ACCA AS Performance Management 2 — Questions and Answers
Question 1: Which of the following describes a 'controllable cost' in the context of responsibility accounting?
- A cost that is fixed regardless of activity
- A cost that can be influenced by the manager of the responsibility centre being evaluated (Correct answer)
- A cost that is allocated from head office
- A cost that is common to all divisions
Correct answer: A cost that can be influenced by the manager of the responsibility centre being evaluated
A controllable cost is one that the manager of a responsibility centre can directly influence through their decisions. Performance evaluation should focus on controllable costs only.
Question 2: The 'learning curve' effect suggests that:
- Labour costs increase as workers gain experience
- The cumulative average time per unit falls by a fixed percentage each time cumulative output doubles (Correct answer)
- Fixed costs decrease as output increases
- Material costs fall due to bulk purchasing discounts
Correct answer: The cumulative average time per unit falls by a fixed percentage each time cumulative output doubles
The learning curve states that as cumulative production doubles, the cumulative average time (and cost) per unit falls by a fixed percentage, reflecting workers becoming more efficient.
Question 3: Which of the following is NOT a financial performance indicator?
- Gross profit margin
- Return on capital employed
- Employee turnover rate (Correct answer)
- Earnings per share
Correct answer: Employee turnover rate
Employee turnover rate is a non-financial HR metric. Gross profit margin, ROCE and EPS are all financial measures derived from accounting data.
Question 4: Throughput accounting ratio (TAR) is calculated as:
- Throughput contribution ÷ Total factory cost
- Throughput per bottleneck hour ÷ Cost per factory hour (Correct answer)
- Sales revenue ÷ Cost of materials
- Net profit ÷ Capital employed
Correct answer: Throughput per bottleneck hour ÷ Cost per factory hour
TAR = (Throughput per unit of bottleneck resource) ÷ (Total factory cost per unit of bottleneck resource). A TAR > 1 indicates the product is worth producing.
Question 5: In a divisional structure, 'goal congruence' means:
- All divisions achieve the same profit
- Divisional managers' decisions are aligned with the overall goals of the organisation (Correct answer)
- Divisions compete with each other for resources
- Head office makes all operational decisions
Correct answer: Divisional managers' decisions are aligned with the overall goals of the organisation
Goal congruence exists when divisional managers, acting in their own interests, also act in the best interest of the organisation as a whole.
Question 6: Which of the following best describes 'benchmarking' in performance management?
- Setting targets based solely on last year's performance
- Comparing performance against best-in-class standards to identify improvement opportunities (Correct answer)
- Calculating variances between budget and actual
- Apportioning head office costs to divisions
Correct answer: Comparing performance against best-in-class standards to identify improvement opportunities
Benchmarking compares an organisation's processes, products and performance against best-practice peers to identify gaps and drive improvement.
ACCA AS Performance Management 2
Which of the following describes a 'controllable cost' in the context of responsibility accounting?