CBS Performance Measurement & Variance Analysis 3

Question 1

A budget specialist notices that the materials price variance is $15,000 unfavorable. Which action is most appropriate first?

Accepted Answer

Investigate the cause, such as supplier price increases or purchasing inefficiencies

Answer

Immediately revise the entire budget

Answer

Dismiss the variance as immaterial

Answer

Transfer funds from a different budget line

Question 2

What does a balanced scorecard framework measure beyond financial performance?

Accepted Answer

Customer, internal process, and learning & growth perspectives in addition to financial metrics

Answer

Only stock price and dividends

Answer

Tax obligations and regulatory compliance only

Answer

Audit findings and control deficiencies

Question 3

Which variance is calculated as (Actual Price – Standard Price) × Actual Quantity?

Accepted Answer

Materials price variance

Answer

Labor efficiency variance

Answer

Materials quantity variance

Answer

Fixed overhead spending variance

Question 4

In governmental budgeting, an encumbrance system is used primarily to:

Accepted Answer

Reserve budget authority for anticipated expenditures before payment is made

Answer

Record revenues when they are earned

Answer

Accrue depreciation on capital assets

Answer

Allocate overhead costs to departments

Question 5

Which performance metric is calculated by dividing actual output by budgeted output and expressing it as a percentage?

Accepted Answer

Volume achievement ratio

Answer

Budget utilization rate

Answer

Operating efficiency ratio

Answer

Cost performance index

Question 6

When actual overhead absorbed is less than actual overhead incurred, the result is called:

Accepted Answer

Under-absorbed overhead

Answer

Over-absorbed overhead

Answer

Favorable overhead variance

Answer

Zero overhead variance

Question 7

Which best describes 'budget slack' and why it is a concern in performance measurement?

Accepted Answer

Intentional over-estimation of costs or under-estimation of revenues to create easier targets, distorting true performance

Answer

Extra funds reserved for emergencies, which is always beneficial

Answer

The difference between the capital budget and operating budget

Answer

Time allowed between budget preparation and budget approval