PM- Ch-13 (Performance measurement and control)

The following statements have been made about a transfer pricing system where Division A transfers output to Division B.

(1) Internal transfers should be preferred when there is an external market for the transferred item, because there will be more control over quality and delivery.

(2) The transfer price will determine how profits will be shared between the two divisions. Which of the above statements is/are true?

• 1 only

• 2 only

• Neither 1 nor 2

• Both 1 and 2

In a company with a divisionalised structure, Division A transfers its output to Division B. Division A produces just one item, Component X. Division B makes and sells an end product that requires one unit of Component X.

Division A is working at full capacity.

What should be the minimum transfer price per unit of Component X in this situation?

• $15

• $16

• $18

• $19

The following statements have been made about performance measurements in not-for- profit organisations,

(1) Not-for-profit organisations do not have financial objectives.

(2) The outputs produced by not-for-profit organisations are easier to measure than output of commercial companies.

Which of the above statements is/are true?

• 1 only

• 2 only

• Neither 1 nor 2

• Both 1 and 2

Which of the following figures would be the most suitable for divisional profit for the purpose of performance measurement?

• Gross profit

• Profit before interest and tax

• Profit before tax

• Profit after tax

Organisations may need to develop performance measures to ensure that the needs of stakeholders are met.

Which TWO of the following measures are geared towards customer needs?

• Profit margin

• Percentage of repeat customers

• Number of warranty claims

• Dividend yield

A hospital wishes to establish a performance measurement for its quality of care, and in particular its adherence to appointment times for patients receiving medical checks.. Which of the following performance measurements would be the most suitable for this

purpose?

• Average length of oppointments

• Average number of oppointments per day

• Average number of days from making an appointment to the appointment date

• Average waiting time of the hospital

Which of the following measures of performance for public sector services is a measure of efficiency?

• Number of patients treated per $1 spent on the state hospital service

• Percentage reduction in the spending budget of a government department compared with the previous year

• Proportion of reported crimes that are solved by the police service

• Proportion of students in a state-owned college achieving good pass grades in their examinations

Which TWO of the following bases for setting a transfer price are most likely to result in goal congruent behaviour by BOTH the selling and receiving divisions?

• Opportunity cost

• Market price

• Actual cost

• Standard full cost plus

A company had budgeted sales of $30.9 million within a market worth $61.8 million. When the budget was drafted, it was assumed that inflation would be 3%. After the end of the budget period, it was discovered that inflation had been 2% and that the market had been worth $65 million

What is the sales revenue figure which should be used when assessing company performance (to one decimal place)?

• $40.7 million

• $32.5 million

• $23.9 million

• $60.5 million

In a balanced scorecard system of performance measurement, which of the following is most likely to be used as a measure of performance from the customer perspective?

• Increase in size of product range

• Percentage of customers making repeat orders

• Number of orders won per sales representative

• Speed of processing an order