Cima P3 Exam Question No 41

Question No 41:

Balanced scorecard
A process to implement balanced scorecard (BSC)

1. A clear vision BSC communicated
2. Demonstration that senior management are committed to the idea
3. Education given to all managers and staff
4. Consultative meetings and presentations
5. Participation encouraged by all staff and management
6. Plan and determine how change needs to occur
7. Implement change
8. Reward and staff appraisal systems modified
9. Review and feedback obtained

Cima P3 Exam Question No 40

Question No 40:

Balanced scorecard disadvantages?

• Historical performance no guide tothe future
• Manipulation performance measures
• Costly 'bespoke' information systems support BSC
• Conflict or 'trade off' between BSC perspectives
• Too many performance measures can distort the benefits

Cima P3 Exam Question No 39

Question No 39:

Balanced scorecard advantages?

• Long-term view of performance
• Non-financial as well as financial measures considered
• Performance measures can be 'tailor made'
• Monitor and control operations
• Communicate and publicise goals to all stakeholders
• Link to remuneration of management and staff

Cima P3 Exam Question No 38

Question No 38:



Balanced scorecard the four perspectives?

• Customer perspective e.g. what must we do right for our customers?
• Internal perspective e.g. what must we excel at internally?
• Innovation and learning perspective e.g. how can we innovate?
• Financial perspective e.g. how do we satisfy shareholders?

Cima P3 Exam Question No 37

Question No 37:

Divisionalisation and controlling people methods of gathering data or information?

• Questionnaires
• Interviews
• Observations
• Existing documentation

Cima P3 Exam Question No 36

Question No 36:

Divisionalisation and controlling people classifying sources of information?

• Financial information and non-financial information.
• Quantitative information and qualitative information.
• Informal and formal information.
• Internal and external information.   

Cima P3 Exam Question No 35

Question No 35:

Divisionalisation and controlling people Consideration of Setting Targets?

• The difficulty of the environment the division operates within
• Motivation and aspirations of the manager
• Only ratios, costs or revenues the manager can control should be assessed   

Cima P3 Exam Question No 34

Question No 34:

Divisionalisation and controlling people methods of appraising divisions?

•  Operating profit (net profit) margin
•  Residual Income
•  Economic Value Added
•  Variance analysis
•  Ratio analysis
•  Other ratios (sales per square foot or transport cost per tonne)
•  Other information (staff turnover, market share, growth, new customers)   

Cima P3 Exam Question No 33

Question No 33:

What is divisionalisation and controlling people economic value added (EVA)?

EVA is an estimate of economic profit, measured as Net Operating Profit after Taxes (or NOPAT) less the money cost of capital. MVA and EVA are strongly correlated.
EVA =
Net cash operating profit after tax
('adjusted' for accounting distortions e.g. add back depreciation)
less
Economic depreciation (based on market value or replacement cost of assets)
less
Amortised R&D, advertising, marketing, goodwill, brand or new product development cost
less
('adjusted' capital employed x cost of capital)

Cima P3 Exam Question No 32

Question No 32:

What is Divisionalisation and controlling people Residual income (RI)?

Residual income is the profit earned by a division less a 'notional interest charge' for the
investment of finance within it.

Residual income = Profit before interest and tax (PBIT) - Capital employed x head office % interest charge

Residual income uses the same profit before interest and tax and capital employed value as the ROCE measure. Residual income is an absolute measure that deducts from profit before interest and tax, an imputed 'notional' interest charge using a cost of capital or return required.

Cima P3 Exam Question No 31

Question No 31:

What is Divisionalisation and controlling people the controllability principle?

The controllability principle is concerned with assessing performance based upon measures that can be controlled only by a manager and omitting any items which are uncontrollable.

Cima P3 Exam Question No 30

Question No 30:

What is Divisionalisation and controlling people Controlling subsidiaries?

• Mission statement, goals and objectives.
• Performance measurement systems
• Systems for strategic planning and control
• Management appraisal process.
• Reward
• Culture

Cima P3 Exam Question No 29

Question No 29:

Divisionalisation and controlling people Recommended process to develop a performance measurement system?

1. Senior management 'a clear vision of change'
2. Benchmark with other organisations
3. Participation by staff throughout the process
4. Targets/criteria should be set after consultation
5. Reward systems should be modified
6. Introduction of new appraisal procedures.
7. Training for managers and staff
8. Review and monitor the new system

Cima P3 Exam Question No 28

Question No 28:

What is Divisionalisation and controlling people The functions of a performance measurement system?
 

• Publicize and communicate direction
• Control the organisation.
• Plan and allocate resources
  

Cima P3 Exam Question No 27

Question No 23:

What is Divisionalisation and controlling people Investment center?

An investment center is a profit center where its performance is also measured by its own responsibility to invest and fund its own resources and activities; therefore return on capital employed or return on investment, would be used normally, when appraising performance.

Cima P3 Exam Question No 26

Question No 26:

What is Divisionalization and controlling people Profit center?

A profit center is when a manager will be accountable for both creating revenue and controlling costs. The division or center can therefore be assessed on profit earned.

Cima P3 Exam Question No 25

Question No 25:

What is the Divisionalisation and controlling people Revenue center?

A revenue center is when a manager will be accountable for creating revenue or sales income only, not cost.

Cima P3 Exam Question No 24

Question No 24:

What is Divizionalization and controlling people Cost center?

A cost center can be a production department, location, function or item of equipment, when a division is appraised in this form; the manager has responsibility to control certain costs, not revenue.

Cima P3 Exam Question No 23

Question No 23:

What is Divisionalization and controlling people Decentralization - Advantages?

• More initiative to sub-ordinate.
• More innovation.
• Greater responsibility to subordinate.
• Greater motivation of worker.
• Reduce workload of line manager.
• Develops employees.
• Decision making better quality and faster (division becomes specialist and closer to its environment).
• Head office has more time for strategy rather than day-to-day involvement.
• Divisional performance comparisons can be made.

Cima P3 Exam Question No 22

Question No 22:

What is the divisionalization and controlling people Centralization - Advantages?

• · Better control and coordination

• · Greater standardization/efficiency

• · Corporate view rather than the individuals own point of view

• · Lowers overhead (less middle management)

• · Less duplication of a managers work

• · Strong leadership

• · Quicker decisions (no need to get authorization).

• · Standardized policies, procedures and documentation.

Cima P3 Exam Question No 21

Question No 21:

What is Management control systems the components of a control system?

• Sensor - detects the information it is programmed or instructed to
• Comparator - comparison of results (costs, productivity or quality) against a
• predetermined standard or plan
•  Effector - automatic or human action based upon exception reporting

Cima P3 Exam Question No 20

Question No 20:

What is Management control systems open and closed loop control systems?

In an open loop control (double feedback loop) system, corrective action is not automatically taken. The output of the system is measured, however environmental factors will also be considered, along with internal feedback before any control action is taken. In a closed loop control (single feedback loop) system, the output is automatically compared to a pre-determined standard; any exceptions and control action will be automatically taken.

Cima P3 Exam Question No 19

Question No 19:

What is Management control systems feed-forward control?

· Forecasting ahead and doing something now before the event occurs
· Closing the door before you can see the horse will bolt
· Cash budgets would be an example of this   

Cima P3 Exam Question No 18

Question No 18:

What is the Management control systems Feedback control?

• · Can be negative or positive
• · Based upon comparison of actual to budgeted performance
• · Control would be closing the door after the horse has bolted

Cima P3 Exam Question No 17

Question No 17:

What is Management control systems The life cycle of the organization?

The functional structure is normally adopted by an entrepreneurial structure because the organization grows and requires more specialization and control. Overtime as the organization becomes larger, more complex and more diversified in terms of its products and markets, the next step is often to adopt a divisional structure. When companies become really large and diverse, they are often composed of a number of independent subsidiaries or divisions, these often established as separate legal entities within a group.

Cima P3 Exam Question No 16

Question No 16:

What are the Management control systems Disadvantages of Project-based, team or matrix organizational structures?

• Complex to maintain
• Dual authority can create conflict
• Too many meetings to get things done.
• Personality clashes

Cima P3 Exam Question No 15

Question No 16:

What is Management control systems Advantages of Project-based, team or matrix organizational structures?

· Improved communication
· Dispersion of power and influence
· Creative and innovative synergy.
· Greater customer or product focus

Cima P3 Exam Question No 14

Question No 14:

What is the  Management control systems Definition of Project-based, team or matrix organisational structures?

Where project teams and functions (departments) co-exist together. Project team members
selected from various internal departments and coordinated by a project manager who has
accountability to meet project deliverables e.g. time, cost and quality.

Cima P3 Exam Question No 13

Question No 13:

What is Management control systems Benefits of shared service centres?

· Economies of scale
· Divisions retain entrepreneurial speed and agility.
· Reduction in cost through shared operations.
· Standardising technology and processes
· Easier to support to multiple business units
· Could deliver higher quality service

Cima P3 Exam Question No 12

Question No 12:

What is the Management control systems Definition of Shared service centres?

Shared service centres 'consolidate' one or more back-office operations for multiple divisions of the same group to use e.g. head office maintains centrally the processes of finance, information technology, customer service and human resources.

Cima P3 Exam Question No 11

Question No 11:

What are the Management control systems Disadvantages of the divisional structure?

• High cost of head office 
• Duplication of functions (or departments) 
• Reluctance to delegate by senior
• Management
• Lack of goal congruence

Cima P3 Exam Question No 10

Question No 10:

What is Management control systems Disadvantages of the divisional structure?

• High cost of head office
• Duplication of functions (or
• departments)
• Reluctance to delegate by senior
• management
• Lack of goal congruence

Cima P3 Exam Question No 9

Question No 9:

What is Management control systems Advantages of the divisional structure?

Answer:

• Quicker decision making
• Focus on product and market
• Performance
• Ring fencing of financial results
• More empowerment
• Good training ground for managers.
• Frees up senior management time

Cima P3 Exam Question No 8

Question No 8:

What is Management control systems Disadvantages of functional structure?

• Lack of communication by departments.
• Conflict between departments
• Bureaucracy, rigidity and tight 
• supervision
• Specialization  of tasks removes
• initiative
• Lack of flexibility for change
• Lack of product or customer
• focus

Cima P3 Exam Question No 7

Question No 7:

What is Management control systems Advantages of functional structure?

· Easier coordination and control
· Greater efficiency
· More effective career progression
· Greater synergy

Cima P3 Exam Question No 6

Question No 6:

What is Management control systems Disadvantages of Small or entrepreneurial structure?

• High reliance on key personnel
• Founders expertise lacking
• Poor financial controls
• Higher risk to investors
• Lack of economies of scale
• Less brand recognition
  

Cima P3 Exam Question No 5

Question No 5:

What is Management control systems Advantages of Small or entrepreneurial structure?

· Creative and dynamic
· Flexible to adapt and change
· More varied tasks for staff

Cima P3 Exam Question No 4

Question No 4:

What is Management control systems Drawbacks from narrow span of control e.g. subordinates tightly supervised?

Answer:

Increased overhead
Tighter supervision and control can de-motivate
Less decision making authority given to subordinates

Cima P3 Exam Question No 3

Question No 3:

What is Management control systems Benefits from narrow span of control e.g. subordinates tightly supervised.

Answer:

1· Manager not 'over loaded' by subordinates
2· More time can be spent by superior with each sub-ordinate
3· Improves communication
4· Retain staff by the increased opportunity to promote them
5· Greater control and coordination

Cima P3 Exam Question No 2

Question No 2:

What is Management control systems Drawbacks from increasing layers of authority?

Answer:

Increased overhead
Vertical communication difficulties
Senior management become more remote
Smaller steps when staff promoted.

Cima P3 Exam Question No 1

Question No 1:

What are the Management control systems Benefits from increasing layers of authority (scalar chain)?


Answer:

· More promotion opportunity for staff
· Retain staff by a structured career path
· Greater control and coordination