Chapter 22 – Strategic management accounting
MULTIPLE CHOICE
1. An example of a lag measure is
a.
hours of employee training.
b.
customer profitability.
c.
employee capabilities.
d.
none of the above.
2. The five key core objectives of the customer perspective of the Balanced Scorecard do NOT include
which of the following?
a.
increase market share
b.
increase customer satisfaction
c.
increase customer retention
d.
increase customer contact
3. Richards, SA., manufactures a product that experiences the following activities:
Processing (three departments)
9 hours
Moving (four moves)
1 hours
Waiting time
7 hours
Storage (before delivery)
13 hours
The manufacturing cycle efficiency (MCE) for the product is
a.
0.48.
b.
0.45.
c.
0.42.
d.
0.30.
4. Hampton, SA., manufactures a product that experiences the following activities:
Processing (three departments)
40 hours
Moving (four moves)
10 hours
Waiting time
30 hours
Storage (before delivery)
80 hours
The manufacturing cycle efficiency (MCE) for the product is
a.
0.33.
b.
0.27.
c.
0.25.
d.
0.18.
5. Hugh, SA., recently evaluated its manufacturing process and determined the following about its main
product:
Processing time
6 minutes
Move time
2 minutes
Inspection time
1 minute
Wait time
3 minutes
The manufacturing cycle efficiency (MCE) for the product is
a.
1.00.
b.
0.75.
c.
0.67.
d.
0.50.
6. A competitive advantage has been established when
a.
customers see the variation as important and the value added to the customer exceeds the
cost of providing differentiation.
b.
a high-cost strategy increases customer value by minimizing customer sacrifices.
c.
a low-profit item is dropped from the product line.
d.
both a and b.
7. ____ involves choosing among alternative strategies with the goal of selecting a strategy, or strategies,
that provides a company with reasonable assurance of long-term growth and survival.
a.
Strategic decision making
b.
Strategic cost management
c.
Competitive advantage
d.
Customer value
8. ____ is creating better customer value for the same or lower cost than competitors or creating
equivalent value for lower cost than offered by competitors.
a.
Strategic decision making
b.
Strategic cost management
c.
Competitive advantage
d.
Total product
9. ____ is the use of cost data to develop and identify superior strategies that will produce a sustainable
competitive advantage.
a.
Strategic decision making
b.
Strategic cost management
c.
Competitive advantage
d.
Customer value
10. When a computer company maintains the internal storage space for a lower price, it is following a
a.
focusing strategy.
b.
low-cost strategy.
c.
differentiation strategy.
d.
strategic positioning strategy.
11. When a computer company increases the internal storage space for the same price, it is following a
a.
focusing strategy.
b.
low-cost strategy.
c.
differentiation strategy.
d.
strategic positioning strategy.
12. When a computer company targets customers in the South, it is following a
a.
focusing strategy.
b.
low-cost strategy.
c.
differentiation strategy.
d.
strategic positioning strategy.
13. When a computer company selects a mix of strategies in order to create sustainable competitive
advantage, it is following a
a.
focusing strategy.
b.
low-cost strategy.
c.
differentiation strategy.
d.
strategic positioning strategy.
14. The industrial value-chain analysis
a.
recognizes only complex linkages within the firm.
b.
is not compatible with differentiation strategies.
c.
determines a linked set of value-creating activities.
d.
requires a firm to operate across the entire value chain.
15. ____ describe the relationships of a firm’s value chain activities that are performed with its suppliers
and customers.
a.
External linkages
b.
Internal linkages
c.
Industrial value chain
d.
Both a and b
16. ____ are relationships among activities that are performed with a firm’s portion of the value chain.
a.
External linkages
b.
Internal linkages
c.
Industrial value chain
d.
Both a and b
17. For a firm to have balanced measures, the measures selected must be balanced between
a.
lag and lead measures.
b.
objective and subjective measures.
c.
financial and nonfinancial measures.
d.
all of these.
18. ____ are outcome measures that are a result of past efforts.
a.
Objective measures
b.
External measures
c.
Financial measures
d.
Lag measures
19. ____ are outcome measures that are expressed in monetary terms.
a.
Objective measures
b.
External measures
c.
Financial measures
d.
Lag measures
20. ____ are outcome measures that can be readily quantified and verified.
a.
Objective measures
b.
External measures
c.
Financial measures
d.
Lag measures
21. ____ are outcome measures that relate to customers.
a.
Objective measures
b.
External measures
c.
Financial measures
d.
Lag measures
22. Which of the following would be a lead measure?
a.
customer profitability
b.
cost per employee
c.
return on investment
d.
employee training hours
23. Which of the following would be a lag measure?
a.
budget forecasts
b.
sales per employee
c.
plant investment
d.
employee training hours
24. Objectives for increasing revenue growth include
a.
adopting a new pricing strategy.
b.
reducing the cost per unit.
c.
eliminating nonvalue-added activities.
d.
reducing distribution channel cost.
25. In the customer perspective, objectives and measures that drive the creation of customer value are
a.
customer survey ratings.
b.
postpurchase cost.
c.
on-time deliveries.
d.
all of the above.
26. From the customer perspective, which of the following might be considered a core objective rather
than a performance value?
a.
decrease price
b.
increase customer retention
c.
improve image
d.
improve product quality
27. Roberts, SA., manufactures a product that experiences the following activities:
Processing (three departments)
Moving (four moves)
Waiting time
Storage time (before delivery)
The MCE for the product is
a.
0.48.
b.
0.45.
c.
0.42.
d.
0.30.
28. Which of the following is not a step in developing the Balanced Scorecard?
a.
setting balanced objectives
b.
outlining control procedures
c.
setting target values
d.
rewards
29. Which of the following statements about a balanced scorecard is true?
a.
The balanced scorecard gives managers a perspective of the organization’s performance
using a recurring set of criteria.
b.
The advantage of a balanced scorecard approach is that it can best be used as a single,
comprehensive measure of corporate performance.
c.
The advantage of a balanced scorecard approach is that it eliminates the need for
management accounting data.
d.
The advantage of a balanced scorecard approach is that it leads management to focus
exclusively on critical downstream issues such as consumer demand, and away from lesser
upstream issues such as design and production.
30. ____ provide some idea of what to expect currently or in the near future.
a.
Trailing measures
b.
Leading measures
c.
Financial measures
d.
All of the above
PROBLEM
1. Strategic-based performance measures are balanced measures. Give examples of four types of
balanced measures.
2. How does the Balanced Scorecard communicate strategy to the organization? How is strategy
translated into performance measures?
3. Clotheshound is a local clothing store in New England. Clotheshound has been experiencing increased
competition from the national clothing chains. In an effort to improve performance, management
intends to create a Balanced Scorecard. In a meeting, several measures were suggested by various
managers.
Management has identified a key problem. Customers are taking too long to pay their department
store’s charge card bills, and the company has an abnormal amount of bad debts. If this problem were
solved, the company would have far more cash to invest in store improvements. Investigation has
revealed that much of the problem with late payments and unpaid bills is apparently due to disputes
about incorrect charges on the customer bills. Incorrect charges usually occur because sales clerks
enter data incorrectly on the charge account slip.
The performance measures suggested by the managers are given below:
•
Total sales revenue
•
Sales per square foot of floor space
•
Sales to inventory ratio
•
Sales per employee
•
Sales to total assets
•
Customer satisfaction with accuracy of charge account bills from monthly customer survey
•
Customer wait time for service
•
Travel expenses for buyers’ trips
•
Average age of accounts receivable
•
Courtesy shown by junior staff members based on surveys of senior staff
•
Unsold inventory at the end of the season as a percentage of total cost of sales
•
Percentage of suppliers making just-in-time deliveries
•
Quality of food in the staff cafeteria based on staff surveys
•
Written-off accounts receivable as a percentage of sales
•
Percentage of charge account bills containing errors
•
Percentage of employees who have attended the city’s cultural diversity workshop
•
Total profit
•
Profit per employee
•
Percentage of salesclerks trained to correctly enter data on charge account slips
Required:
a.
Build an integrated Balanced Scorecard using only performance measures suggested by the
managers. You do not have to use all the measures, but build a Balanced Scorecard that
reveals a strategy for dealing with the problems with accounts receivable and unsold
merchandise.
b.
Construct a testable strategy by showing the causal links (with arrows) between measures in
the different perspectives, and show whether the performance measure should show an
increase or decrease.
c.
Assume that the company adopts the Balanced Scorecard. After operating for a year, there are
improvements in some performance measures but not in others. What should management do
next?
Financial:
Total profit
Average age of accounts receivable
Customer:
4. Why does the Balanced Scorecard differ from company to company? Whose responsibility is the
implementation?
ESSAY
1. Describe the basic features of the Balanced Scorecard.