CGA Performance Management & Analytics Flashcards

Which budgeting approach builds the budget from scratch each period, requiring justification for every expense?

Answer: Zero-based budgeting

Zero-based budgeting starts at zero each period and requires managers to justify every budget item, eliminating the assumption that last year's spending is automatically approved.

In activity-based costing (ABC), cost drivers are used to:

Answer: Allocate overhead costs to products based on their actual consumption of activities

ABC assigns overhead to products based on the activities they consume, using cost drivers (e.g., machine hours, purchase orders) to more accurately trace indirect costs.

A flexible budget adjusts which elements as volume changes?

Answer: Variable costs and revenue only

A flexible budget adjusts variable costs and revenues for actual volume, while fixed costs remain unchanged, enabling meaningful performance comparisons.

Which of the following is an example of a non-financial KPI for a service business?

Answer: Customer satisfaction score (CSAT)

Customer satisfaction scores are non-financial KPIs that measure service quality and customer experience, which are critical leading indicators for long-term financial performance.

What does throughput accounting focus on maximizing?

Answer: Revenue generated per unit of the binding constraint (bottleneck)

Throughput accounting, based on the Theory of Constraints, focuses on maximizing throughput (sales minus truly variable costs) relative to the system's limiting constraint.

Which analysis technique compares actual results to budgeted figures to identify and explain differences?

Answer: Variance analysis

Variance analysis decomposes the difference between actual and budgeted (or standard) results into price, volume, and efficiency components for management investigation.