Business performance : Questions

1
Which indicator should be monitored in a firm pursuing a cost leadership strategy?
* Proposition 1. Number of new products on the market
* Proposition 2. Importance of administrative support expenses over the annual revenue✅ ( Ok )
* Proposition 3. Unit cost of production✅ ( Ok )
* Proposition 4. Importance of production delay

2
The essence of variance analysis is to capture a departure from what was expected.

● False
● True✅ Ok

3
Seven professors, two assistants and five secretaries are working at a department. They each work about 215
days per year and are paid to work 8 hours a day. The normal unproductive time is 0,5 hour per day per
assistant, 2 days per semester per secretary, and 7 days per year per professor. The total costs of the
department amount to €582 825 per year.
The staff is involved in the paper publishing process. The department manager estimated the following: 150
hours per person to operate administrative tasks; 330 hours to write a paper; 60 extra hours for conference
presentation, 250 more hours to publish the paper in a low-ranked journal but 400 additional hours to publish in a
well-ranked journal. Prof. Gooder wrote 3 papers whose 1 of them were published in a low-ranked journal, and
no paper in a well-ranked journal. He also participated in 4 conferences.
What is the activity time for Gooder? Please, indicate only a number (no point, coma, space, unit...)!
- 3*330 + 250 + 4*60 = 1480 ( Ok )

4
Two professors, five assistants and two secretaries are working at a department. They each work about 210 days
per year and are paid to work 7,5 hours a day. The normal unproductive time is 1 hour per day per assistant, 1
hour per day per secretary, and 3 days per semester per professor. The total costs of the department amount to
€378 450 per year.
The staff is involved in the paper publishing process. The department manager estimated the following: 50 hours
per person to operate administrative tasks; 355 hours to write a paper; 45 extra hours for conference
presentation, 120 more hours to publish the paper in a low-ranked journal but 160 additional hours to publish in a
well-ranked journal. Prof. Gooder wrote 3 papers whose 1 of them were published in a low-ranked journal, and 1
paper in a well-ranked journal. He also participated in 3 conferences.
What is the cost of activity for Gooder? Please, indicate only a number (no point, coma, space, unit...)!
48 938 ( Ok )

5
An unfavorable variance indicates that:

● actual revenues exceed budgeted revenues

● actual costs are less than budgeted costs
● the actual amount decreased operating income relative to the budgeted amount ✅ ( ok )
● All of these answers are correct.

6
_______________ is an operation where the work to be performed approaches or exceeds the available
capacity.
 ● A time driver
● A bottleneck ✅ ( Ok )
● Customer-response time
● Manufacturing lead time

7
What is not an Activity-Based Costing (ABC) system?
* Proposition 1. A set of management accounting procedures ✅
* Proposition 2. An IT tool facilitating the recording of accounting transactions ✅
* Proposition 3. An accounting technique adapted to all kind of business contexts and organizational structures
* Proposition 4. A system that aims to calculate the cost of goods based on a functional/departmental view of the
firm.

8
When considering customer needs and wants, only financial measures can be used, since they are easily
measured.
● True
● False ✅ ( Ok )

9
The only difference between the static budget and flexible budget is that the static budget is prepared using
planned output.
- False ✅ ( Ok )
● True
10
All budgets are based on standard costs.

● False ✅ ( Ok )
● True

11
Friend Ltd. uses Activity Based Costing (ABC) system to determine the cost of its two products: A and B. The
estimated total cost for one of the company’s three activity cost pools is €12 000. The expected activity for
product A and B is 400 and 200 respectively. What is the activity rate ? (Take the nearest number)
- €20
● €30
● There is not enough information. ✅ ( Ok )
● €0,03…
● €60
● €0,05
● €0,016…
● None of them.

12
The master budget is one type of flexible budget.

● True
● False✅ ( Ok )

13
Adelaide Inc. has established the following budgeted information regarding fixed overheads for next month:
* Fixed overheads €180 000
* Labour hours 3 000
* Machine hours 10 000
* Units of production 5 000
Actual fixed costs for the month were €150 000. Adelaide Inc. produces many different products using highly
automated manufacturing processes and absorbs overheads on the most appropriate basis. What will be the
predetermined overhead absorption rate? (Take the nearest number)

● None of them.
● €60
● €0,02
● €15
● €30
● €50
● €0,055…
● €18
● €0,027…
● €0,016…
● €36 ✅ ( Ok )
● €0,066…
● €0,033…

14
An unfavorable price variance for direct materials might indicate:

● congestion due to scheduling problems

● that the market had an unexpected oversupply of those materials
● that the purchasing manager skillfully negotiated a better purchase price
● that the purchasing manager purchased in smaller quantities due to a change to just-in-time inventory methods ✅ (
Ok )

15
THE FOLLOWING INFORMATION APPLIES TO THE NEXT 4 QUESTIONS
Bugos Company makes a household appliance with model number XX300. The goal for 20x4 is to reduce direct
materials usage per unit. No defective units are currently produced. Manufacturing conversion costs depend on
production capacity defined in terms of XX300 units that can be produced. The industry market size for
appliances increased 5% from 20X3 to 20X4. The following additional data are available for 20X3 and 20X4.

Question: What is operating income for 20X3?

● $1,000,000
● $750,000
● $700,000
● $450,000 ✅ ( Ok )

16
What is operating income for 20X4?

● $997,500
● $438,500 ✅ ( Ok )
● $428,500
● $678,500
 17
Which strategy is Bugos Corporation pursuing?

● Product differentiation, because total conversion costs decreased.

● Product differentiation, because the units produced and sold increased.
● Cost leadership, because the selling price decreased. ✅ ( Ok )
● Cost leadership, because direct material costs per square foot increased.

18
Overall, was Bugos’ strategy successful in 20X4?

● No, because operating income decreased. ✅ ( Ok )

● Yes, because more units were produced and sold.
● Yes, because less direct materials were used.
● No, because the selling price per unit decreased.

19
__________ is an organization’s ability to offer products or services that are perceived by its customers as being
superior and unique relative to those of its competitors.

● Product differentiation ✅ ( Ok )
● The balanced scorecard
● Strategy
● Cost leadership

20
LSMn1 S.A. proposes diverse services. Here, only two of these services: the Teach and the Res are considered.
Next year the company expects to operate 1 000 times the Teach service and 400 times the Res service. The
management of LSMn1 S.A. is considering the introduction of an Activity Based Costing (ABC) system.

The management of LSMn1 S.A. has identified three activities and has gathered annual information on cost
pools, drivers and activity levels for supply of all services.

Activity cost pools

* Project pricing: 20 000€
* Consulting: 250 000€
* After-sales: 50 000€
Cost drivers
* Project pricing: Number of pricing hours
* Consulting: Number of labor hours
* After-sales: Number of requests
Activity level
* Project pricing: 200 pricing hours
* Consulting: 25 000 labor hours
* After-sales: 500 requests
What is the activity cost driver rate for Consulting? Please, indicate only a number (no point, space, comma,
unit...)!

250 000/ 25 000 = 10 (Ok )

21
The learning and growth perspective of the balanced scorecard evaluates the profitability of the strategy.
 ● False
● True ✅ ( Ok )

22
Which cause-and-effect relationship is correct based on a balanced scorecard perspective?
* Proposition 1. ‘To improve product quality’ contributes ‘To reduce cost of capital’ ✅ (Ok )
* Proposition 2. ‘To improve product quality’ contributes ‘To increase sales revenue’.✅ (Ok )
* Proposition 3. ‘To reduce cost of capital’ contributes ‘To increase sales revenue’.
* Proposition 4. ‘To increase sales revenue’ contributes ‘To reduce cost of capital’.

23
Which cause-and-effect relationship is correct based on a balanced scorecard perspective?
* Proposition 1. ‘To improve customer management’ contributes ‘To increase financial revenue’. ✅ (Ok)
* Proposition 2. ‘To increase financial revenue’ contributes ’To improve customer management’.
* Proposition 3. ‘To improve customer management’ contributes ‘To reduce inventory’
* Proposition 4. ‘To reduce inventory’ contributes to ‘To improve customer management’

24
Take S.A. offers a broad range of wood-made products for big companies. The CEO has some doubts on the
profitability of three product lines: the Desk, the Partitioning and the Cabinet. In December, Take Take S.A. offers
a broad range of wood-made products for big companies. The company sold, manufactured, delivered and fixed
5 Desks, 30 Partitionings and 10 Cabinets. There is no inventory.

The CFO of Take S.A. has identified three activities and has gathered information on cost pools, drivers and
activity levels for the supply of all products in December.

Activity cost pools

* Logistics: €10 000
* Manufacturing: €50 000
* Project management: €80 000
Cost drivers
* Logistics: Total value of wood panels
* Manufacturing: Direct machine hours
* Project management: Project management hours
Activity level
* Logistics: €10 000 of wood panels
* Manufacturing: 2 000 direct machine hours
* Project management: 1 600 project management hours
What is the activity cost driver rate for Logistics? Please, indicate only a number (no point, coma, space, unit...)!

10 000/140 000 = 14 ( Ok )

25
Two professors, five assistants and two secretaries are working at a department. They each work about 210 days
per year and are paid to work 7,5 hours a day. The normal unproductive time is 1 hour per day per assistant, 1
hour per day per secretary, and 3 days per semester per professor. The total costs of the department amount to
€378 450 per year.
The staff is involved in the paper publishing process. The department manager estimated the following: 50 hours
per person to operate administrative tasks; 355 hours to write a paper; 45 extra hours for conference
presentation, 120 more hours to publish the paper in a low-ranked journal but 160 additional hours to publish in a
well-ranked journal. Prof. Gooder wrote 3 papers whose 1 of them were published in a low-ranked journal, and 1
paper in a well-ranked journal. He also participated in 3 conferences.
What is the annual practical capacity? Please, indicate only a number (no point, coma, space, unit...)!

11 445 ( Ok )
 26
Which cause-and-effect relationship is correct?
* Proposition 1. Number of breakdowns is a lagging indicator of production delays. ✅ ( Ok )
* Proposition 2. Number of breakdowns is a leading indicator of maintenance costs. ✅
* Proposition 3. Number of breakdowns is a lagging indicator of maintenance costs.
* Proposition 4. Number of breakdowns is a leading indicator of production delays.

27
What is the key characteristic of a strategic map?
* Proposition 1. Not all indicators should be part of the chain of cause-and-effect relationships.
* Proposition 2. The map involves a set of links from leading indicators to lagging indicators.
* Proposition 3. The adoption of lagging indicators only.
* Proposition 4. The links between indicators are based on a series of assumptions. ✅ ( Ok )

28
An organization that is using the cost leadership approach would:

- incur costs for innovative R&D

- focus on productivity through efficiency improvements ✅ ( Ok )
- bring products to market rapidly
- provide products at a higher cost than competitors

29
An increase of operating income from one year to the next indicates a company’s strategy was successful.

- False ✅ ( Ok )
- True
30
What is the main difference between TD ABC and ABC?
* Proposition 1. ABC aims to design a costing model that is easier to update than TD ABC.
* Proposition 2. ABC better reflects the strategy of the firm than TD ABC.
* Proposition 3. ABC aims to provide better insights into capacity utilization than TD ABC.
* Proposition 4. ABC requires the adoption of more allocation bases than TD ABC. ✅ (Ok)

31
The cash budget is a schedule of expected cash receipts and disbursements that:

- requires an aging of accounts receivable and accounts payable

- is a self-liquidating cycle
- is prepared immediately after the sales forecast
- predicts the effect on the cash position at given levels of operations ✅ ( Ok )
32
Five professors, nine assistants and one secretary are working at a department. They each work about 220 days
per year and are paid to work 8 hours a day. The normal unproductive time is 1 hour per day per employee. The
total costs of the department amount to €462 000 per year.
The staff is involved in the paper publishing process. The department manager estimated the following: 100
hours per person to operate administrative tasks; 200 hours to write a paper; 50 extra hours for conference
presentation, 100 more hours to publish the paper in a low-ranked journal but 180 additional hours to publish in a
well-ranked journal. Prof. Gooder wrote 4 papers whose 2 of them were published in a low-ranked journal, and 1
paper in a well-ranked journal. He also participated in 5 conferences.
What is the cost per time unit of capacity? Please, indicate only a number (no point, coma, space, unit...) ! 5+9+1
= 15
220 days à 8h per day (8-1)*220 = 1540h par an
1540 * 15 = 23 100h

Cost of department = 462000K€

462000/23100 = 20€ --> REPONSE ( Ok )

33
What is NOT a cost driver?
* Proposition 1. A unit of activity that causes the change in activity's cost
* Proposition 2. A type of period cost ✅
* Proposition 3. A cost that can be justified by management accountant ✅
* Proposition 4. An upstream process that has an impact on downstream processes

34
Building in budgetary slack includes:

- overestimating budgeted revenues

- making budgeted targets more easily achievable✅ ( Ok )
- underestimating budgeted costs
- All of these answers are correct.

35
Which cause-and-effect relationship is correct?
* Proposition 1. Employee satisfaction is a leading indicator of customer satisfaction.
* Proposition 2. Employee satisfaction is a lagging indicator of customer satisfaction.
* Proposition 3. Shareholder satisfaction is a leading indicator of customer satisfaction.
* Proposition 4. Shareholder satisfaction is a lagging indicator of customer satisfaction. ✅