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SMA M1 – Module Quiz 2 (Part E)

YOU SCORED 6 OUT OF A POSSIBLE 10 [60%]

Question 1 Marks: 0
Which one of the following is a form of strategic management accounting support for the operational management task of rewarding?

Answer Options
You answered D. The correct answer is A
USER SELECTION CORRECT ANSWER

A Measuring individual, departmental, team and organisational performance

B Preparing budgets and forecasts, using costing systems and providing historical data

C Using budgets to coordinate various departments and communicate organisational priorities to employees

D Identifying causes of variances and establishing performance incentives and criteria

Answer Explanation

A is correct because individual, departmental, team or organisational performance is measured and reported as a basis for incentives and rewards.

B is incorrect because preparing budgets and forecasts is part of the planning process.

C is incorrect because budgeting, coordinating and communicating budget priorities is part of the budget implementation process.

D is incorrect because these are parts of the control process.

Module: 1 > Part: E > Part E: Analytical techniques available to management accountants > Table 1.7 > Page: 32

Question 2 Marks: 1
Which type of accounting information is used by a corporation to make decisions about its operations?

Answer Options
You answered C. The correct answer is C

USER SELECTION CORRECT ANSWER

A Auditor reports

B Cash flow statements

C Budgets and forecasts

D Statements of financial position

Answer Explanation

C is correct as it identifies budgets and forecasts as information used to make internal decisions.

A, B, and D are incorrect because this information is used for decision-making by external groups rather than the organisation itself.

Module: 1 > Part: E > Analytical techniques available to management accountants > Page: 32

Question 3 Marks: 0
PoshGowns Pty Ltd (PoshGowns) is a clothing manufacturer focusing on the youth fashion market. Two years ago, an international competitor entered the
local market and opened a chain of stores. The competitor offers ‘fashion at an affordable price’ and has captured a significant share of PoshGown’s market
with this strategy.

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Which one of the following analysis techniques would be most relevant to PoshGowns in countering the threat?

Answer Options
You answered D. The correct answer is C
USER SELECTION CORRECT ANSWER

A PEST analysis

B Product life cycle analysis

C Porter's five forces analysis

D Customer profitability analysis

Answer Explanation

C is correct because Porter’s five forces analysis is a tool for analysing threats in the organisation’s industry—specifically, competitors.

A is incorrect because it does not address the threat in PoshGown’s market. It is focussed on broader economic and social issues.

B is incorrect because fashion items have short life cycles, and understanding this short life cycle is not going to help counter the competitive threat.

D is incorrect because customer profitability is not the presenting issue for PoshGowns; rather, the issue is the loss of market share.

Module: 1 > Part: E > Analytical techniques available to management accountants > Porter's five forces model > Page: 39

Question 4 Marks: 1
Which one of the following is a strategic management process?

Answer Options
You answered D. The correct answer is D
USER SELECTION CORRECT ANSWER

A Providing costings and other information as required to guide routine and non-routine decisions.

B Analysing variances, developing performance and reward systems, and evaluating internal controls.

C Resource allocation via budgeting, and giving information to employees setting expectations of activity.

Evaluate and rank the feasibility and profitability of strategies, considering both capital budgeting (discounted cash flow measures) and strategic
D
costs/benefits.

Answer Explanation

D is correct because this is an activity associated with the strategic task of strategic planning and choice. All the other options are 'generic operational
management tasks'.

Module: 1 > Part: E > Analytical techniques available to management accountants > Page: 32

Question 5 Marks: 1
Which one of the following statements regarding risks is not correct?

Answer Options
You answered C. The correct answer is C
USER SELECTION CORRECT ANSWER

A Reputational risk is the risk of damage to an organisation's reputation or brand.

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B Operational risk is the risk of errors or mistakes occurring in the tasks or activities undertaken by an organisation.

C Financial reporting risk is the risk of not providing internal management with accurate and clear information.

D Quality risk is the risk of failing to design products or services appropriately or failing to ensure policies and procedures are followed.

Answer Explanation

C is correct because financial reporting risk is the risk of not providing external users (not internal management) with accurate and clear information.

Module: 1 > Part: E > Analytical techniques available to management accountants > Strengths, weaknesses, opportunities
and threats > Page: 34

Question 6 Marks: 1
Which of the following best describes that part of the strategic management process within an organisation that examines its competitive position in relation
to products, production facilities, non-current assets, people, organisational structures and current operating results?

Answer Options
You answered B. The correct answer is B
USER SELECTION CORRECT ANSWER

A SWOT analysis

B Internal analysis

C External analysis

D Stakeholder analysis

Answer Explanation

B is correct because all of the issues identified in this question (products, production facilities, etc.) are mainly internal concerns and so internal analysis is
the best answer. Much of the management accountant’s role is to help the organisation identify and create a sustainable competitive advantage. So, while
the word ‘competitive’ may intrinsically have an external focus, the organisation still needs to look internally to maximise its strengths and improve its
competitive position.

A is incorrect. While SWOT might have a partly internal focus, it is not the best answer because it also has a 50 per cent external focus.

C is incorrect because the issues are mainly internal.

D is incorrect because no specific mention is made of stakeholders.

Module: 1 > Part: E > Part E: Analytical techniques available to management accountants > Internal analysis > Page: 32

Question 7 Marks: 0
Which of the following statements best describes the purpose of product life cycle analysis?

Answer Options
You answered B. The correct answer is C
USER SELECTION CORRECT ANSWER

A To increase the probability that new products will become ‘stars’

B To determine the market share and growth potential of an organisation’s products

C To identify and manage the risks associated with an organisation’s product offerings

D To understand and plan for the cash flow required by an organisation’s product offerings

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Answer Explanation

C is correct because the main purpose of product life cycle analysis is similar to that of portfolio analysis—to reduce risk. As such, product life cycle analysis
is an important part of the strategic analysis for an organisation. Understanding risk is critical to strategic planning.

A is incorrect as a ‘star’ is a product classification associated with the Boston Consulting Group (BCG) growth/share matrix, not product life cycle analysis.

B is incorrect as market share and growth measures are associated with the BCG matrix, not product life cycle analysis.

D is incorrect as cash flow management is just one aspect of the risk management process associated with understanding an organisation’s product
portfolio.

Module: 1 > Part: E > Internal Analysis > Portfolio Theory and Product Life Cycle > Page: 36

Question 8 Marks: 0
Which of the following statements does not correctly describe an organisation’s value chain?

Answer Options
You answered C. The correct answer is D
USER SELECTION CORRECT ANSWER

A The primary and support activities from which the organisation can derive a competitive advantage

B A series of linked and strategically relevant activities that deliver products or services that the organisation’s customers value

C A set of interrelated activities that provide opportunities for optimising the collective value derived from the interdependencies

An aggregation of independent and strategically relevant activities that collectively contribute to the economic value generated by the
D
organisation

Answer Explanation

D is correct because the value chain comprises primary and secondary (or support) activities that are interrelated and deliver products or services that the
organisation’s customers value. Thus, an organisation’s value chain cannot be an aggregation of independent, yet strategically relevant, activities collectively
contributing to the economic value generated by the organisation.

Options A, B and C are incorrect because they provide valid descriptions of value chains, as noted above.

Module: 1 > Part: E > Value analysis > Organisation value chains > Page: 33

Question 9 Marks: 1
The automobile industry has become increasingly fragmented as the major companies narrow the scope of their activities to those tasks or functions where
they have a competitive advantage. For example, many automotive companies specialise in the design of new cars and outsource  the manufacture of parts
and components used in the assembly of new vehicles.

In designing a vehicle, assume the six major development activities that can be performed by an automotive maker are as follows:

Development activities

I. Product engineering—designing parts and components

II. Basic engineering—developing the basic technological features of the product
III. Concept generation—conducting market research to identify future market needs, and combining these needs with the technical possibilities of
existing and future technology to develop a product concept
IV. Pilot run—testing the performance of the manufacturing process prior to entering full-scale production
V. Product planning—developing the product concept into a product design, including styling and target costs
VI. Process design—designing manufacturing processes for the new product

Taking a value chain perspective, what is the sequential order in which the six development activities should be performed by the automotive maker?

Answer Options
You answered A. The correct answer is A
USER SELECTION CORRECT ANSWER

A Activities III, V, II, I, VI and IV

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B Activities V, III, I, II, VI and IV

C Activities III, II, V, I, VI and IV

D Activities I, III, V, II, VI and IV

Answer Explanation

A is correct. In taking a value chain perspective, the sequential order in which the six major development activities for designing a vehicle would be
performed by the automotive maker is activities III, V, II, I, VI and IV.

Sequence Activity Description of development activity

1 III Concept generation - conducting market research to identify future
market needs and combining these needs with the technical
possibilities of existing and future technology to develop a product
concept.
2 V Product planning - developing the product concept into product
design, including styling and target costs.
3 Basic engineering - developing the basic technological features of the
II
product.
4 I Product engineering - designing parts and components.
Process design - developing manufacturing processes for a new
5 VI
product.
6 IV Pilot run - testing the performance of the product and the
manufacturing process prior to entering full-scale production.

Options B, C and D are incorrect because they list the development activities in the incorrect order.

Module: 1 > Part: E > Value analysis > Page: 33

Question 10 Marks: 1
Which one of the following is the most likely pairing of an item in the Boston Consulting Group growth/share matrix and the product life cycle?

Answer Options
You answered A. The correct answer is A
USER SELECTION CORRECT ANSWER

A Star | Growth

B Dog | Introduction

C Cash cow | Growth

D Question mark | Star

Answer Explanation

A is correct as a star describes high market share and a high rate of market growth. During the growth stage of the product life cycle (PLC) a rapid increase
in market size is expected, and it is hopeful or likely that you are gaining market share. 

B is incorrect as dogs are more closely linked to maturity or decline. 

C is incorrect as cash cows are most closely linked to maturity because the rate of market growth is low during the maturity phase. 

D is incorrect as this links two items within the BCG Matrix, rather than linking the BCG Matrix with the PLC. 

Module: 1 > Part: E > Internal analysis > Page: 37-38

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