Certified Management Accountant Performance Measurement 4

Question 1

A company benchmarks its order fulfillment cycle time against the industry best practice. This type of benchmarking is called:

Accepted Answer

Competitive benchmarking

Answer

Competitive benchmarking compares a company's performance directly against direct competitors in the same industry.

Question 2

In a decentralized organization, which performance measure best aligns divisional manager incentives with overall company goals?

Accepted Answer

Residual income or EVA

Answer

Residual income and EVA encourage managers to accept investments that exceed the cost of capital, aligning with firm-wide value creation.

Question 3

The customer perspective of the balanced scorecard typically includes which key metric?

Accepted Answer

On-time delivery rate

Answer

On-time delivery rate directly reflects the customer's experience with the company's fulfillment reliability.

Question 4

An investment center manager is evaluating a new project with ROI of 14% when the division's current ROI is 16% and the company's WACC is 11%. Using residual income, the manager should:

Accepted Answer

Accept the project because it exceeds WACC

Answer

Residual income is positive (14% > 11% WACC), so the project creates value and should be accepted despite lowering the divisional ROI.

Question 5

Which variance is calculated as (Actual hours worked − Standard hours allowed) × Standard rate?

Accepted Answer

Labor efficiency variance

Answer

The labor efficiency variance measures whether more or fewer labor hours were used than the standard allowed for actual output.

Certified Management Accountant Practice Test

Certified Management Accountant Practice Test

Certified Management Accountant Performance Measurement 4