AICPA CPA-Business Exam - Topic 1 Question 52 Discussion

Actual exam question for AICPA's CPA-Business exam

Question #: 52
Topic #: 1

Micro Manufacturers uses a performance reporting system that combines both financial and nonfinancial measures to evaluate division performance. All of the following measure operational efficiency, except:

AOperating leverage.

BDays' sales in accounts receivables.

CInventory turnover.

DResidual income.

Show Suggested Answer

Suggested Answer: D

Choice 'd' is correct. Residual income measures profitability in excess of a target rate of return.

Operational efficiency is not considered.

Choices 'a', 'b', and 'c' are incorrect. Operating leverage, days' sales in accounts receivable, and inventory are all measures of operational efficiency, specifically, efficiency in managing working capital.

by Cecily at May 29, 2022, 08:29 PM

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Jesse

4 months ago

Operating leverage is more about fixed costs, not efficiency.

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Alberto

4 months ago

Days' sales in accounts receivables is definitely about efficiency!

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Cathrine

4 months ago

Wait, are we sure about that? I thought all of these were efficiency metrics.

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Josphine

4 months ago

Totally agree, it's more of a profitability measure.

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Noelia

4 months ago

Residual income isn't really about operational efficiency.

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Dominga

5 months ago

I recall that operating leverage relates to fixed costs and how they impact profits, so it might not be about operational efficiency directly.

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Mose

5 months ago

I practiced a similar question where we had to identify which metrics were financial versus operational. I feel like days' sales in accounts receivables might not fit.

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Shayne

5 months ago

I think I remember that operational efficiency measures focus on how well resources are used, but I'm not sure about residual income.

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Nieves

5 months ago

I’m leaning towards residual income as the odd one out since it’s more about profitability than efficiency. But I could be wrong!

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Arleen

5 months ago

The question is asking about an organization's statement of what it wants to become, so I think the answer is corporate vision. That seems to be the best fit based on the options provided.

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Lasandra

5 months ago

I've worked with data extensions before, so I feel pretty confident about this. Using data retention and limiting custom fields are definitely the way to go. The other options don't seem as relevant.

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