Fundamentals of Cost Accounting, 6e (Lanen)
Chapter 18 Performance Measurement to Support Business Strategy
1) One reason financial measures are used to evaluate performance is that they are easily
quantifiable.
2) One disadvantage of using nonfinancial measures to evaluate performance is that they are only
available on a monthly, quarterly, or annual basis.
3) One question that an organization’s mission statement should answer is how the organization
will evaluate its performance relative to its competitors.
4) In general, all managers in a given organization are responsible for the same things and should
be evaluated using the same financial and nonfinancial measures.
5) In general, performance measures—financial and nonfinancial—should relate to what
managers at different levels control.
6) A business model is a description of how different levels and employees in the organization
must perform for the organization to achieve its goals and objectives.
7) In general, the use of multiple measures to evaluate performance is better than the use of a
single performance measure.
8) At the middle levels in the organization, control and performance measurement focus on how
people carry out the daily activities that create the organization’s products.
9) At the upper level of the organization, performance measurement focuses on whether the
organization is meeting its responsibilities and performing well from the stakeholders’
perspective.
10) A balanced scorecard is basically a balance sheet prepared using nonfinancial measures.
11) The concept of a balanced scorecard is to measure how well the organization is doing from
the view of employees, suppliers, customers, business partners, and the community, as well as
the shareholders.
12) A balanced scorecard uses only nonfinancial measures to determine how well the
organization is doing in view of competing stakeholder concerns.
13) Continuous improvement involves the search for and implementation of the best way to do
something as practiced by other organizations or in other parts of one’s own organization.
14) One of the important guidelines of benchmarking is to not benchmark everything at the best-
in-the-business level; no organization can be the best at everything.
15) The primary objective of benchmarking is to evaluate performance of an activity, operation,
or organization relative to the performance by other companies.
16) Manufacturing cycle time is the total time involved in processing, moving, storing, and
inspecting a good or providing a service.
17) Improving the efficiency of the manufacturing cycle involves decreasing the time spent
processing a good.
18) The number of defective units is an example of a subjective performance measure.
19) Partial productivity is the ratio of the value of output to the value of all key inputs.
20) One advantage of nonfinancial measures is that managers directly involved in operations are
likely to understand them.
21) Employee involvement in real decision-making is likely to increase the employee’s
commitment to the organization and its objectives.
22) Employees empowered with real decision-making authority are more likely to be more
responsive to customer concerns.
23) ________ is a firm’s ability to generate products or services that are perceived by its
customers as being superior and unique as opposed to those offered by its competitors.
A) Strategy
B) Product differentiation
C) Cost leadership
D) The balanced scorecard
24) ________ is a firm’s ability to implement low costs compared to its competitors with
productivity improvements, increased efficiency, reduction of waste, and the use of cost control.
A) Strategy
B) Product differentiation
C) Cost leadership
D) The balanced scorecard
25) Which of the following statements is(are) true regarding financial measures?
(A) One disadvantage of using financial measures to evaluate performance is that they are
typically reported on a monthly, quarterly, or annual basis.
(B) One reason financial measures are used to evaluate performance is that they are easily
quantifiable.
A) Only A is true.
B) Only B is true.
C) Both of these are true.
D) Neither of these is true.
26) A description of an organization’s values, definition of its responsibilities to stakeholders,
and identification of its major strategies is called its:
A) business-level strategy.
B) mission statement.
C) performance objectives.
D) master budget.
27) Which of the following nonfinancial measures would not be used to evaluate a middle
manager’s performance?
A) Frequency of meeting customer delivery requirements.
B) Amount of unwanted employee turnover.
C) Success in dealing with suppliers.
D) Fulfilling responsibilities to company shareholders.
28) A balanced scorecard shows measures of performance as they related to areas of
performance. Which of the following is a measure of performance of customer value?
A) Gross margin ratio.
B) Retention of existing customers.
C) Hours of job related training.
D) Process cycle time.
29) Which of the following is not one of the four views of the balanced scorecard?
A) Financial.
B) Competitor performance.
C) Internal business process.
D) Learning and growth.
30) Which of the following best describes possible objectives related to the customer perspective
of the balanced scorecard?
A) Reduced cycle time, project management.
B) Improved relationships, timeliness.
C) Increased revenue, reduced costs.
D) Employee satisfaction, global knowledge improvement.
31) A business model attempts to minimize problems associated with:
A) decentralization.
B) divisional autonomy.
C) goal congruence.
D) maximizing profits.
32) Which of the following statements is(are) false regarding performance measures?
(A) In general, the use of multiple measures to evaluate performance is better than the use of a
single performance measure.
(B) Managers evaluated using multiple measures will most likely act differently than managers
evaluated using single measures.
A) Only A is false.
B) Only B is false.
C) Both of these are false.
D) Neither of these is false.
33) A balanced scorecard is a set of:
A) performance measures.
B) financial statements.
C) budget schedules.
D) annual reports.
34) In general, a balanced scorecard is used to evaluate an organization’s performance using:
A) standard costs and variance analysis.
B) multiple financial and nonfinancial measures.
C) financial statements and ratio analysis.
D) the Board of Directors’ audit committee.
35) One of the results in using balanced scorecards is a shift from a focus on financial results to a
focus on:
A) maximizing market share.
B) minimizing budgetary slack.
C) eliminating fraudulent behavior.
D) increasing customer satisfaction.
36) Which of the following balanced scorecard perspectives focuses on quality and process
improvement?
A) Financial.
B) Customer.
C) Internal Business Process.
D) Learning and growth.
37) Which of the following balanced scorecard perspectives focuses on customer service issues?
A) Financial.
B) Customer.
C) Internal Business Process.
D) Learning and Growth.
38) Which of the following balanced scorecard perspectives focuses on shareholder‘s interests?
A) Financial.
B) Customer.
C) Internal Business Process.
D) Learning and growth.
39) Which of the following balanced scorecard perspectives focuses on employee development?
A) Financial.
B) Customer.
C) Internal Business Process.
D) Learning and growth.
40) In the balanced scorecard, the financial perspective addresses which of the following
questions?
A) “To achieve our mission, how will we sustain our ability to change and improve?”
B) “To succeed financially, how should we appear to our shareholders?”
C) “To satisfy our shareholders and customers, in what business process must we excel?”
D) “To achieve our mission, how should we appear to our customers?”
41) In the balanced scorecard, the internal business process perspective addresses which of the
following questions?
A) “To achieve our mission, how will we sustain our ability to change and improve?”
B) “To succeed financially, how should we appear to our shareholders?”
C) “To satisfy our shareholders and customers, in what business process must we excel?”
D) “To achieve our mission, how should we appear to our customers?”
42) In the balanced scorecard, the learning and growth perspective addresses which of the
following questions?
A) “To achieve our mission, how will we sustain our ability to change and improve?”
B) “To succeed financially, how should we appear to our shareholders?”
C) “To satisfy our shareholders and customers, in what business process must we excel?”
D) “To achieve our mission, how should we appear to our customers?”
43) In the balanced scorecard, the customer perspective addresses which of the following
questions?
A) “To achieve our mission, how will we sustain our ability to change and improve?”
B) “To succeed financially, how should we appear to our shareholders?”
C) “To satisfy our shareholders and customers, in what business process must we excel?”
D) “To achieve our mission, how should we appear to our customers?”
44) The balanced scorecard measures an organization’s performance in all of the following areas
except:
A) financial.
B) government.
C) customer.
D) learning and growth.
45) ________ communicates an organization’s strategy into an inclusive set of performance
measures that provide the structure for implementing that strategy.
A) Productivity component
B) Product differentiation
C) Cost leadership
D) The balanced scorecard
46) The first step to the successful implementation of a balanced scorecard is specifying the:
A) organization’s vision and strategy.
B) elements that pertain to value-added aspects of the business.
C) owner’s expectations about return on investment.
D) objectives of all four balanced scorecard measurement perspectives.
47) Which of the following represents value-added time in the manufacturing cycle?
A) Inspection Time.
B) Storage Time.
C) Move Time.
D) Process Time.
48) Manufacturing Cycle Efficiency is computed as:
A) Processing Time × Manufacturing Cycle Time.
B) Processing Time ÷ Inspection Time.
C) Processing Time ÷ Manufacturing Cycle Time.
D) Moving Time ÷ Storage Time.