ACA Management Information 3 — Questions and Answers
Question 1: Which of the following is an example of a non-financial performance indicator?
- Return on capital employed
- Operating profit margin
- Customer satisfaction score (Correct answer)
- Earnings per share
Correct answer: Customer satisfaction score
Non-financial indicators measure qualitative or operational aspects of performance, such as customer satisfaction, staff turnover, and on-time delivery, which are not directly captured by financial ratios.
Question 2: The balanced scorecard approach to performance measurement uses perspectives including:
- Financial, customer, internal processes, and learning & growth (Correct answer)
- Revenue, costs, assets, and liabilities
- Short-term, medium-term, and long-term
- Quantitative and qualitative only
Correct answer: Financial, customer, internal processes, and learning & growth
The Kaplan and Norton Balanced Scorecard uses four perspectives: Financial, Customer, Internal Business Processes, and Learning & Growth, to give a comprehensive view of organisational performance.
Question 3: Absorption costing can result in higher reported profits than marginal costing when:
- Inventory levels fall during the period
- Inventory levels increase during the period (Correct answer)
- Sales exceed production
- Variable costs increase
Correct answer: Inventory levels increase during the period
When inventory levels rise, absorption costing defers fixed overhead in closing inventory, reducing the period charge and reporting higher profit compared to marginal costing.
Question 4: A direct cost is one that:
- Varies directly with output
- Can be specifically traced to a cost object (Correct answer)
- Is incurred by the production department
- Is a variable overhead
Correct answer: Can be specifically traced to a cost object
A direct cost is specifically and exclusively identifiable with a particular cost unit, cost centre, or cost object without the need for arbitrary apportionment.
Question 5: Limiting factor analysis determines the optimal production plan by ranking products on the basis of:
- Highest selling price
- Highest contribution per unit
- Highest contribution per unit of limiting factor (Correct answer)
- Lowest variable cost per unit
Correct answer: Highest contribution per unit of limiting factor
When a resource is scarce, products should be ranked by contribution earned per unit of the limiting factor (e.g., contribution per machine hour), to maximise total contribution.
Question 6: Target costing starts with:
- The cost of production and adds a desired profit margin
- The market price and deducts the required profit margin to set a target cost (Correct answer)
- The standard cost and adjusts for variances
- The budgeted cost and adds inflation
Correct answer: The market price and deducts the required profit margin to set a target cost
Target costing begins with a competitive market price, deducts the required profit margin, and derives a target cost that the design and production teams must achieve.
ACA Management Information 3
Which of the following is an example of a non-financial performance indicator?