Ch.16

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

A. Comparing performance with standards

Which of the following statements about the concept of Six Sigma is true?

D. It indicates how often defects in a process are likely to occur.

Performance standards can be set with respect to which of the following?

Quality, time used and quantity

The balance sheet shows?

a financial picture of a company at a given time

Procedures used to verify accounting reports and statements are referred to as a(n)?

accounting audits

AllMax Enterprises has begun a new system of allocating costs according to what their employees do, rather than what the company spends. For example, labor expenses are allocated to employee tasks rather than salary and benefits. This practice is referred to as?

activity-based costing

The values of the various items the corporation owns are referred to as?

assets

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)?

balance sheet

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?

budgetary control

The use of rules, regulations and authority to guide performance is referred to as?

bureaucratic control

Using budgeting, statistical reports and performance appraisals to regulate behavior and results are all considered components of?

bureaucratic control

Katrina Calocia is a financial manager at Flavors, Inc., a lollipop manufacturer. One of her duties as manager is to provide a budget that shows the anticipated receipts and expenditures of her company. The budget also shows the amount of working capital available and the extent to which outside financing may be required. Katrina produces this budget after all other budget estimates are complete. Which type of budget is Katrina currently working on?

cash budget

The increasing need for clan control is caused by?

changes in the employment relationship

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

clan control

Control that is based on the idea that employees may share the values, expectations and goals of the organization and act in accordance with them is called?

clan control

A liquidity ratio that indicates the extent to which short-term assets can decline and still be adequate to pay short-term liabilities is referred to as the?

current ratio

The most common liquidity ratio is current assets to current liabilities, which is also called the?

current ratio

A manager designing a control system should evaluate the information provided by the system in terms of which of the following questions?

does the system provide people with data relevant to the decisions they need to make?

The textbook equates the effective use of clan control with?

empowerment

An evaluation conducted by one organization of another organization is referred to as a(n)?

external audit

Managers conduct __________ audits of other companies and _________ audits of their own company.

external, internal

A four-sigma quality level leads to a nearly perfect level of quality.

false

A serious mistake for an entrepreneur is to invest too much time in budgeting.

false

According to the principle of exception, any deviation from the goal requires corrective action.

false

As long as supervisors monitor behavior, timing of the feedback is unimportant.

false

Budgeting information is always expressed in monetary units.

false

Bureaucratic control uses prices, competition, profit centers and exchange relationships.

false

By definition, management audits are internal, not external.

false

Clan control assumes that the interests of the organization and individuals naturally diverge.

false

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

false

Control has been called one of the Siamese twins of management. The other twin is organizing.

false

Feedforward control means that managers monitor their distributors.

false

Formal bureaucratic control systems have always been the most pervasive and the most effective in organizations.

false

Ideally the transfer price should reflect less than the price that the receiving business unit would have to pay for that product/service in the marketplace.

false

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

false

In today's more 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

Measuring performance are commonly obtained from written reports, 10-K reports, and personal observation.

false

Performance standards can be set with respect to quantity, quality, time and effort.

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 the standard.

false

The typical control system has five major steps.

false

Traditional methods of accounting such as activity-based costing are still appropriate today.

false

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

false

Control that focuses on the use of information about previous results to correct deviations from the acceptable standard is referred to as?

feedback control

A firm conducting an internal audit would assess?

its own financial stability

The amounts a corporation owes to creditors are referred to as?

liabilities

An evaluation of the effectiveness and efficiency of various systems within an organization is called a(n)?

management audit

"Management myopia" is a condition that refers to?

managers limiting their focus to short-term profits at the expense of longer-term concerns

Control based on the use of pricing mechanisms and economic information is referred to as?

market control

Where are performance data commonly obtained?

oral and written reports and personal observation

Control has been called one of the Siamese twins of management. The other twin is?

planning

An itemized financial statement of the income and expenses of a company's operations is referred to as the?

profit and loss statement

An itemized financial statement of the income and the expenses of a company's operations is called the?

profit and loss statement

A ratio of profit to capital used or a rate of return from capital is referred to as?

return on investment (ROI)

When a control system prompts employees to do only tasks required in their formal job descriptions, it is causing?

rigid bureaucratic behaviors

Bureaucratic control deals with?

rules and regulations

In order to gain employee acceptance of useful performance standards, a manager can?

set standards that employees view as possible to achieve

Leverage ratios?

show the relative amount of funds in the business supplied by creditors and shareholders

The level of expected performance for a given goal; a target that establishes a desired performance level, motivates performance and serves as a benchmark against which actual performance is assessed is referred to as a(n)?

standard

The Six Sigma approach is based on ____________ analyses that contribute to ____________.

statistical, customer satisfaction

The amount accruing to the corporation's owners is referred to as?

stockholders' equity

When employees feel forced to attempt to "beat the system" their behavior might be classified as?

tactical

Carlos 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 require budgets under last year's actual expenditures. The management's strategies are referred to as?

tactical behaviors

The last step in the control process is?

taking corrective action

Perhaps the greatest benefit of activity based costing is?

the ability to highlight and monitor costly activities

Chun-Mei has just reviewed a number of indicators of financial control. The one that troubles her indicates that the company may have trouble meeting its short-term financial obligations. Chun-Mei is concerned about?

the current ratio

Empowerment is important in organizations today because?

the nature of management has changed

A managerial principle stating that control is enhanced by concentrating on the exceptions or significant deviations from the expected result or standard is referred to as?

the principle of exception

Jennifer Saxton is in charge of production at Nanosystems, Inc. Part of her job is to be sure that the parts produced are extremely accurate; in fact, it is important that they are perfectly produced as they are used in medical devices. When Jennifer concentrates on the significant deviations from established standards, she is using?

the principle of exception

Market controls involve?

the use of economic standards

The price charged by one unit of an organization that supplies to another unit in the same organization is referred to as a(n)?

transfer price

"Love contracts" are one method of avoiding sexual harassment.

true

A balanced scorecard is a control system combining four sets of performance measures: financial, customer, business process, and learning and growth.

true

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

true

A master budget includes every activity of the 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

ABC is a method of cost accounting designed to identify streams of activity and then to allocate costs across particular business processes according to the amount of time employees devote to particular activities.

true

According to Michael Hammer, it is important to carefully select standards that look at entire business processes and identify which actions make those processes succeed.

true

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

true

Bureaucratic control has a perceived negative connotation.

true

Concurrent control is the heart of any control system.

true

Concurrent control takes place while plans are being carried out.

true

Control is a managerial necessity.

true

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

true

External audits are often used for feedback control but can also be useful for preliminary control.

true

If an employee does not believe his or her performance standard is realistic, he or she is not likely to accept the standard.

true

In an organization, unmeasured behaviors are neglected.

true

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

true

Increasingly, managers are discovering that control systems based solely on bureaucratic and market mechanisms are insufficient for directing today's workforce.

true

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

true

One symptom of an out-of-control company is a lack of agreed-upon standards.

true

Organization culture is the foundation of clan control.

true

Personal observation involves going to the area of activity and watching what is occurring.

true

Return on investment is a profitability ratio.

true

Standards are established in order to set performance expectations.

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

Using the Six-Sigma approach to quality does not always lead to improvements in the bottom line.

true

To be effective, control systems must?

use multiple control approaches

The __________ is used for areas of the organization that incur expenses but no revenue.

cost budget

Which of the following is the second stage in budgetary control? A. Responding appropriately B. Budgetary operations C. Comparing Six Sigma data D. Establishing expectancies E. Accounting audit

B. Budgetary operations

Casinos control card dealers in a variety of ways. Which of the following would be the most correct tool to use for control?

B. Using closed-circuit cameras, two way mirrors and direct supervision

The use of market control mechanisms has been criticized by those who believe that?

B. economic measures do not adequately reflect the complete value of an organization.

Which of the following are the basic elements of a balance sheet? A. Income, expenses, profit/loss B. Operations, sales, growth C. Assets, liabilities, owner's equity D. Income, deductions, taxes E. Budgets, controls, plans

C. Assets, liabilities, owner's equity

Which of the following is a symptom of an out-of-control company? A. Strict top management B. Excessive policies C. Lack of periodic reviews D. Bad communication systems E. Lack of cohesiveness in the culture

C. Lack of periodic reviews

Which of the following is a guideline provided by your text for managing in an empowered setting? A. Put control where the best people are B. Build on trust C. Use reactive controls D. Base control on company norms E. Reinforce responsiveness and teamwork

E. Reinforce responsiveness and teamwork

Practices commonly uncovered by a management audit include: A. performance of unnecessary work. B. procedures that are unnecessarily costly. C. duplication of work. D. poor inventory control. E. any of the above.

E. any of the above.

Electronic monitoring of telemarketers' conversations with potential clients is an example of _______ control.

concurrent

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?

concurrent control

The heart of any control system is?

concurrent control

Which type of control takes place while plans are being carried out?

concurrent control

Advances in information technology have created powerful?

concurrent controls

Any process that directs the activities of individuals toward achieving organizational goals is?

control

Employees resist formal control systems for which of the following reasons?

control systems can change the power structure of the organization

At Precision Instruments, it was recently announced that all assembly workers are to arrive 15 minutes early for their shift in order to be outfitted in specialized gear that will reduce minute particles from the environment from entering products that are being assembled. Products are then assembled in a controlled environment. This requirement reflects _______ control.

feedforward

Which type of control is future oriented?

feedforward control

External audits can be used for which of the following?

identifying possible mergers or acquisitions

Traditionally, boards have tried to control CEO performance mainly through?

incentive pay

Profitability ratios?

indicate management's ability to generate a financial return on sales or investment

Liquidity ratios?

indicate the company's ability to pay short-term debts

Bureaucratic controls often results in?

inflexible behavior

Assessing your own company's planning, organizing, leading and controlling efforts is the essential function of?

internal audits