor is the constraint that limits the organisation's activities — commonly sales demand, but could be labour, materials, or machine capacity — and must be identified before other budgets can be prepared.

Participative (bottom-up) budgeting involves:

Answer: Department managers preparing their own budgets for approval

Participative budgeting involves lower-level managers in the budget-setting process, which can improve motivation, increase budget accuracy through local knowledge, but risks budget slack.

Economic Value Added (EVA) is calculated as:

Answer: Net operating profit after tax minus a capital charge (WACC × invested capital)

EVA = NOPAT − (WACC × Invested Capital). It measures whether the company is generating returns above its cost of capital, indicating genuine value creation for shareholders.