Question 1

​A solution to the budget-gaming problem is

Accepted Answer

A) ​Introduce milestones or kinks in the compensation scheme 
B) Use a target based pay function with each target scoring greater return 
C) Do not base compensation on meeting a particular budget goal 
D) ​All of the above 
A) ​Introduce milestones or kinks in the compensation scheme 
B) Use a target based pay function with each target scoring greater return 
C) Do not base compensation on meeting a particular budget goal 
D) ​All of the above

Question 2

​Managers of profit centers earn more when their divisions

Accepted Answer

A) ​increase their sales and decrease their costs 
B) decrease their sales and increase their costs 
C) increase the costs of the components for which they are responsible 
D) ​None 
A) ​increase their sales and decrease their costs 
B) decrease their sales and increase their costs 
C) increase the costs of the components for which they are responsible 
D) ​None

Question 3

​Piece rate pay is

Accepted Answer

A) ​Compensation per dollar of profit of the company 
B) Compensation per dollar of profit of the division 
C) Compensation per piece a worker produces 
D) ​Compensation per dollar of sales 
A) ​Compensation per dollar of profit of the company 
B) Compensation per dollar of profit of the division 
C) Compensation per piece a worker produces 
D) ​Compensation per dollar of sales

Question 4

​Managers of profit centers are usually given a lot of discretion because

Accepted Answer

A) ​They always do an excellent job 
B) The company can never judge their performance 
C) The company has a clear performance evaluation metric 
D) ​They rarely ever do a good job 
A) ​They always do an excellent job 
B) The company can never judge their performance 
C) The company has a clear performance evaluation metric 
D) ​They rarely ever do a good job

Question 5

​The functional form of corporate organization

Accepted Answer

A) ​organizes employees along the functions or tasks that they perform 
B) organizes employees along the customer types that they serve 
C) organizes employees along individual projects that arise 
D) ​organizes employees into softball teams 
A) ​organizes employees along the functions or tasks that they perform 
B) organizes employees along the customer types that they serve 
C) organizes employees along individual projects that arise 
D) ​organizes employees into softball teams

Question 6

​Am M-form of an organization is one in which

Accepted Answer

A) ​Each division performs a single task 
B) Each division performs all the tasks necessary to serve a particular type of  customer 
C) Each division performs all the tasks necessary to serve all the customers of a particular geographical area 
D) ​Both B&C 
A) ​Each division performs a single task 
B) Each division performs all the tasks necessary to serve a particular type of  customer 
C) Each division performs all the tasks necessary to serve all the customers of a particular geographical area 
D) ​Both B&C

Question 7

​When the transfer price is increased

Accepted Answer

A) ​the buying division will chose to purchase less from the selling division 
B) the buying division will chose to purchase more from the selling division 
C) the selling division will chose to purchase less from the buying division 
D) ​the selling division will chose to purchase more from the buying division 
A) ​the buying division will chose to purchase less from the selling division 
B) the buying division will chose to purchase more from the selling division 
C) the selling division will chose to purchase less from the buying division 
D) ​the selling division will chose to purchase more from the buying division

Question 8

​The parent company would want to reward managers based on division revenues because

Accepted Answer

A) ​It decreases the incentives for the managers to make good decisions for their division 
B) It increases the incentives for the managers to make good decisions for their divisions 
C) It does not change the motivations for the managers 
D) ​None of the above 
A) ​It decreases the incentives for the managers to make good decisions for their division 
B) It increases the incentives for the managers to make good decisions for their divisions 
C) It does not change the motivations for the managers 
D) ​None of the above

Question 9

​Tom & Jerry are running Hanna Barbera's lemonade stand as two profit centers.Tom makes the lemonade while Jerry sells it.Jerry argues that Tom is transferring the lemonade to him priced too high,which forces him to charge the customers a high price,losing sales.Who is making the bad decision?

Accepted Answer

A) ​Tom 
B) Jerry 
C) Hanna Barbera 
D) ​None of them 
A) ​Tom 
B) Jerry 
C) Hanna Barbera 
D) ​None of them

Question 10

​Annual budgeting of production goals of a division within a firm

Accepted Answer

A) is an accounting mechanism to plan for the costs and revenues over a time period 
B) increase the burden on the division when goals rise 
C) can lead to accumulated inventory when the goals of an upstream division are arbitrarily set too high 
D) ​all of the above 
A) is an accounting mechanism to plan for the costs and revenues over a time period 
B) increase the burden on the division when goals rise 
C) can lead to accumulated inventory when the goals of an upstream division are arbitrarily set too high 
D) ​all of the above

Question 11

​Which of the following is TRUE?

Accepted Answer

A) ​Maximizing division profits will always lead to maximizing company profit 
B) Maximizing division profits will always lead to minimizing company profit 
C) Maximizing division profits can sometimes lead to reducing company-wide profit 
D) ​Maximizing division profits has no effect on company-wide profits 
A) ​Maximizing division profits will always lead to maximizing company profit 
B) Maximizing division profits will always lead to minimizing company profit 
C) Maximizing division profits can sometimes lead to reducing company-wide profit 
D) ​Maximizing division profits has no effect on company-wide profits

Question 12

​Once a division manager sees that production goal for a time period is likely to be met

Accepted Answer

A) ​he has an incentive to increase the pace of production 
B) he has an incentive to decrease the pace of production 
C) he does not have an incentive to change the pace of production 
D) ​he has an incentive to produce other products 
A) ​he has an incentive to increase the pace of production 
B) he has an incentive to decrease the pace of production 
C) he does not have an incentive to change the pace of production 
D) ​he has an incentive to produce other products

Question 13

​A profit center

Accepted Answer

A) ​Is very complicated to run and manage 
B) Doesn't require a lot of attention from executives at the firm's headquarters 
C) Requires the parent company's highest degree of attention 
D) ​Does not properly incentivize the managers when it comes to their own division's performance 
A) ​Is very complicated to run and manage 
B) Doesn't require a lot of attention from executives at the firm's headquarters 
C) Requires the parent company's highest degree of attention 
D) ​Does not properly incentivize the managers when it comes to their own division's performance

Question 14

​In profit centers

Accepted Answer

A) ​Managers are easy to evaluate because there is a simple metric of how well they performed 
B) Managers typically do not have the information to run their division efficiently 
C) Managers' decisions rarely affect other divisions 
D) ​Managers typically do not have the incentives to run their division efficiently 
A) ​Managers are easy to evaluate because there is a simple metric of how well they performed 
B) Managers typically do not have the information to run their division efficiently 
C) Managers' decisions rarely affect other divisions 
D) ​Managers typically do not have the incentives to run their division efficiently

Question 15

​The parent company would want to reward managers based on division revenues because

Accepted Answer

A) ​The managers usually have the least information about their divisions 
B) It would incentivize the otherwise clueless managers about the daily activities of their divisions 
C) The managers usually have the best information about how to run their divisions 
D) ​None of the above 
A) ​The managers usually have the least information about their divisions 
B) It would incentivize the otherwise clueless managers about the daily activities of their divisions 
C) The managers usually have the best information about how to run their divisions 
D) ​None of the above

Question 16

​When a transfer price increases

Accepted Answer

A) ​the profits of the division using the intermediate product will rise 
B) the profits of the division using the intermediate product will be unaffected 
C) the profits of the division using the intermediate product will fall 
D) ​the costs of the division using the intermediate product will fall 
A) ​the profits of the division using the intermediate product will rise 
B) the profits of the division using the intermediate product will be unaffected 
C) the profits of the division using the intermediate product will fall 
D) ​the costs of the division using the intermediate product will fall

Question 17

​An example of organizational architecture based on customer location is when divisions are defined as

Accepted Answer

A) ​R&D,Engineering,Production,Marketing,Sales 
B) Component 1 Plant,Component 2 Plant,Component 3 Plant,Final Assembly 
C) Store 1,Store 2,Store 3,Region A,Region B,Sales Division 
D) ​Business Customers,Educational Customers,Household Customers 
A) ​R&D,Engineering,Production,Marketing,Sales 
B) Component 1 Plant,Component 2 Plant,Component 3 Plant,Final Assembly 
C) Store 1,Store 2,Store 3,Region A,Region B,Sales Division 
D) ​Business Customers,Educational Customers,Household Customers

Question 18

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

Accepted Answer

A) ​Workers develop functional expertise 
B) Workers can easily share information within their division 
C) They inhibit the exploitation of economies of scale 
D) ​None of the above 
A) ​Workers develop functional expertise 
B) Workers can easily share information within their division 
C) They inhibit the exploitation of economies of scale 
D) ​None of the above

Question 19

​Ways to "game" the budgeting process include

Accepted Answer

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

Question 20

​An advantage of a functional division is that performance is

Accepted Answer

A) ​More easily measured 
B) More difficult to measure 
C) Not measured 
D) ​None of the above 
A) ​More easily measured 
B) More difficult to measure 
C) Not measured 
D) ​None of the above

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

​A solution to the budget-gaming problem is

​Managers of profit centers earn more when their divisions

​Piece rate pay is

​Managers of profit centers are usually given a lot of discretion because

​The functional form of corporate organization

​Am M-form of an organization is one in which

​When the transfer price is increased

​The parent company would want to reward managers based on division revenues because

​Tom & Jerry are running Hanna Barbera's lemonade stand as two profit centers.Tom makes the lemonade while Jerry sells it.Jerry argues that Tom is transferring the lemonade to him priced too high,which forces him to charge the customers a high price,losing sales.Who is making the bad decision?

​Annual budgeting of production goals of a division within a firm

​Which of the following is TRUE?

​Once a division manager sees that production goal for a time period is likely to be met

​A profit center

​In profit centers

​The parent company would want to reward managers based on division revenues because

​When a transfer price increases

​An example of organizational architecture based on customer location is when divisions are defined as

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

​Ways to "game" the budgeting process include

​An advantage of a functional division is that performance 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

A solution to the budget-gaming problem is

Managers of profit centers earn more when their divisions

Piece rate pay is

Managers of profit centers are usually given a lot of discretion because

The functional form of corporate organization

Am M-form of an organization is one in which

When the transfer price is increased

The parent company would want to reward managers based on division revenues because

Tom & Jerry are running Hanna Barbera's lemonade stand as two profit centers.Tom makes the lemonade while Jerry sells it.Jerry argues that Tom is transferring the lemonade to him priced too high,which forces him to charge the customers a high price,losing sales.Who is making the bad decision?

Annual budgeting of production goals of a division within a firm

Which of the following is TRUE?

Once a division manager sees that production goal for a time period is likely to be met

A profit center

In profit centers

The parent company would want to reward managers based on division revenues because

When a transfer price increases

An example of organizational architecture based on customer location is when divisions are defined as

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

Ways to "game" the budgeting process include

An advantage of a functional division is that performance is