Question 1

​A solution to the budget-gaming problem is

Accepted Answer

A) ​Introduce milestones or kinks in the compensation scheme 
B) Use a straight line pay for performance function 
C) Base compensations on meeting particular budget goals 
D) ​All of the above 
A) ​Introduce milestones or kinks in the compensation scheme 
B) Use a straight line pay for performance function 
C) Base compensations on meeting particular budget goals 
D) ​All of the above

Question 2

​Transfer prices

Accepted Answer

A) ​are an accounting device to allocate the costs and revenues of intermediate products across divisions 
B) increase the 'profits' of the profit center producing the intermediate product when they rise 
C) decrease the 'profits' of the profit center using the intermediate product when they rise 
D) ​all of the above 
A) ​are an accounting device to allocate the costs and revenues of intermediate products across divisions 
B) increase the 'profits' of the profit center producing the intermediate product when they rise 
C) decrease the 'profits' of the profit center using the intermediate product when they rise 
D) ​all of the above

Question 3

A functionally organized firm is one in which​

Accepted Answer

A) ​Various divisions perform the same task 
B) Various divisions perform separate tasks 
C) Various divisions compete with each other 
D) ​Various divisions handle the same production function 
A) ​Various divisions perform the same task 
B) Various divisions perform separate tasks 
C) Various divisions compete with each other 
D) ​Various divisions handle the same production function

Question 4

​The manager of the sales department (a profit center)at Harvey's HVAC,decides to outsource any sales training that the division needs since in house training is expensive,even though the outsourced training does not cover the company's repair and warranty information from the service department.Does the Sales department have enough incentive to make a good decision?

Accepted Answer

A) ​Yes,because them making the right decision would increase the division profit 
B) No,because them making the right decision does not affect the division profit 
C) No,because them making the right decision decreases the division profit 
D) ​Yes,because them making the right decision increases the company's total profits 
A) ​Yes,because them making the right decision would increase the division profit 
B) No,because them making the right decision does not affect the division profit 
C) No,because them making the right decision decreases the division profit 
D) ​Yes,because them making the right decision increases the company's total profits

Question 5

​Which of the following is a reason there are divisional conflicts over the transfer price?

Accepted Answer

A) ​the manager of the upstream division prefers a transfer price that is too high 
B) the manager of the downstream division prefers a transfer price that is too low 
C) the corporate headquarters does not have enough information to determine the correct transfer price 
D) ​all of the above 
A) ​the manager of the upstream division prefers a transfer price that is too high 
B) the manager of the downstream division prefers a transfer price that is too low 
C) the corporate headquarters does not have enough information to determine the correct transfer price 
D) ​all of the above

Question 6

​The manager of the sales department (a profit center)at Harvey's HVAC,decides to outsource any sales training that the division needs since in house training is expensive,even though the outsourced training does not cover the company's repair and warranty information from the service department.Who is making a bad decision?

Accepted Answer

A) ​The Sales department 
B) The Service department 
C) The Training division 
D) ​None of the above 
A) ​The Sales department 
B) The Service department 
C) The Training division 
D) ​None of the above

Question 7

​Which of the following is a feature of an M-Form organization?

Accepted Answer

A) ​divisions have difficulty responding to changes in customer demand 
B) it is difficult to maintain customer relationships 
C) coordination across divisions is simple and does not take much management time 
D) employee evaluation is hampered by managers often having different skill sets than those the manage 
A) ​divisions have difficulty responding to changes in customer demand 
B) it is difficult to maintain customer relationships 
C) coordination across divisions is simple and does not take much management time 
D) employee evaluation is hampered by managers often having different skill sets than those the manage

Question 8

​An international producer is trying to centralize its R&D.This is consistent with it trying to

Accepted Answer

A) ​Set up a functional division 
B) Take advantage of the economies of scale 
C) Take advantage of the learning curve effect 
D) ​All of the above 
A) ​Set up a functional division 
B) Take advantage of the economies of scale 
C) Take advantage of the learning curve effect 
D) ​All of the above

Question 9

​Ways to "game" the budgeting process include

Accepted Answer

A) accelerating sales if just short of a target 
B) accelerating 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) accelerating sales if just short of a target 
B) accelerating 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 10

​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 foster 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 foster the exploitation of economies of scale 
D) ​None of the above

Question 11

​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) corporate executives reward managers based on firm profitability instead of divisional profitability 
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 profit centers care too little about the effects of their decisions on other divisions 
C) corporate executives reward managers based on firm profitability instead of divisional profitability 
D) ​corporate executives cannot tell when one divisional manager's decisions are appropriate or not

Question 12

​Which of the following is TRUE?

Accepted Answer

A) ​Maximizing division profits always leads to maximizing company-wide profits 
B) Managers of profit centers are given a lot 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 always leads to maximizing company-wide profits 
B) Managers of profit centers are given a lot 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 13

​Channel stuffing is

Accepted Answer

A) ​Shipping out sales at the beginning of the year 
B) Shipping out products only if you are certain that they would not be returned 
C) Shipping out products at the end of the year to mark them as earned revenue,even if you know that they would be returned later 
D) ​Shipping out products at the start of the year even though it is certain that there would be more demand during the year 
A) ​Shipping out sales at the beginning of the year 
B) Shipping out products only if you are certain that they would not be returned 
C) Shipping out products at the end of the year to mark them as earned revenue,even if you know that they would be returned later 
D) ​Shipping out products at the start of the year even though it is certain that there would be more demand during the year

Question 14

​Cost centers are

Accepted Answer

A) ​Evaluated on the profits they earn 
B) Not evaluated on the profits they earn 
C) Sometimes evaluated on the profits they earn and sometimes not 
D) ​None of the above 
A) ​Evaluated on the profits they earn 
B) Not evaluated on the profits they earn 
C) Sometimes evaluated on the profits they earn and sometimes not 
D) ​None of the above

Question 15

​When a transfer price increases

Accepted Answer

A) ​the buying division will want to sell less to the selling division 
B) the buying division will want to sell more to the selling division 
C) the selling division will want to sell less to the buying division 
D) ​the selling division will want to sell more to the buying division 
A) ​the buying division will want to sell less to the selling division 
B) the buying division will want to sell more to the selling division 
C) the selling division will want to sell less to the buying division 
D) ​the selling division will want to sell more to the buying division

Question 16

​In profit centers

Accepted Answer

A) ​Managers are difficult to evaluate because there is no 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 are incentivized to run their division efficiently 
A) ​Managers are difficult to evaluate because there is no 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 are incentivized to run their division efficiently

Question 17

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

Accepted Answer

A) ​Workers find it difficult to develop functional expertise 
B) Workers can easily share information within their division 
C) They inhibit the exploitation of economies of scale 
D) ​All of the above 
A) ​Workers find it difficult to develop functional expertise 
B) Workers can easily share information within their division 
C) They inhibit the exploitation of economies of scale 
D) ​All of the above

Question 18

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.What could be a profitable solution to this transfer-pricing problem?

Accepted Answer

A) ​Move the decision making to Hanna Barbera 
B) Turn Tom's division into a cost center 
C) Base Tom's reward on the company profits 
D) ​Base Jerry's reward on the company profits 
A) ​Move the decision making to Hanna Barbera 
B) Turn Tom's division into a cost center 
C) Base Tom's reward on the company profits 
D) ​Base Jerry's reward on the company profits

Question 19

​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.Does the decision maker have the information to make a good decision?

Accepted Answer

A) ​Yes 
B) No 
C) Uncertain 
D) ​None of the above 
A) ​Yes 
B) No 
C) Uncertain 
D) ​None of the above

Question 20

​High Powered Incentives
Hyperion Tool & Dye bids for contracts to retool other companies' production lines.The compensation schedule for their sales staff includes a 2% commission for the first $350,000 in orders per quarter,3% for the next $650,000,and 4% for amounts over $1,000,000.Hyperion is having trouble scheduling its staff for the jobs that they are awarded because the orders always seem to be awarded around the first and last days of a quarter.Why are orders bunched like this and how can Hyperion fix this?

Accepted Answer

Hyperion's sales staff has an incentive

A solution to the budget-gaming problem is

Transfer prices

A functionally organized firm is one in which

Which of the following is a reason there are divisional conflicts over the transfer price?

Which of the following is a feature of an M-Form organization?

An international producer is trying to centralize its R&D.This is consistent with it trying to

Ways to "game" the budgeting process include

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

All of the following can cause conflict between divisions EXCEPT

Which of the following is TRUE?

Channel stuffing is

Cost centers are

When a transfer price increases

In profit centers

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

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

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