Deck 14: Strategic Performance Measurement Systems

Question 1

Which of the following statements is/are true?

A) Non-financial measures may reflect drivers of future financial performance.
B) Non-financial measures are more difficult to understand.
C) Non-financial measures are more difficult to action.
D) Non-financial measures may reflect drivers of future financial performance AND and non-financial measures are more difficult to understand.

Answer 1

A

Question 2

Performance measures,which include cost,product quality and manufacture cycle time,are related to:

A) financial perspective
B) customer perspective
C) internal business processes
D) learning and growth

Answer 2

C

Question 3

Employee satisfaction,absenteeism and employee suggestions implemented are measures related to:

A) financial perspective
B) customer perspective
C) internal business processes
D) learning and growth

Answer 3

D

Question 4

Which of the following statements is/are false?
I)Non-financial measures are only applicable when profit is not a principle goal of the firm
Ii)It is often difficult to take any action because of non-financial measures.
Iii)At the operational level,it is often easier to relate to non-financial measures.

A) ii and iii
B) i and iii
C) i and ii
D) All of the given answers

Question 5

Which of the following are used by most successful organisations when evaluating performance?
Financial performance measures
Non-financial performance measures

A) No
Yes
B) Yes
No
C) Yes
Yes
D) To a limited degree only
Yes

Question 6

Market share may be a lead indicator from:

A) a financial perspective
B) a customer perspective
C) internal business processes
D) learning and growth

Question 7

Which of the following do conventional measurement systems include?
I)Profitability
Ii)Return on investment
Iii)Cost variance analysis
Iv)Budget variance analysis

A) i,ii and iii
B) ii,iii and iv
C) i,iii and iv
D) All of the given answers

Question 8

Measures that monitor the factors that drive outcomes are called:

A) lead indicators
B) lag indicators
C) benchmark indicators
D) cause and effect indicators

Question 9

The number of products returned by customers,the number of product defects and on-time delivery are measures related to:

A) financial perspective
B) customer perspective
C) internal business processes
D) learning and growth

Question 10

The purposes of performance measurement are to:
I)communicate company strategies to employees
Ii)identify problem areas
Iii)act as a guide to future strategies
Iv)identify key performance indicators

A) i,ii and iii
B) ii,iii and iv
C) i,ii and iv
D) All of the given answers

Question 11

An increasingly popular approach that integrates financial and customer performance measures with measures in the areas of internal operations and innovation is known as:

A) the integrated performance measurement tool
B) the balanced scorecard
C) integrated efficiency
D) benchmarking

Question 12

Which of the following statements are problems associated with conventional performance measures?
I)They may encourage short-term financial performance
Ii)They describe results not causes.
Iii)They do not emphasise areas that need development for long-term goal achievement.

A) i and ii
B) ii and iii
C) i and iii
D) All of the given answers

Question 13

On which of the following is the Kaplan and Norton framework for developing a balanced scorecard is based?
I)Financial perspective
Ii)Customer perspective
Iii)Learning and growth
Iv)Internal processes

A) i,ii and iii
B) ii,iii and iv
C) i,iii and iv
D) All of the given answers

Question 14

All the following are methods of comparison used in performance measurement.Which are inadequate as contemporary measures?
I)Standard costs
Ii)Past periods
Iii)Budget targets
Iv)Benchmarks

A) i,ii and iv
B) ii,iii and iv
C) i,iii and iv
D) i,ii and iii

Question 15

Southern Cruises Ltd,which operates in a very competitive marketplace,is considering four categories of performance measures: (i)profitability (ii)customer satisfaction (iii)efficiency and quality and (iv)innovation.The company assigns one manager to each ship in its fleet to oversee the ship's general operations.If Southern Cruises Ltd desired to adopt a balanced scorecard approach,which measures should it use in the evaluation of managers?

A) i and ii
B) ii and iii
C) i,ii and iv
D) All of the given answers

Question 16

Which of the following statements is/are false?

A) Performance measures identify problem areas.
B) Performance measures are essential to determine a firm's profitability.
C) Performance measures form the basis for rewards.
D) All of the given answers

Question 17

Performance measures,including shareholder value,residual value and cash flow are related to:

A) financial perspective
B) customer perspective
C) internal business processes
D) learning and growth

Question 18

Measures that monitor the progress towards the organisation's goals are called:

A) lead indicators
B) lag indicators
C) benchmark indicators
D) progress indicators

Question 19

Which of the following are performance measures of delivery at the shop floor level?
I)Standard cost variances
Ii)Accident reports
Iii)Schedule adherence
Iv)Number of good units completed

A) iii and iv
B) ii and iii
C) i and iii
D) ii and iv

Question 20

Which of the following are likely to be the result of concentration on short-term financial measures?
I)Reduced expenditure on product development
Ii)Increased spending on new technology
Iii)Increased employee training
Iv)Reduced marketing effort

A) i and ii
B) i and iii
C) i and iv
D) ii and iv

Question 21

On which of the following does a balanced scorecard approach focus on?

A) Strategic objectives
B) Critical success factors
C) Performance measures at all levels of the business
D) All of the given answers

Question 22

Benchmarking that involves comparison with firms with similar interests and technologies is termed:

A) competitive benchmarking
B) industry benchmarking
C) process benchmarking
D) external benchmarking

Question 23

Market share may be a lag indicator from:

A) a financial perspective
B) a customer perspective
C) internal business processes
D) learning and growth

Question 24

The steps to be taken in the benchmarking process are:
I)establishing performance goals
Ii)identifying functions or activities to be benchmarked
Iii)implementing plans
Iv)data collection and analysis
V)selecting benchmark partners
What is the correct sequence of these steps?

A) i,ii,iii,iv and v
B) ii,v,iv,i and iii
C) iii,ii,i,v and iv
D) ii,v,i,iv and iii

Question 25

Normalisation is used to remove the effects of factors outside the control of the organisation in:

A) competitive benchmarking
B) industry benchmarking
C) process benchmarking
D) external benchmarking

Question 26

Which of the following statements is/are true?
I)The more performance measures there are the better the outcome is likely to be
Ii)Reward systems are more reliable if they are separated from the performance measurement system.
Iii)It is better to wait until comprehensive information is available for a performance report than to issue it promptly with less comprehensive information.

A) i and ii
B) i and iii
C) ii and iii
D) None of the given answers

Question 27

One of the signs that a firm's performance measurement system is inadequate is when no one notices when reports are not supplied.For which of the following reasons may this occur?
I)Reports are too detailed
Ii)Reports are too summarised
Iii)Reports are too late
Iv)Reports focus on the wrong factors

A) ii,iii and iv
B) i,ii and iv
C) i,iii and iv
D) All of the given answers

Question 28

An important concern for all companies in competitive markets is to access competitors' costs.It is clear that competitors will not willingly supply cost data and thus other sources need to be explored.Which of the following may be used to identify competitors' costs?

A) Publicly available data such as sales volume,market share and product mix
B) Industry databases
C) Company reports and analyses from stockbrokers
D) All of the given answers

Question 29

Which of the following are characteristics of a good performance measurement system?
I)Emphasises the negative
Ii)Simple
Iii)Linked to strategy
Iv)Timely

A) i,ii and iii
B) ii,iii and iv
C) i,iii and iv
D) All of the given answers

Question 30

Which of the following statements is/are true?
I)A Du Pont chart includes lag indicators for revenue measures
Ii)A Du Pont chart includes lead indicators for costs.
Iii)A Du Pont chart fails to show any relationship between cost and invested capital.iv.A Du Pont chart clearly shows the relationship between lead indicators and invested capital.

A) i,ii and iii
B) ii,iii and iv
C) i,ii and iv
D) All of the given answers

Question 31

Elements that derive from the competitive strategy and are essential to the success of the organisation are called:

A) key performance indicators
B) critical success factors
C) key performance factors
D) critical success drivers

Question 32

Benchmarking that involves comparison with best practices that occur in any industry is termed:

A) internal benchmarking
B) industry benchmarking
C) process benchmarking
D) external benchmarking

Question 33

The essential element of a Du Pont chart is that it:

A) includes financial measures
B) includes key performance indicators
C) includes key performance drivers
D) identifies linkages between A,B and C

Question 34

Which is the easiest form of benchmarking to establish?

A) Competitive benchmarking
B) Internal benchmarking
C) Industry benchmarking
D) Process benchmarking

Question 35

Which of the following statements is/are false?
I)It is important that performance measures be benchmarked to high external standards
Ii)Measures should be easy to understand and communicate to all employees involved in the particular function or activity.
Iii)It is more motivational to express delivery performance as 15 per cent late than 85 per cent on time.

A) iii
B) i and ii
C) ii
D) ii and iii

Question 36

Which of the following statements are true in respect to continuous improvement?
I)Some companies focus their efforts to improve performance on specific problem areas
Ii)Companies should set an increasingly difficult targets to motivate employees to improve their performance continuously.
Iii)It is inappropriate to change performance measures on short-term cycles,such as monthly.

A) i and iii
B) ii and iii
C) i and ii
D) All of the given answers

Question 37

The ultimate performance measure is expressed in financial terms;however,it is often difficult to relate non-financial measures to financial outcomes.Which of the following may be reasons for apparent success in improving non-financial measures not translating into financial improvement?

A) Failure to utilise freed-up resources
B) Identifying incorrect critical success factors
C) Incorrect design of performance measures
D) All of the given answers

Question 38

Which of the following may result in failure to utilise the freed up resources flowing from improved performance?

A) Difficulty in disposing of excess equipment
B) Inability to increase sales to take up the idle capacity
C) Imbalance between resources made idle and those required to increase activity levels
D) All of the given answers

Question 39

One of the signs that a firm's performance measurement system is inadequate is when performance measures show improvement but this is not translated into profit.In which of the following circumstances may this occur?
I)Resources freed up through improvements may not have been utilised to improve profitability
Ii)Factors being measured are not critical success factors.
Iii)Too many similar measures are used.iv.There is a time lag between improved performance and improved profitability.

A) i,ii and iii
B) ii,iii and iv
C) i,ii and iv
D) i,iii and iv

Question 40

The extent to which a business needs to improve to reach best practice is termed:

A) performance target
B) performance goal
C) performance gap
D) performance driver

Question 41

Assuming you must choose one measure only,which of the following non-financial performance indicators would most likely be chosen to measure employee satisfaction?

A) Number of repeat orders
B) Percentage of absenteeism
C) Number of complaints about service
D) Percentage of idle time

Question 42

From the following statements about benchmarking,select the incorrect statement.

A) Benchmarking involves working towards best practice.
B) Benchmarking requires selection of a benchmarking partner.
C) Benchmarking requires measuring against another firm in exactly the same type of business.
D) Benchmarking involves continuous improvement.

Question 43

What items or perspectives are measured in the balanced scorecard?

A) A firm can choose to measure whatever items it considers important
B) Financial and customer
C) Internal business
D) Learning and growth

Question 44

Which of the following is the most appropriate lead indicator in relation to 'customer satisfaction rating'?

A) Market share
B) Number of customer complaints
C) Percentage of on-time delivery
D) Sales growth

Question 45

Which of the following is the most appropriate lag indicator in relation to 'customer satisfaction rating'?

A) Sales growth
B) Number of customer complaints
C) Percentage of employees with tertiary qualifications
D) Percentage of on-time delivery

Question 46

Which of the following non-financial indicators measures product availability?

A) Number of overdue deliveries
B) Percentage stock outs
C) Downtime/total time
D) Percentage warranty claims

Question 47

Benchmarking exercises are most likely to focus on:

A) production activities of the firm
B) activities of the firm that are reported in financial performance measures
C) factors which are identified as critical success factors for the firm
D) items the firm has identified as one of its 'weaknesses' in a SWOT analysis

Question 48

Assuming you must choose one measure only,which of the following non-financial performance indicators would most likely be chosen to measure quality?

A) Number of repeat orders
B) Percentage of absenteeism
C) Machine downtime
D) Percentage of idle time

Question 49

Which of the following about a strategic performance measurement system (SPMS)is incorrect?

A) It is a system that focuses on translating a strategy into financial and non-financial measures.
B) SPMS requires linking performance measures in cause-and-effect relationships.
C) SPMS always require the development of a strategy map first,followed by a balanced scorecard.
D) SPMS can be used by non-profit organisations.

Question 50

The internal business process perspective of a balanced scorecard may contain which of the following set of performance measures?

A) Sales force efficiency,percentage of warranty claims,number of employees completed internal training
B) Defect costs,employee satisfaction rating,number of customer complaints
C) Sales force efficiency,scrap costs,percentage of machine downtime
D) Number of incorrect deliveries to customers,production cycle time,profit margin

Question 51

Which of the following comments best describes the appropriate application of benchmarking to a medium-sized Australian company with a range of products and services specifically designed for local conditions and demands?

A) In the absence of a valid basis for comparison,benchmarking is unlikely to be informative in this case.
B) Benchmarking should be based on world best practice for the nearest equivalent organisation.
C) Efforts should be made to compare particular activities and processes with similar processes elsewhere,allowing for differences in the business environment.
D) The use of benchmarking may inhibit originality in meeting the special features and unique needs of the firm's market.

Question 52

Assuming you must choose one measure only,which of the following non-financial performance indicators would most likely be chosen to measure productivity?

A) Units produced per month
B) Number of repeat orders
C) Percentage of absenteeism
D) Percentage of idle time

Question 53

Which of the following statements most correctly completes the following sentence that identifies some of the limitations of traditional management accounting? 'Traditional management accounting focuses on …'

A) financial performance measures,labour-related activity measures and cost elimination.
B) financial performance measures,volume-related activity measures and cost control.
C) non-financial performance measures,labour-related activity measures and cost elimination.
D) financial performance measures,labour-related activity measures,cost elimination,volume-related activity measures and cost control.

Question 54

A firm using the balanced scorecard has included among its strategies 'to improve bottom-line profit we need to improve working conditions'.Which of the following statements best describes the evaluation of the firm's success in implementing the strategy?

A) It is impossible to determine whether the strategy has been successful.
B) The only way to measure success is to survey employees.
C) A number of performance evaluation measures will need to be put in place,but even with favourable results on those measures,the firm cannot conclude that the profit resulted from the improvement in working conditions.
D) If managers can observe employees' motivation they will have a good idea of the success or otherwise of the strategy.

Question 55

Assuming you must choose one measure only,which of the following non-financial performance indicators would most likely be chosen to measure satisfaction with delivery?

A) Number of repeat orders
B) Percentage of absenteeism
C) Number of complaints about service
D) Units produced

Question 56

Assuming you must choose one measure only,which of the following non-financial performance indicators would most likely be chosen as a measure of the production process?

A) Number of repeat orders
B) Percentage of idle time
C) Percentage of absenteeism
D) Number of complaints about service

Question 57

The management accountant at Kaster Furniture Makers decides to include the following measures on their balanced scorecard (BSC): customer satisfaction,rework costs,on-time delivery,average shopfloor personnel qualification and sales growth in local markets.These measures belong to which BSC perspectives?

A) Financial perspective
Sales growth in the local markets
Internal business process perspective
On-time delivery,customer satisfaction
Customer perspective
Learning and growth perspective
Rework costs,average shopfloor personnel qualification
B) Financial perspective
Sales growth in the local markets
Internal business process perspective
Rework costs
Customer perspective
On-time delivery,customer satisfaction
Learning and growth perspective
Average shopfloor personnel qualification
C) Financial perspective
Rework costs
Internal business process perspective
On-time delivery
Customer perspective
Sales growth in the local markets,customer satisfaction
Learning and growth perspective
Average shopfloor personnel qualification
D) Financial perspective
Sales growth in the local markets;Rework costs
Internal business process perspective
On time delivery;Average shopfloor personnel qualification
Customer perspective
Customer satisfaction
Learning and growth perspective

Question 58

Which of the following statements is most correct about the selection of performance measures?

A) The key stakeholders are the owners of the firm and therefore financial performance measures will always be the most crucial.
B) In today's environment,firms are likely to have an appropriate mix of both financial and non-financial performance measures.
C) In the contemporary manufacturing environment,it is likely that non-financial performance measures will replace financial performance measures.
D) Because of the focus on critical success factors,it is likely that non-financial performance measures will replace financial performance measures.

Question 59

Which of the following is the most appropriate lag indicator in relation to 'percentage of products passed final quality inspection'?

A) Percentage of machine downtime
B) Number of customer complaints
C) Percentage of on-time delivery
D) Number of employees completed quality training

Question 60

Which of the following statements about performance measures is most correct and complete?

A) Most financial performance measures are lead indicators.
B) Most financial performance measures are lag indicators.
C) All non-financial performance measures are lead indicators.
D) All non-financial performance measures are lag indicators.

Question 61

In production,the time taken to get materials and machinery ready for a run is termed set-up time.

Question 62

Echo Beetle is an interior design and renovation management firm.The customer perspective of Echo Beetle's balanced scorecard contain these two measures: (1)client satisfaction rating and (2)percentage of projects completed on-time.Which of the following are the most appropriate measures on Echo Beetle's internal business process perspective?

A) Adherence to project schedule (%),number of projects that passed internal quality inspection
B) Machine down time,productivity
C) Product defects,number of customer complaints
D) Time employees spent on training,cost per project

Question 63

Quality and customer satisfaction are non-financial measures that can be drivers of future financial performance.

Question 64

One way of setting up a system of continuous improvement is to utilise benchmarking for comparing products functions and activities.

Question 65

Which of the following statements about the DuPont chart is incorrect?

A) It shows that return-on-investment can be decomposed into profit and costs.
B) It identifies lead indicators of revenue.
C) It identified lead indicators of costs.
D) Its underlying assumption is that return-on-investment is the 'ultimate' goal.

Question 66

Performance measures can be used by senior management to evaluate staff member's performance upon which rewards can be based.

Question 67

The balanced scorecard requires measures to 'cascade down' an organisation,this means:

A) Managers should start with the lag indicators,and work downward to identify lead indicators.
B) Managers should start with the lead indicators,and work downward to identify lag indicators.
C) Managers should produce reports that are highly aggregated,and then allow users to 'drill down' each measure to find more specific details.This avoids information overload.
D) Managers should ensure that objectives,performance measures and targets of organisational units and individual managers are reflective of the objectives,performance measures and targets at the higher organisational levels.

Question 68

The perspectives that are generally considered with the balanced scorecard are the same regardless of whether the business is a profit or not-for-profit concern.

Question 69

One of the problems with the conventional accounting system is that it is common to measure current performance against the previous year's performance,which is not an indicator that the business's performance is good enough.

Question 70

Strategy maps are useful for explaining the cause-and-effect relationships that link business processes and resources.

Question 71

The Du Pont chart identifies linkages between key performance drivers,key performance indicators and financial performance measures.

Question 72

Some of the measures that can be used for measuring competitiveness include market ratios,capital structure and liquidity.

Question 73

Which of the following is not a limitation of a non-financial measure?

A) Managers find it difficult to select measures because there is a wide choice of non-financial measures.
B) Managers find that some non-financial measures,such as customer satisfaction rating,lack integrity and are hard to verify.
C) Non-financial measures are often too simplistic,such that managers find it hard to draw meaningful conclusions from examining non-financial measures.
D) Non-financial measures do not always 'translate' to financial outcomes.