Management Chapter 16

An evaluation conducted by one organization on another organization is referred to as a(n) _____ audit. A. external B. competitive C. comparative D. intrinsic E. parallel

A

Control based on the norms, values, shared goals, and trust among group members is referred to as _____ control.

A

Control has been called one of the Siamese twins of management. The other twin is ____. A. planning B. organizing C. leading D. directing E. empowerment

A

Empowerment is important in organizations today because: A. the nature of management has changed. B. employees' jobs have become less challenging. C. employees are more concerned about pay. D. labor unions are growing. E. of the increasing role of technology.

A

In order to gain employee acceptance of a control system, managers should: A. set performance standards that employees view as possible to achieve. B. tell employees that they need not necessarily use the standards. C. focus on controlling negative behavior than enforcing positive behavior. D. set standards low enough that all employees can easily meet them. E. make their own decisions while setting performance standards.

A

Leverage ratios indicate: A. the relative amount of funds in the business supplied by shareholders. B. a company's ability to pay short-term debts. C. management's ability to generate a financial return on sales or investment. D. the profit margins for the last six months. E. the future profits from the current customer base.

A

Liquidity ratios indicate a company's: A. ability to pay short-term debts. B. ability to generate a financial return on sales. C. relative amounts of funds supplied by creditors. D. ability to meet its long-term financial obligations. E. profitability and leverage ratios.

A

On the balance sheet, the amounts a corporation owes to various creditors are referred to as ____. A. liabilities B. assets C. budgets D. diseconomies E. expenses

A

Scenario A: Which of the following control systems does Powertech utilize? A. Bureaucratic control B. Market control C. Clan control D. Democratic control E. Standard control

A

Scenario B: Which of the following approaches to bureaucratic control is described in option 2? A. Feedback B. Feedforward C. Concurrent D. Market E. Clan

A

Scenario C: Which of the following types of control systems does the organization currently use? A. Clan B. Market C. Bureaucratic D. Concurrent E. Feedforward

A

Scenario D: On which of the following control systems does Matthew want the organization to focus? A. Clan B. Market C. Bureaucratic D. Concurrent E. Feedforward

A

Scenario E: On which of the following would Linda be working? A. Balance sheet B. Assets C. Liabilities D. Stockholders' equity E. Profit and loss statement

A

The final step in the control process is: A. taking corrective action. B. setting performance standards. C. measuring performance. D. comparing performance with standards. E. determining deviations.

A

The increasing need for clan control is caused by the: A. changes in the employment relationship. B. unchanging nature of management. C. changes in the economic environment. D. changes in government regulations. E. unchanging nature of employees' jobs.

A

Which of the following is an outcome of bureaucratic controls? A. Inflexible behavior B. Decentralized decision making C. Boundarylessness D. Empowered workforce E. Innovation and creativity

A

A report that shows the financial picture of a company at a given time and itemizes assets, liabilities, and stockholders' equity is referred to as a(n) ____. A. profit and loss statement B. balance sheet C. expense report D. income statement E. budget report

B

An evaluation of the effectiveness and efficiency of various systems within an organization is called a(n) _____ audit. A. human resource B. management C. activity-based D. budget E. six-sigma

B

Electronic monitoring of telemarketers' conversations with potential clients is an example of _____ control. A. feedback B. concurrent C. preliminary D. clan E. feedforward

B

In contrast to bureaucratic controls, market controls involve the use of: A. rules and regulations. B. economic forces. C. authority. D. autocratic power. E. norms.

B

Kate is a financial manager at Nature Feeds, a manufacturer of cattle feed. She makes a budget that shows the anticipated receipts and expenses of the company. The budget also shows her the amount of working capital available and whether the company will need loans. This is the last budget that Kate creates for the upcoming year. Which of the following types of budget is exemplified in this scenario? A. Master budget B. Cash budget C. Cost production budget D. Production budget E. Sales budget

B

A ratio of profit to capital used, or a rate of return from capital, is referred to as ____. A. the debt-equity ratio B. the leverage ratio C. return on investment D. net working capital E. transfer price

C

A(n) _____ is the level of expected performance for a given goal; it is a target that establishes a desired performance level, motivates performance, and serves as a benchmark against which actual performance is assessed. A. goal B. objective C. standard D. control process E. audit

C

At Performance Instruments, all assembly workers must wear specialized gear to reduce possible injuries from minute particles in the manufacturing environment. This requirement best reflects _____ control. A. feedback B. proactive C. feedforward D. reactive E. concurrent

C

Control based on the use of pricing mechanisms and economic information to regulate activities within organizations is referred to as _____ control. A. clan B. feedback C. market D. feedforward E. bureaucratic

C

Control that focuses on the use of information about previous results to correct deviations from the acceptable standard is referred to as _____ control. A. feedforward B. preliminary C. feedback D. audit E. performance

C

Scenario B: Which of the following approaches to bureaucratic control is described in option 1? A. Feedback B. Feedforward C. Concurrent D. Market E. Clan

C

Scenario C: Which of the following types of control systems did the organization most likely use in the past? A. Clan B. Market C. Bureaucratic D. Subjective E. Informal

C

Scenario D: On which of the following control systems do the top managers want to focus? A. Clan B. Market C. Bureaucratic D. Democratic E. Informal

C

Scenario E: On which of the following will Mark be working? A. Balance sheet B. Assets C. Liabilities D. Stockholders' equity E. Profit and loss statement

C

The _____ budget is used for areas of an organization that incur expenses but no revenue, such as human resources and other support departments. A. sales B. production C. cost D. cash E. capital

C

A company's balance sheet shows its: A. areas of improvement. B. projected profit. C. strengths, weaknesses, and threats. D. financial picture at a given time. E. performance over time.

D

A managerial principle stating that control is enhanced by concentrating on the significant deviations from the expected result or standard is referred to as the principle of ____. A. control B. concentration C. progression D. exception E. standardization

D

Core Rentals has begun a new system of allocating costs according to the tasks their employees perform and the amount of time they spend on the particular tasks. This practice adopted by Core Rentals is referred to as ____. A. unit-based accounting B. time-based auditing C. task accounting D. activity-based costing E. allocation costing

D

External audits are generally used for: A. assessing what the company has done for itself. B. evaluating production efficiency. C. evaluating sales effectiveness. D. investigating possible targets for mergers or acquisitions. E. assessing what the company has done for its customers.

D

Jeremy is in charge of production at Tech Farm Equipment. His job responsibilities include eliminating defects in the equipment parts the factory produces. However, he has advised his crew to alert him only when defects exceed 200 per million, which he considers a serious deviation from standards. In this case, Jeremy is using: A. a management audit. B. the principle of deviation. C. clan control. D. the principle of exception. E. behavioral standards.

D

Maria has just reviewed a number of indicators of financial control for her firm. One that worries her indicates that the company may soon have trouble making loan payments and clearing its current accounts receivables. In this case, Maria is concerned about the _____ ratio. A. profit and loss B. profitability C. leverage D. net working capital E. return on investment

D

On the balance sheet, the amount accruing to a corporation's owners is referred to as ____. A. a liability B. transfer price C. an asset D. stockholders' equity E. return on investment

D

On the balance sheet, the values of the various items a corporation owns are referred to as ____. A. liabilities B. debts C. budgets D. assets E. savings

D

Scenario A: Which of the following control systems does Purple Lotus utilize? A. Feedback control B. Market control C. Clan control D. Feedforward control E. Concurrent control

D

Scenario E: On which of the following will Lisa be working? A. Balance sheet B. Assets C. Liabilities D. Stockholders' equity E. Profit and loss statement

D

To be effective, control systems must: A. keep performance standards flexible and easy. B. focus on one-way top-down communication. C. be acceptable to all stockholders. D. use multiple control approaches. E. centralize decision making.

D

Which of the following controls takes place before operations begin? A. Feedback control B. Clan control C. Initial control D. Feedforward control E. Concurrent control

D

Which of the following statements about six sigma is true? A. The system was developed at Ford during the 1970s. B. The lower the sigma number, the lower the level of defects. C. It is designed merely to reduce product defects. D. It indicates how often defects in a process are likely to occur. E. Six sigma always improves the bottom line.

D

Yiheng was new to his organization but quickly noticed a pattern at the annual budgeting session. Mid-level managers were asking for unrealistically high budgets, while top management was attempting to request budgets under last year's actual expenditures. Both parties were using strategies that are referred to as ____. A. budget breakdowns B. bureaucratic budgeting C. budget resistance D. tactical behaviors E. rigid behaviors

D

_____ budget is commonly expressed in physical units, and it can be prepared with information including types and capacities of machines, economic quantity, and availability of materials. A. Master B. Cash C. Capital D. Production E. Sales

D

Ideally, a transfer price should be less than the price that the receiving business unit would have to pay for that product or service in the marketplace.

False

If bureaucratic and market mechanisms are insufficient for directing a company's workforce in today's environment, it can turn to structural control.

False

In contrast to market controls, bureaucratic controls involve the use of economic forces to regulate performance.

False

In today's complex organizations, the budget process is much more likely to be top-down

False

Liabilities are the amounts accruing to the corporation's owners.

False

Liquidity ratios indicate a company's ability to meet its long-term financial obligations

False

Market control is the use of rules, regulations, and formal authority to guide performance.

False

Performance standards can only be set with respect to quantity or quality.

False

The balance sheet shows the financial picture of a company over time

False

The last step in the control process is to compare performance with standards

False

The most effective performance standards tend to be subjective rather than objective.

False

The second step in a typical control process is comparing performance with the standard.

False

When supervisors monitor employee behavior, they are exercising feedback control.

False

With bureaucratic control, business units are treated as profit centers, and their managers are evaluated based on profit and loss.

False

A control system cannot be effective without consideration of how people will react to it.

True

A master budget includes every major activity of a business

True

A transfer price is the price charged by one unit for a good or service provided to another unit within the organization

True

Activity-based costing is a method of cost accounting designed to allocate costs across particular business processes according to the amount of time employees devote to particular activities.

True

Because financial ratios usually are expressed in compressed time horizons, they often cause management myopia.

True

Clan control is control based on the norms, values, shared goals, and trust among group members.

True

Concurrent control takes place while plans are being carried out.

True

Control is defined as any process that directs the activities of individuals toward the achievement of organizational goals.

True

Control is one of the forces that keeps an organization heading in the right direction

True

External audits are often used for feedback control but can also be useful to prevent problems

True

If an employee believes his or her control system is overly controlling, that employee is likely to exhibit dysfunctional behavior.

True

If managers create a strong culture of correct behavior, then clan control can be a very effective control tool.

True

In large diversified companies, market controls are often used to regulate independent business units

True

Market control is control based on the use of pricing mechanisms and economic information to regulate activities within organizations.

True

One of the reasons standards are established is to set performance expectations

True

Personal observation involves going to the area where activities take place and watching what is occurring.

True

Point-of-sale terminals in store checkout lines sending sales data back immediately to a retailer's headquarters is an example of how information technology has improved concurrent control.

True

Return on investment is a profitability ratio.

True

The first step in the control process is to set performance standards

True

The most common type of tactical behavior in control systems is to manipulate information or report false performance data.

True

The profit and loss statement is an itemized financial statement of the income and expenses of a company's operations.

True

Three key categories of financial ratios are liquidity, leverage, and profitability.

True

Traditional methods of cost accounting tend to be inappropriate in today's business environment because they are based on outdated methods of rigid hierarchical organization.

True

Using the six sigma approach to quality does not always lead to improvements in the bottom line.

True

Management myopia occurs when managers: A. lack motivation to reach their performance targets and in turn find it difficult to motivate subordinates. B. limit their focus to short-term profits at the expense of longer-term strategic obligations. C. find themselves unable to rise beyond a certain level in the organizational hierarchy. D. are promoted beyond their level of competence. E. find it hard to progress within an organization due to corporate downsizing or paring of middle management layers.

B

Procedures used to verify accounting reports and statements are referred to as ____. A. lean accounting B. accounting audits C. activity-based costing D. accounting reforms E. budget audits

B

Scenario A: Which of the following control systems does Mid-Atlantic Health utilize? A. Bureaucratic control B. Market control C. Clan control D. Feedforward control E. Concurrent control

B

Scenario B: Which of the following approaches to bureaucratic control is described in option 3? A. Feedback B. Feedforward C. Concurrent D. Market E. Clan

B

Scenario D: On which of the following control systems do the middle-level managers want to focus? A. Clan B. Market C. Bureaucratic D. Concurrent E. Feedforward

B

Scenario E: On which of the following would Eric be working? A. Balance sheet B. Assets C. Liabilities D. Stockholders' equity E. Profit and loss statement

B

The control process used while plans are being carried out, including directing, monitoring, and fine-tuning activities as they are performed, is referred to as _____ control. A. feedforward B. concurrent C. feedback D. preliminary E. market

B

The price charged by one unit for a good or service provided to another unit within the organization is referred to as a(n) _____ price. A. substitute B. transfer C. department D. organizational E. budget

B

The use of rules, regulations, and authority to guide performance is referred to as _____ control. A. clan B. bureaucratic C. market D. authentic E. autonomous

B

Which of the following can be drawn tentatively and used as a goal against which actual performance can be measured? A. Statement of cash flow B. Profit and loss statement C. Balance sheet D. External audit E. Capital budget

B

Which of the following is the first major step in the formal control process? A. Comparing performance with standards B. Setting standards C. Taking corrective action D. Developing values E. Measuring performance

B

Which of the following is the most pertinent argument against market control mechanisms? A. They rely too heavily on rules and procedures. B. Economic measures do not adequately reflect the complete value of an organization. C. They are too dependent on organization culture. D. Hierarchical structure is the only valid way to determine the future success of an organization. E. Decision making and power are too centralized when they are in use.

B

_____ is in effect when supervisors watch employees to ensure they work efficiently and avoid mistakes. A. Organizational modification B. Concurrent control C. Management adjustment D. Feedback control E. Feedforward control

B

_____ ratio is a liquidity ratio that indicates the extent to which short-term assets can decline and still be adequate to pay short-term liabilities. A. Debt-equity B. Current C. Profitability D. Return on investment E. Stockholders' equity

B

The activity-based costing system: A. is more appropriate method of cost accounting for rigid hierarchical organizations. B. effectively departmentalizes an organization based on its core functions such as human resources, purchasing, and maintenance. C. provides a more accurate picture of how costs should be charged to products and services. D. assumes that organizations are bureaucratic "machines" that can be separated into component functions. E. fails to allocate costs across business processes and is less effective than traditional methods of cost accounting.

C

The debt-equity ratio is an example of a _____ ratio. A. net working capital B. profitability C. leverage D. current E. liquidity

C

The effective use of clan control is associated with employee ____. A. bureaucracy B. manipulation C. empowerment D. dissatisfaction E. unionization

C

The process of investigating what is being done and comparing the results with the corresponding budget data to verify accomplishments or remedy differences is referred to as ____. A. activity-based costing B. budgetary auditing C. budgeting D. financial audits E. budget planning

C

Using budgeting, statistical reports, and performance appraisals to regulate behavior and results is considered a component of ____.

C

Which of the following are the basic elements of a balance sheet? A. Income, expenses, and outcome B. Operations, sales, and growth C. Assets, liabilities, and stockholder's equity D. Receipts, deductions, and taxes E. Budgets, controls, and corrective actions

C

Which of the following best describes the use of profitability ratios? A. It shows the relative amount of funds in the business supplied by creditors and shareholders. B. It indicates a company's ability to pay short-term debts. C. It indicates management's ability to generate a financial return on sales or investment. D. It shows the profit margins for the last six months. E. It indicates the future profits from the current customer base.

C

Which of the following controls is future oriented and aims to prevent problems before they arise? A. Feedback control B. Proactive control C. Feedforward control D. Reactive control E. Concurrent control

C

Which of the following is a commonly used source for obtaining performance data? A. Competitors B. Human resource department C. Personal observation D. Upper management E. Technical analysts from outside the company

C

Which of the following is a symptom of an out-of-control company? A. Flexible work hours for employees B. Highly challenging organizational goals C. Lack of periodic reviews D. Highly rigid work culture E. Lack of new employees

C

_____ budget is used for the cost of fixed assets, such as plants and equipment, that are usually treated not as regular expenses but as investments. A. Master B. Cash C. Capital D. Production E. Sales

C

An itemized financial statement of the income and expenses of a company's operations is called the ____. A. statement of financial ratios B. balance sheet C. cash flow statement D. assets and liabilities statement E. profit and loss statement

E

Periodically assessing a company's own planning, organizing, leading, and controlling efforts is the essential function of ____. A. strategic audits B. feedforward control C. feedback control D. competitive audits E. internal audits

E

Which of the following is one of the factors based on which performance standards can be set? A. Efficiency B. Knowledge C. Market share D. Employee satisfaction E. Time used

E

_____ control involves creating relationships based on mutual respect and encouraging each individual to take responsibility for his or her actions. A. Autocratic B. Centralized C. Bureaucratic D. Cultural E. Clan

E

A balanced scorecard is a control system combining four sets of performance measures: technological, customer feedback, productivity, and strategy.

False

According to the principle of exception, even the smallest of deviations from the standard require corrective action.

False

An example of feedforward control is managers monitoring their distributors

False

As long as supervisors monitor behavior constantly, the feedback may be given at any point in time without consequence.

False

Authority and organizing are called the Siamese twins of management.

False

Budgeting information is confined to finances

False

By definition, management audits are internal, not external

False

Clan control assumes that the interests of organizations and individuals naturally diverge

False

Formal bureaucratic control systems continue to be the most effective in organizations.

False