Management Accounting Fundamentals Exam Questions and Correct Answers Graded A+ (Latest Update ) Already Passed

Management Accounting Fundamentals Exam Questions and Correct Answers Graded A+ (Latest Update ) Already Passed management accoutiing - Answers measures, analyses and reports financial and non financial information, with intentions to asist management control - Answers the process of ensuring that the organisation is adapted to their environment and pursuing courses of action that will enable it to achieve their purpose problems with organisational control - Answers -objectives (can be ambiguous and conflicting) -measures (can be vague and subjective) -prediction (can be partial and unreliable) -action (can be constrained) levers of control - Answers -diagnostic (keep critical performance variables within preset units) -boundary (what we can and cannot do) -interactive (interacting with others) -belief (what does the company stand for) criticisms of levers of control - Answers focused on the top level of management, does not cope well with informal controls or controls at lower hierarchal levels, unlikely it adequately explains the operation of the whole control system additionally... the concepts of LoC are open to interpretation types of budgets - Answers Functional budgets eg sales, production, direct material, direct labour etc. Cash busget Master budget eg SOPL or SOFP padding the budget - Answers The process of building budgetary slack into a budget by overestimating expenses and underestimating revenue. main 4 responsibility centres - Answers -cost centre (costs only) -revenue centre (revenue only -profit centre (costs and revenues) -investment centre (costs, revenues and investments) controllability - Answers the degree of influence that a manager has over costs, revenues or other variables incremental budgeting - Answers allocates increased or decreased funds to a department by using the last budget period as a reference point; only incremental changes in the budget request are reviewed stages in zero-based budgeting (ZBB) - Answers -identification and justification of each activity -description of each activity in a decision package -ranking decision packages in order of priority -the allocation of resources according to the ranking of the decision packages standard costing - Answers an estimated unit cost prepared in advance, made by working out how much of a cost was used in the production process, per unit. problems with standard costing - Answers - standards can quickly become outdated - factors beyond the control of the manager may affect a variance - difficult to demarcate management responsibilities - no incentive to achieve beyond the standard - standards may create perverse incentives types of performance measures - Answers Absolute measures eg cost of sales Relative measures eg % profit margins Non-financial measures eg market share, customer satisfaction, employee turnover Market based measures eg share price, dividends types of motivation - Answers intrinsic - from inside the individual extrinsic - from outside the individual Herzberg's Two-Factor Theory - Answers proposed that work satisfaction and dissatisfaction arise from two different factors: hygiene factors, relate to workers environment eg conditions or pay; motivating factors which define how they feel about their job eg achievement, recognition Issues with setting targets - Answers -individuals cannot cope with a large number of targets -theres a problem of combining motivational targets with realistic planning numbers -areas not subject to a target may be ignored construct and proxy measures - Answers construct measure - the direct cause and effect of an objective eg working harder to learn more proxy measure - the objectives associated with the construct measure that can be easily measured and risk - Answers there are multiple outcomes but its probabilities can be estimated for each of these outcomes uncertainty - Answers there are multiple possible outcomes but probabilities cannot be estimated for each of these outcomes approaches to decision making in management accounting - Answers maximax - maximise the maximum return maximin - maximise the minimum return minimax regret - minimise the maximum regret expected value - maximise the weighted average return overhead absorption rate - Answers budgeted overhead/budgeted activity ABC (activity based costing) - Answers Alternative costing method for strategic management; divides production into activities, defines costs drivers for activities, and allocates costs to objects based on activity consumption eg machine oil and repairs - number of machine hours Cost drivers can be classified as: - Answers unit-level costs - activities performed at least once for each unit of product batch-level costs - activities performed for each batch of products; independent of the number of units in the batch product-level costs - activities that support production of a product or type of model; do not vary with number of batches produced facility-sustaining costs - activities undertaken to support the organisation; do not vary on number of units, batches or product line Theory of Constraints (TOC) - Answers -traditional performance measures do not always help organisations achieve their ultimate goal -for businesses it was assumed profit was the goal -there will always be some constraint that limits the ability to generate profit TOC 5 steps - Answers -identify the systems bottleneck -decide best way to exploit the bottleneck -subordinate all operations to support step 2 -elevate the systems bottleneck ie increase its capacity -if a bottleneck has been broken in a previous step then return to step 1 TOC - consequences of the 5 steps - Answers -a buffer of work-in-progress should be kept in front of the bottleneck resource -strict quality control is needed for the parts being supplied to the bottleneck resource -attempts should be made to find alternative production processes avoiding the bottleneck -non-bottleneck resources do not need to be run at full capacity -inventory levels should fall elsewhere TOC - criticisms of accounting - Answers -traditional efficiency measures are misleading -inventory valuation methods punish managers who reduce stock -a temptation to use too many performance measures TOC - alternate measures - Answers throughput = sales revenue - any material purchases operational expense = all operating costs excluding material inventory = total of inventories, plant and equipment and other assets Throughput accounting - Answers -assumes all costs are fixed in the short run except material -it is the rate at which products generate throughput that determines profitability -inventory should be valued at material cost only as its production does not increase profitability return per factory hour - Answers Sales revenue - material purchases / time on bottleneck resources cost per factory hour - Answers Total factory cost/total bottleneck resource time available Throughput accounting ratio - Answers Return per factory hour / cost per factory hour (want TA 1)