ACCA Advanced Performance Management 4 — Questions and Answers
Question 1: A hospital measures 'average waiting time to surgery' as a key performance indicator. Under the Balanced Scorecard, in which perspective does this metric MOST likely sit?
- Financial
- Customer (Correct answer)
- Internal business process
- Learning and growth
Correct answer: Customer
Waiting time to surgery is a service quality measure experienced directly by patients (customers), so it belongs in the customer perspective of the Balanced Scorecard.
Question 2: In Kaplan and Norton's Strategy Map, cause-and-effect linkages flow upward from which perspective to ultimately drive financial results?
- Customer → Internal Process → Learning & Growth → Financial
- Learning & Growth → Internal Process → Customer → Financial (Correct answer)
- Financial → Customer → Internal Process → Learning & Growth
- Internal Process → Learning & Growth → Customer → Financial
Correct answer: Learning & Growth → Internal Process → Customer → Financial
Strategy Maps show that learning and growth capabilities enable better internal processes, which improve customer outcomes, which ultimately drive financial performance.
Question 3: Which type of budget requires managers to justify every line of expenditure from a zero base each period, regardless of prior-year spending?
- Rolling budget
- Incremental budget
- Zero-based budget (Correct answer)
- Flexible budget
Correct answer: Zero-based budget
Zero-based budgeting (ZBB) starts from scratch each period, requiring full justification of all costs, which eliminates embedded inefficiencies perpetuated by incremental approaches.
Question 4: In the context of environmental management accounting (EMA), which category includes the costs of preventing pollution before it occurs?
- External failure costs
- Internal failure costs
- Appraisal costs
- Prevention costs (Correct answer)
Correct answer: Prevention costs
Prevention costs in environmental quality costing include investments in cleaner technology, employee training, and process redesign to avoid generating pollution in the first place.
Question 5: A firm operating in a hypercompetitive market adopts a dynamic capabilities approach to sustain competitive advantage. What does this primarily involve?
- Locking in switching costs to retain customers
- Continuously sensing, seizing, and reconfiguring resources to adapt to market changes (Correct answer)
- Achieving the lowest cost position through economies of scale
- Building brand loyalty through heavy advertising investment
Correct answer: Continuously sensing, seizing, and reconfiguring resources to adapt to market changes
Dynamic capabilities theory (Teece et al.) holds that firms sustain advantage in fast-moving markets by continuously sensing opportunities, seizing them, and reconfiguring their asset base.
Question 6: Which of the following scenarios would make a negotiated transfer price MOST appropriate?
- A perfectly competitive external market exists for the intermediate product
- There is no external market and full cost information is reliably available
- Divisional managers have autonomy and both divisions have external market access (Correct answer)
- Head office needs to maximize consolidated group profit above divisional autonomy
Correct answer: Divisional managers have autonomy and both divisions have external market access
Negotiated transfer prices work best when both divisions operate as genuine profit centers with access to external markets, giving both parties a real alternative and a basis for negotiation.
Question 7: Under the ACCA APM syllabus, which CSF (Critical Success Factor) analysis step immediately precedes the identification of key performance indicators?
- Defining the organizational mission
- Identifying critical success factors from strategic objectives (Correct answer)
- Setting performance targets for each KPI
- Communicating results to operational managers
Correct answer: Identifying critical success factors from strategic objectives
The sequence is: mission → objectives → CSFs → KPIs; CSFs are the areas where the firm must excel to meet its objectives, and KPIs are then designed to measure performance in those CSF areas.
ACCA Advanced Performance Management 4
A hospital measures 'average waiting time to surgery' as a key performance indicator.
Under the Balanced Scorecard, in which perspective does this metric MOST likely sit?