Free CPA Australia SMA Exam Flashcards

They interpret financial and operational evidence to help managers choose, implement and evaluate strategy. Useful advice explains value drivers, alternatives, risks and assumptions rather than merely reporting historical totals.

A shareholder measure focuses on returns to owners. Customers, employees and other stakeholders can value different outcomes, such as service quality or safety; identify whose value is measured before judging a strategy.

Compare results with objectives and test the assumptions behind the strategy. Feed the findings into revised choices and implementation; an approved strategy still needs evaluation when conditions change.

Strengths and weaknesses concern the organisation’s resources and capabilities. Opportunities and threats concern its external environment. A strong internal capability is not an external opportunity simply because it can be exploited.

Customers can meet the same underlying need through a different product or service. An attractive alternative with low switching costs limits what the industry can charge, even without another identical product.

Data are observations; information gives observations context and meaning; knowledge applies interpretation and experience to guide action. A larger dataset alone does not establish a useful decision.

It protects trust through ethical conduct, responsible resource use and honest reporting. Disclose important uncertainty and limitations rather than hiding inconvenient evidence to secure acceptance of a recommendation.

It answers that user’s question with suitable detail, timing, accuracy and context. Compare its benefit with collection cost; a perfectly accurate historical total may still be irrelevant to a forward-looking choice.

Operational managers often need timely detail about processes and exceptions. Strategic managers need broader trends, future scenarios and external context. Tailor aggregation and frequency to the decision rather than sending everyone one report.

Check definitions, periods, units, provenance and methods; reconcile or triangulate the difference. Explain any remaining uncertainty to the user rather than averaging incompatible figures or quietly selecting the preferred result.

Implementation, migration, training, support, disruption and control risks, together with the decision benefits the system will deliver. Compare alternatives against stakeholder needs and disclose important estimation limits.

Users need to know what the evidence cannot establish. State missing data, uncertain assumptions and constraints on analysis so the apparent precision of a report does not conceal decision risk.

A forecast estimates the likely outcome using current information; a budget sets a plan or target and resource allocation. Updating a forecast need not mean changing the performance target.

1,050 units: sales + desired closing inventory − opening inventory = 1,000 + 150 − 100. Assume no losses or other inventory movements; all three figures refer to the same product and month.

Depreciation allocates an asset’s cost to accounting periods and is not itself a cash payment. Include the actual asset payment when due; separately capture any cash tax effect in a model that includes taxation.

AUD 11,200 = 1,200 × 6 + 4,000. Flex the variable component to actual activity; fixed cost stays unchanged within the stated relevant range. Use this benchmark to separate volume effects from spending or efficiency effects.

AUD 42 adverse = actual quantity purchased × (actual price − standard price) = 210 × (5.20 − 5). This purchase-basis variance compares prices for the same purchased quantity; it does not measure material usage.

AUD 50 adverse = (actual usage − standard quantity allowed for actual output) × standard price = (210 − 200) × 5. Value the extra input at the standard price, keeping price effects separate.

AUD 240 adverse = (actual hours worked − standard hours allowed for actual output) × standard rate = (120 − 110) × 24. Assume no separately recorded idle hours; this isolates hours used, not wage-rate changes.

AUD 60 adverse = actual variable overhead − actual hours × standard variable-overhead rate = 780 − 120 × 6. Use actual hours for the spending comparison; standard hours for actual output belong in the efficiency comparison.

AUD 400 adverse = budgeted fixed overhead − standard fixed overhead absorbed for actual output = 4,000 − 900 × 4. This absorption-based volume variance does not establish that actual cash spending rose.

Deliberate understatement of achievable revenue or overstatement of required resources to make a target easier. Participation can improve local information, but review assumptions and incentives so participation does not reward padding.

Activities and resource requests must be justified and prioritised from a fresh base. Incremental budgeting starts from an existing budget or actual result and adjusts it; inefficient spending can persist unless that base is challenged.

A project is temporary work intended to deliver a distinct outcome. Operations repeatedly sustain the business. A recurring project type can still involve a unique scope, stakeholder group or delivery context.

The sponsor supports the business purpose, authority and resources; the project manager coordinates delivery within the agreed scope and constraints. Sponsorship does not replace daily planning, monitoring and issue management.

Zero: NPV = −10,000 + 11,000/(1.10) = AUD 0. Assume the receipt is the only future cash flow and taxes are ignored. The project exactly earns the stated required return under these assumptions.

11 days: the longest required dependency path sets the earliest finish. The 11-day path is critical; shortening the 8-day path alone will not shorten the project under the stated assumptions.

CPI = earned value/actual cost = 45,000/50,000 = 0.90. The completed work has earned AUD 0.90 of budgeted value per AUD 1 spent; CPI below 1 indicates cost inefficiency, not the project’s calendar delay.

Actual delivery, costs, benefits and stakeholder outcomes against the business case and specifications. Capture lessons and unresolved benefit responsibilities; finishing expenditure or closing contracts alone does not prove that strategic benefits were achieved.

Evaluate a manager using results they can materially influence over the relevant period. Separate managerial performance from the whole division’s results; an allocated corporate cost may affect division profit without being controllable by its manager.

An investment centre is accountable for the assets or capital employed as well as revenues and costs. Its evaluation therefore needs a return-on-capital or similar measure, rather than profit alone.

Validity asks whether the measure captures the intended objective; reliability asks whether it is consistently measured. A consistently recorded complaint count may still poorly represent service quality if customers stop complaining and leave.

Financial, customer, internal business process, and learning and growth (also called innovation and learning). Select objectives and measures that explain the organisation’s strategy; four unrelated lists do not establish those connections.

It expresses proposed links between strategic objectives, such as better capability leading to better service and customer retention. Treat the links as assumptions to test; drawing an arrow is not evidence of causation.

A leading indicator tracks a factor expected to influence a later result; a lagging indicator records an outcome already achieved. Training effectiveness may lead future quality, while past defect rates lag it; context determines usefulness.

20% = controllable operating profit/average controllable operating assets × 100 = 100,000/500,000 × 100. Match the profit period and asset basis; a change in valuation or depreciation policy can change the ratio.

ROI = (operating profit/sales) × (sales/average operating assets). With AUD 100,000 profit, AUD 1,000,000 sales and AUD 500,000 average assets, 10% margin × 2 annual turnovers = 20% annual ROI. Use the same period and scope throughout.

AUD 50,000 = profit − required return × assets = 100,000 − 0.10 × 500,000. The charge and profit use the same annual, controllable operating basis. Positive residual income means profit exceeds the stated capital charge.

An investment earning 15% on the same annual accounting basis can reduce a division’s current 20% ROI while exceeding a 10% required return. Assess the project’s cash flows and risks rather than rejecting it solely to protect the existing ratio.

Compare equivalent processes, definitions, periods and operating conditions, then investigate why performance differs. Copying another organisation’s target without understanding its resources or customer needs can produce an unsuitable standard.

Handlers may rush or avoid complex cases to meet the measured target. Pair speed with outcome measures such as first-contact resolution and service quality, so incentives support the intended objective rather than merely improving the reported number.

AUD 1,500: the driver rate is 30,000/100 = AUD 300 per setup; 5 × 300 = 1,500. Assign this activity pool using setup consumption rather than automatically spreading it by units produced.

AUD 120 = (90,000/9,000) × 12 = AUD 10 per practical-capacity minute × 12 minutes. Use practical capacity, not actual utilised minutes, so unused capacity is visible rather than automatically charged to orders.

AUD 80 = selling price − desired profit = 100 − (20% × 100). The stated percentage is a margin on sales, not a markup on cost; define that basis before calculating a cost target.

Pre-production development and design, plus post-sale support, warranty and disposal obligations. Assess revenues against costs across the product’s life; a decision that saves factory cost may increase costs elsewhere or later.

Target costing works toward an allowable cost when developing or redesigning a product. Kaizen costing pursues continuing cost improvements during operations. Both need quality and customer-value safeguards rather than indiscriminate cost cutting.

Prevention avoids defects; appraisal checks conformity; internal failure corrects defects before customer receipt; external failure concerns defects after customer receipt. Training, inspection, factory rework and warranty repair illustrate the four categories respectively.

AUD 500 = 5,000 − 3,000 − 1,500 on the stated annual cost basis. Revenue or product margin alone misses cost-to-serve. An allocated loss also does not prove all costs would disappear if the customer were dropped.

Make: relevant cost is AUD 11 per unit versus AUD 12 to buy, a saving of AUD 1 per unit. Exclude fixed costs that continue either way; the conclusion assumes equal quality, timing and risk and no opportunity cost of capacity.

Large or unreliable orders can add inventory holding, handling, delay, defect and return costs elsewhere in the chain. Compare total cost and customer outcomes across connected activities rather than optimising the purchasing price in isolation.