Question 1

​All of the following can cause conflict between divisions EXCEPT

Accepted Answer

A) ​Coordination between divisions does not benefit all divisions equally 
B) managers of cost centers care too little about enhancing revenues 
C) managers are rewarded only for actions that profit their own division generates,regardless of the effects on other divisions 
D) ​corporate executives cannot tell when one divisional manager's decisions are appropriate or not 
A) ​Coordination between divisions does not benefit all divisions equally 
B) managers of cost centers care too little about enhancing revenues 
C) managers are rewarded only for actions that profit their own division generates,regardless of the effects on other divisions 
D) ​corporate executives cannot tell when one divisional manager's decisions are appropriate or not B

Question 2

​When considering setting the transfer price at the market price of a product similar to the intermediate good that is already available on the market

Accepted Answer

A) ​It is appropriate to ignore that the market price includes a margin above marginal cost 
B) It is OK if the product on the market includes costly features your downstream division does not use 
C) Consider whether the product on the market is inexpensive because its quality is lower than you use 
D) ​If it is similar enough,it is justification for you producing it in-house 
A) ​It is appropriate to ignore that the market price includes a margin above marginal cost 
B) It is OK if the product on the market includes costly features your downstream division does not use 
C) Consider whether the product on the market is inexpensive because its quality is lower than you use 
D) ​If it is similar enough,it is justification for you producing it in-house B

Question 3

​When considering setting the transfer price at the market price of a product similar to the intermediate good that is already available on the market

Accepted Answer

A) ​It is appropriate to ignore that the market price includes a margin above marginal cost 
B) It is OK if the product on the market includes costly features your downstream division does not use 
C) It is OK if the product on the market is inexpensive because its quality is lower than you use 
D) ​If it is similar enough,it calls into question whether there are gains from producing it in-house 
A) ​It is appropriate to ignore that the market price includes a margin above marginal cost 
B) It is OK if the product on the market includes costly features your downstream division does not use 
C) It is OK if the product on the market is inexpensive because its quality is lower than you use 
D) ​If it is similar enough,it calls into question whether there are gains from producing it in-house D

Question 4

​Which of the following is TRUE?

Accepted Answer

A) ​Maximizing division profits can sometimes lead to reducing company-wide profits 
B) Managers of profit centers are not given any discretion in their decision making 
C) Profit centers usually require the highest degree of attention of corporate executives 
D) ​A manager being rewarded on division revenues has no incentive to make good decisions for his division 
A) ​Maximizing division profits can sometimes lead to reducing company-wide profits 
B) Managers of profit centers are not given any discretion in their decision making 
C) Profit centers usually require the highest degree of attention of corporate executives 
D) ​A manager being rewarded on division revenues has no incentive to make good decisions for his division

Question 5

​Straight line pay for performance

Accepted Answer

A) ​Provides an incentive to increase performance 
B) Breaks the link between meeting a particular budget target and compensation 
C) Rewards the manager for doing more and punishes them for doing less 
D) ​All of the above 
A) ​Provides an incentive to increase performance 
B) Breaks the link between meeting a particular budget target and compensation 
C) Rewards the manager for doing more and punishes them for doing less 
D) ​All of the above

Question 6

​Managers of profit centers earn more when their divisions

Accepted Answer

A) ​increase their sales and  increase their costs 
B) decrease their sales and increase their costs 
C) decrease the costs of the components for which they are responsible 
D) ​increase the costs of the components for which they are responsible 
A) ​increase their sales and  increase their costs 
B) decrease their sales and increase their costs 
C) decrease the costs of the components for which they are responsible 
D) ​increase the costs of the components for which they are responsible

Question 7

​A bank divided in different divisions for consumer banking and business banking is an example of

Accepted Answer

A) ​An M-form of an organization 
B) A functional organization 
C) An N-form organization 
D) ​All of the above 
A) ​An M-form of an organization 
B) A functional organization 
C) An N-form organization 
D) ​All of the above

Question 8

​In a firm organized along functional lines,employee performance

Accepted Answer

A) ​Is easily evaluated because supervisor and employee have similar skills 
B) Is more difficult to evaluate because the supervisor and the employee could have different skills 
C) Does not need to be evaluated 
D) ​None of the above 
A) ​Is easily evaluated because supervisor and employee have similar skills 
B) Is more difficult to evaluate because the supervisor and the employee could have different skills 
C) Does not need to be evaluated 
D) ​None of the above

Question 9

​For managers who know that they have no chance of meeting their goals,high powered sales goals

Accepted Answer

A) Give an incentive to spread out their sales into the year 
B) Give an incentive to accelerate costs or delay sales 
C) Give no incentive to accelerate sales or delay costs 
D) ​None of the above 
A) Give an incentive to spread out their sales into the year 
B) Give an incentive to accelerate costs or delay sales 
C) Give no incentive to accelerate sales or delay costs 
D) ​None of the above

Question 10

​Functional divisions

Accepted Answer

A) ​Make it easier to tie pay to performance 
B) Make it more difficult to tie pay to performance 
C) Break all ties between pay and performance 
D) ​None of the above 
A) ​Make it easier to tie pay to performance 
B) Make it more difficult to tie pay to performance 
C) Break all ties between pay and performance 
D) ​None of the above

Question 11

​Ways to "game" the budgeting process include

Accepted Answer

A) ​delaying sales if just short of a target 
B) delaying expenses if just short of a target 
C) accelerating sales once a target is met 
D) ​delaying expenses costs once a target is met 
A) ​delaying sales if just short of a target 
B) delaying expenses if just short of a target 
C) accelerating sales once a target is met 
D) ​delaying expenses costs once a target is met

Question 12

​When considering setting the transfer price at the market price of a product similar to the intermediate good that is already available on the market

Accepted Answer

A) ​It is important to recognize that the market price includes a margin above marginal cost 
B) It is OK if the product on the market includes costly features your downstream division does not use 
C) It is OK if the product on the market is inexpensive because its quality is lower than you use 
D) ​If it is similar enough,it is justification for you producing it in-house 
A) ​It is important to recognize that the market price includes a margin above marginal cost 
B) It is OK if the product on the market includes costly features your downstream division does not use 
C) It is OK if the product on the market is inexpensive because its quality is lower than you use 
D) ​If it is similar enough,it is justification for you producing it in-house

Question 13

​A production goal may be set too high by upper management because

Accepted Answer

A) ​they are unsure about the actual costs of production 
B) they under-estimate the difficulty of meeting a goal 
C) division managers over-state the difficulty of meeting the goal 
D) ​all of the above 
A) ​they are unsure about the actual costs of production 
B) they under-estimate the difficulty of meeting a goal 
C) division managers over-state the difficulty of meeting the goal 
D) ​all of the above

Question 14

​A solution to the budget-gaming problem is

Accepted Answer

A) ​Remove all kinks from the compensation schedule 
B) Use a target based pay function with each target scoring greater return 
C) Base compensations on meeting particular budget goals 
D) ​All of the above 
A) ​Remove all kinks from the compensation schedule 
B) Use a target based pay function with each target scoring greater return 
C) Base compensations on meeting particular budget goals 
D) ​All of the above

Question 15

​Which of the following is FALSE about firms organized along functional lines?

Accepted Answer

A) ​Workers develop functional expertise 
B) Workers find it difficult to share information within their division 
C) They foster the exploitation of economies of scale 
D) None of the above 
A) ​Workers develop functional expertise 
B) Workers find it difficult to share information within their division 
C) They foster the exploitation of economies of scale 
D) None of the above

Question 16

​All of the following can cause conflict between divisions EXCEPT

Accepted Answer

A) ​Coordination between divisions does not benefit all divisions equally 
B) managers of profit centers care too little about the effects of their decisions on other divisions 
C) managers are rewarded only for how much profit their own division generates 
D) ​corporate executives can tell when a divisional manager's decisions are appropriate or not 
A) ​Coordination between divisions does not benefit all divisions equally 
B) managers of profit centers care too little about the effects of their decisions on other divisions 
C) managers are rewarded only for how much profit their own division generates 
D) ​corporate executives can tell when a divisional manager's decisions are appropriate or not

Question 17

​Under which of the following conditions would a cost center be the best option?

Accepted Answer

A) ​Always,since they are largely run on their own 
B) Never,since they require a high degree of the firm's attention 
C) As long as the cost of monitoring is low 
D) ​As long as the benefits from monitoring are low 
A) ​Always,since they are largely run on their own 
B) Never,since they require a high degree of the firm's attention 
C) As long as the cost of monitoring is low 
D) ​As long as the benefits from monitoring are low

Question 18

​The efficient transfer price is

Accepted Answer

A) ​the upstream division's average cost 
B) the upstream division's marginal cost 
C) the downstream division's average cost 
D) ​the downstream division's marginal cost 
A) ​the upstream division's average cost 
B) the upstream division's marginal cost 
C) the downstream division's average cost 
D) ​the downstream division's marginal cost

Question 19

​Cost centers

Accepted Answer

A) ​Are largely run by themselves 
B) Require the parent company to monitor quality control 
C) May try to reduce costs by reducing quality 
D) ​Both B&C 
A) ​Are largely run by themselves 
B) Require the parent company to monitor quality control 
C) May try to reduce costs by reducing quality 
D) ​Both B&C

Question 20

​A problem with using the price of a product similar to the intermediate good sold on the market is

Accepted Answer

A) ​the market price includes a margin above marginal cost 
B) the product on the market may include costly features your downstream division does not use 
C) the product on the market may be cheap because it is not as high of quality as your downstream division uses 
D) ​all of the above 
A) ​the market price includes a margin above marginal cost 
B) the product on the market may include costly features your downstream division does not use 
C) the product on the market may be cheap because it is not as high of quality as your downstream division uses 
D) ​all of the above

Exam 20: Getting Divisions to Work in the Firms Best Interest

​All of the following can cause conflict between divisions EXCEPT

​When considering setting the transfer price at the market price of a product similar to the intermediate good that is already available on the market

​When considering setting the transfer price at the market price of a product similar to the intermediate good that is already available on the market

​Which of the following is TRUE?

​Straight line pay for performance

​Managers of profit centers earn more when their divisions

​A bank divided in different divisions for consumer banking and business banking is an example of

​In a firm organized along functional lines,employee performance

​For managers who know that they have no chance of meeting their goals,high powered sales goals

​Functional divisions

​Ways to "game" the budgeting process include

​When considering setting the transfer price at the market price of a product similar to the intermediate good that is already available on the market

​A production goal may be set too high by upper management because

​A solution to the budget-gaming problem is

​Which of the following is FALSE about firms organized along functional lines?

​All of the following can cause conflict between divisions EXCEPT

​Under which of the following conditions would a cost center be the best option?

​The efficient transfer price is

​Cost centers

​A problem with using the price of a product similar to the intermediate good sold on the market is

The One Lessor of Business

Benefits, Costs, and Decisions

Extent How Much Decisions

Investment Decisions: Look Ahead and Reason Back

Simple Pricing

Economies of Scale and Scope

Understanding Markets and Industry Changes

Market Structure and Long Run Equilibrium

Strategy: the Quest to Keep Profit From Eroding

Foreign Exchange, Trade, and Bubbles

More Realistic and Complex Pricing

Direct Price Discrimination

Strategic Games

Bargaining

Making Decisions With Uncertainty

Auctions

The Problem of Adverse Selection

The Problem of Moral Hazard

Getting Employees to Work in the Firms Best Interest

Managing Vertical Relationships

Filters

All of the following can cause conflict between divisions EXCEPT

When considering setting the transfer price at the market price of a product similar to the intermediate good that is already available on the market

When considering setting the transfer price at the market price of a product similar to the intermediate good that is already available on the market

Which of the following is TRUE?

Straight line pay for performance

Managers of profit centers earn more when their divisions

A bank divided in different divisions for consumer banking and business banking is an example of

In a firm organized along functional lines,employee performance

For managers who know that they have no chance of meeting their goals,high powered sales goals

Functional divisions

Ways to "game" the budgeting process include

When considering setting the transfer price at the market price of a product similar to the intermediate good that is already available on the market

A production goal may be set too high by upper management because

A solution to the budget-gaming problem is

Which of the following is FALSE about firms organized along functional lines?

All of the following can cause conflict between divisions EXCEPT

Under which of the following conditions would a cost center be the best option?

The efficient transfer price is

Cost centers

A problem with using the price of a product similar to the intermediate good sold on the market is