Q.1 What is the primary focus of Strategic Management Accounting (SMA)?
Internal cost control
Competitor analysis and decision support
Financial reporting
Tax compliance
Explanation - SMA emphasizes providing information on competitors and the external environment to aid strategic decision-making, beyond traditional cost control.
Correct answer is: Competitor analysis and decision support
Q.2 Which of the following best describes a 'value chain analysis' in SMA?
A tool to calculate tax liabilities
A process of identifying costs in production only
An analysis of activities that add value to a product or service
A review of financial ratios
Explanation - Value chain analysis focuses on identifying activities that add or reduce value in the production and delivery of goods/services.
Correct answer is: An analysis of activities that add value to a product or service
Q.3 Which tool is commonly used in SMA for competitor performance assessment?
SWOT analysis
Ratio analysis
Variance analysis
Trial balance
Explanation - SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis is often used in SMA to assess competitor performance and positioning.
Correct answer is: SWOT analysis
Q.4 In SMA, benchmarking is best defined as:
Comparing actual performance with budgets
Measuring performance against industry leaders
Setting targets for cost control
Calculating standard costs
Explanation - Benchmarking involves comparing internal performance against best-in-class organizations to identify improvement opportunities.
Correct answer is: Measuring performance against industry leaders
Q.5 Strategic Management Accounting differs from traditional management accounting because it:
Focuses only on short-term costs
Is limited to internal operations
Considers external competitors and markets
Deals with preparing balance sheets
Explanation - SMA looks beyond internal information to consider external factors like competitor strategies and market conditions.
Correct answer is: Considers external competitors and markets
Q.6 Which concept is emphasized in SMA for long-term business success?
Cash flow management
Tax minimization
Sustainability and competitive advantage
Historical cost analysis
Explanation - SMA supports strategies that create sustainable competitive advantage, not just short-term gains.
Correct answer is: Sustainability and competitive advantage
Q.7 What does 'strategic positioning' in SMA aim to achieve?
Reduce production errors
Improve taxation reporting
Differentiate the firm from competitors
Reconcile bank statements
Explanation - Strategic positioning involves using resources and strategies to stand out in the marketplace.
Correct answer is: Differentiate the firm from competitors
Q.8 Which framework is used in SMA to analyze external business environment?
Porter’s Five Forces
Trial balance
Activity-based costing
Zero-based budgeting
Explanation - Porter’s Five Forces framework analyzes industry competitiveness and external pressures.
Correct answer is: Porter’s Five Forces
Q.9 Customer profitability analysis in SMA helps organizations to:
Calculate net income
Identify the most valuable customers
Reduce competitor market share
Improve tax compliance
Explanation - Customer profitability analysis helps businesses focus on customers who provide long-term value.
Correct answer is: Identify the most valuable customers
Q.10 Balanced Scorecard is associated with SMA because it:
Tracks financial ratios only
Provides multi-dimensional performance measures
Focuses only on cost control
Is a statutory requirement
Explanation - Balanced Scorecard includes financial, customer, internal process, and learning perspectives, aligning with SMA goals.
Correct answer is: Provides multi-dimensional performance measures
Q.11 Which of the following is NOT a tool of SMA?
Competitor analysis
Target costing
Budget variance analysis
Value chain analysis
Explanation - Budget variance analysis is part of traditional management accounting, while the others belong to SMA tools.
Correct answer is: Budget variance analysis
Q.12 Target costing in SMA means:
Calculating product cost after production
Setting allowable cost based on market price
Focusing on historical cost analysis
Adjusting costs based on tax laws
Explanation - Target costing starts with market price and desired profit margin, then determines the maximum allowable cost.
Correct answer is: Setting allowable cost based on market price
Q.13 Which type of costing is most aligned with SMA for long-term strategy?
Lifecycle costing
Absorption costing
Marginal costing
Standard costing
Explanation - Lifecycle costing considers costs across a product’s entire life, aligning with strategic decision-making.
Correct answer is: Lifecycle costing
Q.14 Porter’s generic strategies include cost leadership, differentiation, and:
Market penetration
Focus
Diversification
Value engineering
Explanation - Porter identified three main strategies: cost leadership, differentiation, and focus.
Correct answer is: Focus
Q.15 Strategic cost management in SMA emphasizes:
Reducing taxes
Aligning costs with strategy
Preparing financial accounts
Bank reconciliation
Explanation - Strategic cost management ensures costs are managed in line with overall business strategy.
Correct answer is: Aligning costs with strategy
Q.16 Activity-based costing in SMA helps firms by:
Simplifying overhead allocation
Ignoring non-value-added activities
Tracing costs to activities and products
Eliminating direct costs
Explanation - ABC assigns costs to activities and then to products, providing more accurate costing data.
Correct answer is: Tracing costs to activities and products
Q.17 Which SMA technique supports competitive pricing strategy?
Target costing
Standard costing
Variance analysis
Incremental budgeting
Explanation - Target costing aligns product design and costs to meet market-driven pricing requirements.
Correct answer is: Target costing
Q.18 Which SMA tool examines internal strengths and external threats?
SWOT analysis
Ratio analysis
Trial balance
Variance analysis
Explanation - SWOT analysis evaluates internal strengths/weaknesses and external opportunities/threats.
Correct answer is: SWOT analysis
Q.19 Which type of information is MOST relevant for SMA decision-making?
Historical costs
Competitor pricing
Trial balance data
Tax liabilities
Explanation - Competitor pricing helps businesses position themselves strategically in the market.
Correct answer is: Competitor pricing
Q.20 In SMA, long-term cost reduction strategies are often supported by:
Learning curve analysis
Bank reconciliation
Standard costing
Tax audits
Explanation - Learning curve analysis highlights how costs decrease with experience and efficiency gains over time.
Correct answer is: Learning curve analysis
Q.21 The main objective of SMA is to:
Ensure statutory compliance
Assist in strategic decision-making
Prepare financial statements
Monitor tax laws
Explanation - SMA focuses on providing relevant information for long-term and competitive decisions.
Correct answer is: Assist in strategic decision-making
Q.22 Customer relationship management in SMA focuses on:
Building long-term profitable customer relations
Preparing trial balances
Minimizing tax obligations
Eliminating non-financial information
Explanation - SMA emphasizes analyzing and managing customer profitability to sustain business growth.
Correct answer is: Building long-term profitable customer relations
Q.23 A strategic management accountant is MOST likely to advise management on:
Tax filing deadlines
Competitor strategies
Auditing procedures
Internal controls
Explanation - SMA professionals provide insights into competitor actions and market positioning.
Correct answer is: Competitor strategies
Q.24 Which SMA tool measures financial and non-financial performance together?
Balanced Scorecard
Variance analysis
Trial balance
Ratio analysis
Explanation - Balanced Scorecard integrates both financial and non-financial measures aligned with strategy.
Correct answer is: Balanced Scorecard
Q.25 Lifecycle costing is useful in SMA because it:
Focuses only on current period costs
Ignores product design costs
Considers costs from development to disposal
Deals with statutory reporting
Explanation - Lifecycle costing evaluates costs throughout a product’s life cycle, ensuring strategic pricing and profitability.
Correct answer is: Considers costs from development to disposal