Management Accounting & Strategy Flashcards
7 cards from real CGA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Management Accounting & Strategy flashcards as text
The residual income (RI) approach to evaluating divisional performance differs from ROI in that RI:
Answer: Deducts a capital charge from operating income rather than forming a ratio
Residual income subtracts a minimum required return (capital charge) from divisional operating income, avoiding the ratio distortions of ROI.
In a make-or-buy decision, which of the following costs is MOST likely to be relevant?
Answer: Variable manufacturing cost that would be avoided by outsourcing
Variable manufacturing costs that disappear if the component is outsourced are future, avoidable costs — the key criterion for relevance.
A flexible budget differs from a static (master) budget because a flexible budget:
Answer: Adjusts cost allowances to the actual level of activity achieved
A flexible budget recalculates expected costs at the actual output level, enabling a meaningful comparison with actual spending.
Porter's Five Forces model is primarily used in strategic management to:
Answer: Assess the level of competitive intensity and profitability potential of an industry
Porter's Five Forces analyzes suppliers, buyers, new entrants, substitutes, and rivalry to evaluate the attractiveness of an industry.
Economic Value Added (EVA) is calculated as:
Answer: EBIT multiplied by (1 − tax rate) minus the weighted average cost of capital times invested capital
EVA = NOPAT − (WACC × Invested Capital), measuring the true economic profit after deducting the full cost of capital.
Which of the following best describes the concept of a 'cost driver' in activity-based costing?
Answer: A factor that causes changes in the cost of an activity
A cost driver is a variable that has a causal relationship with the cost of an activity, such as the number of setups driving setup costs.
In the context of strategic planning, a SWOT analysis categorizes internal factors as:
Answer: Strengths and Weaknesses
Strengths and Weaknesses are internal to the organization, while Opportunities and Threats come from the external environment.