Management Accounting and Strategy Quiz

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Questions and Answers

What is the primary purpose of stakeholder classification using the ICE mnemonic?

To identify stakeholders who are able to affect the organization’s activities (correct)

To understand the dynamics of stakeholder influence on a strategic decision

To evaluate the suitability of a proposed strategy

To prioritize stakeholders based on their power and interest

What is the recommended management strategy for dealing with stakeholders who have high interest but low power?

Keep Informed (correct)

Keep Satisfied

Minimal Effort

Treat as a Key Player

What is the definition of a stakeholder?

A group or individual who is affected by or can affect the organization’s activities (correct)

A group or individual who is affected by the organization’s activities

A group or individual who can affect the organization’s activities only

A group or individual who is not affected by the organization’s activities

What is an incremental budget?

A budget that is based on the previous year, adjusted for known changes Signup and view all the answers

What is the purpose of stakeholder mapping?

To understand the dynamics of stakeholder influence on a strategic decision Signup and view all the answers

Which statement about the participation of junior management in the budget setting process is NOT true?

Junior management should not be involved in the budget setting process Signup and view all the answers

What is the primary purpose of an organization's strategy?

To achieve a specific goal Signup and view all the answers

What type of linkages deal with the impact of strategy implementation on strategy formulation?

Both Forward and Backward Linkages Signup and view all the answers

What is the key characteristic of an emergent corporate strategy?

Its final objective is unclear and develops during its life Signup and view all the answers

What happens to emergent strategies over time?

They evolve and change as needs arise Signup and view all the answers

What is the main difference between Mintzberg's intended strategy and other types of strategies?

It is a mix of deliberate and emergent strategy Signup and view all the answers

Which of the following statements is NOT true about emergent strategies?

They are proactive and well-developed in advance Signup and view all the answers

What is a characteristic of the emergent approach?

Consistent with actual practice in organisations Signup and view all the answers

What is the primary effect of barriers to entry on firms outside an industry?

Affect the ability of firms to enter and take advantage of profit opportunities Signup and view all the answers

What is a characteristic of a substitute in Porter's five forces model?

An alternative product or service that performs the same function Signup and view all the answers

What is a limitation of the unrealised intent and unmet objectives approach?

It does not account for experimentation and learning Signup and view all the answers

What is a characteristic of deliberate strategy?

It is a planned and intentional strategy Signup and view all the answers

What is an example of a barrier to entry?

The relative size of existing firms in the industry Signup and view all the answers

What is a pitfall in selecting benchmarks?

Selecting benchmarks that are consistently performing below industry averages Signup and view all the answers

What is a characteristic of an activity-based costing system?

It allocates costs to products based on direct labour-hours Signup and view all the answers

What is the role of a cost driver in activity-based costing?

It is a factor that causes a change in the cost of an activity Signup and view all the answers

What is a limitation of traditional absorption costing?

It under-estimates overhead costs for high volume products Signup and view all the answers

What is a benefit of incorporating a continuous improvement mindset based on benchmarking results?

It helps to identify areas where industry averages are not being met Signup and view all the answers

What is a characteristic of a well-designed benchmarking process?

It incorporates a continuous improvement mindset Signup and view all the answers

What is an advantage of involving lower-level personnel in the budgeting process?

It improves morale and motivation Signup and view all the answers

What is a characteristic of the top-down approach to budgeting?

It imposes budgets on junior managers Signup and view all the answers

What is a criticism of traditional budgets based on fixed annual periods?

They ignore key drivers of shareholder value Signup and view all the answers

What is the most appropriate system of budgeting when there are high levels of discretionary spending and powerful stakeholders to whom spending choices must be justified?

Rolling budgets Signup and view all the answers

What is a difference between the top-down and bottom-up approaches to budgeting?

The realism of budget targets Signup and view all the answers

What is a potential consequence of traditional budgeting techniques in a fast-moving business environment?

Inadequate budget flexibility Signup and view all the answers

Study Notes

Unrealised Intent and Unmet Objectives

Deliberate and unrealised strategy is when an organisation's actual strategy differs from the intended one.

Emergent Approach to Strategy

Allows experimentation about the strategy to take place
Organisation may be slow to respond to market changes
Consistent with actual practice in organisations
Managers of divisions granted significant autonomy

Barriers to Entry

Affect the ability of firms outside an industry to enter and take advantage of profit opportunities
Examples: relative size of existing firms in the industry, capital requirements, switching costs, product differentiation

Porter's Five Forces Model

Substitute refers to an alternative product or service that performs the same function for the consumer

Stakeholders

Any group or individual who is affected by or can affect the organisation's activities
Stakeholder mapping is a technique used to understand the dynamics of stakeholder influence on a strategic decision
Recommended management strategy for dealing with stakeholders with high interest but low power is 'Keep Informed'

Budgeting for Strategy in Action

Incremental budget: a budget based on the previous year, adjusted for known changes
Participation of junior management in the budget setting process can lead to more realistic budgets and increased motivation

Strategy Formulation

Forward Linkages deal with the impact of strategy implementation on strategy formulation
Emergent corporate strategy is a strategy whose final objective is unclear and whose elements are developed during the course of its life
Emergent strategies generally evolve and change as needs arise

Activity-Based Costing

Uses a number of activity cost pools, each of which is allocated to products on the basis of direct labour-hours
A cost driver is a factor that causes a change in the cost of an activity
Traditional absorption costing tends to under-estimate overhead costs for high volume products

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Description

Test your understanding of management accounting and strategy with this tutorial quiz, covering topics such as strategy implementation and formulation. Evaluate your knowledge of forward and backward linkages, and more. Take the challenge!