CGA CGA Performance Management & Analytics 2 — Questions and Answers
Question 1: Which budgeting approach builds the budget from scratch each period, requiring justification for every expense?
- Incremental budgeting
- Rolling budgeting
- Zero-based budgeting (Correct answer)
- Activity-based budgeting
Correct 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.
Question 2: In activity-based costing (ABC), cost drivers are used to:
- Determine selling prices for all products
- Allocate overhead costs to products based on their actual consumption of activities (Correct answer)
- Eliminate all indirect costs from product costing
- Simplify the chart of accounts
Correct 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.
Question 3: A flexible budget adjusts which elements as volume changes?
- Fixed costs only
- Variable costs and revenue only (Correct answer)
- All costs remain fixed as in the static budget
- All revenue and cost items proportionally
Correct 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.
Question 4: Which of the following is an example of a non-financial KPI for a service business?
- Return on investment
- Customer satisfaction score (CSAT) (Correct answer)
- Operating profit margin
- Debt-to-equity ratio
Correct 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.
Question 5: What does throughput accounting focus on maximizing?
- Cost reduction through overhead elimination
- Revenue generated per unit of the binding constraint (bottleneck) (Correct answer)
- Number of products in the product line
- Total fixed cost absorption
Correct 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.
Question 6: Which analysis technique compares actual results to budgeted figures to identify and explain differences?
- Ratio analysis
- Variance analysis (Correct answer)
- Trend analysis
- Regression analysis
Correct answer: Variance analysis
Variance analysis decomposes the difference between actual and budgeted (or standard) results into price, volume, and efficiency components for management investigation.
CGA CGA Performance Management & Analytics 2
Which budgeting approach builds the budget from scratch each period, requiring justification for every expense?