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Performance Management Flashcards

6 cards from real ACCA AS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

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  1. Which of the following best describes a 'balanced scorecard'?

    Answer: A performance management framework using financial and non-financial measures across four perspectives

    The balanced scorecard (Kaplan & Norton) measures performance across four perspectives: Financial, Customer, Internal Business Processes, and Learning & Growth.

  2. Residual income (RI) is calculated as:

    Answer: Divisional profit − (Capital employed × Cost of capital)

    RI = Divisional profit − (Capital employed × Imputed cost of capital). Unlike ROI, RI is an absolute measure that encourages investment in projects earning above the cost of capital.

  3. Which of the following is an advantage of return on investment (ROI) as a divisional performance measure?

    Answer: It is directly comparable across divisions of different sizes

    ROI is a relative measure (%), allowing fair comparison across divisions with different sizes. However, it can discourage investment in positive NPV projects if they dilute the existing ROI.

  4. Transfer pricing is used when:

    Answer: One division sells goods or services to another division within the same organisation

    Transfer prices are the internal prices charged when one profit centre (division) sells goods or services to another within the same organisation.

  5. Which transfer pricing method is most likely to achieve goal congruence?

    Answer: Market price transfer pricing

    Market price transfer pricing uses the external market price as the internal transfer price, aligning divisional incentives with overall company objectives and promoting goal congruence.

  6. A 'cost driver' in activity-based costing is:

    Answer: The factor that causes the cost of an activity to change

    A cost driver is the factor that causes the cost of an activity to vary (e.g., number of production runs drives set-up costs). ABC uses cost drivers to allocate overhead accurately.