Question 1

An example of organizational architecture based on production of intermediate products 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 2

If it is particularly difficult for the corporate headquarters to determine the correct transfer price

Accepted Answer

A) average costs is a good enough approximation 
B) average variable costs is a good enough approximation 
C) a similar products market price is a good enough approximation 
D) the upstream division could be run as a cost center 
A) average costs is a good enough approximation 
B) average variable costs is a good enough approximation 
C) a similar products market price is a good enough approximation 
D) the upstream division could be run as a cost center

Question 3

An example of organizational architecture based on customer type 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 4

When a transfer price is set lower

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 5

The features of the M-Form of firm organization are

Accepted Answer

A) divisions have difficulty responding to market changes 
B) it is easier to maintain customer relationships 
C) coordination across divisions is simple and does not take much management time 
D) evaluating employees is easier because managers typically are similarly trained 
A) divisions have difficulty responding to market changes 
B) it is easier to maintain customer relationships 
C) coordination across divisions is simple and does not take much management time 
D) evaluating employees is easier because managers typically are similarly trained

Question 6

A reason there are divisional conflicts over the transfer price

Accepted Answer

A) the manager of the upstream division gets rewarded for a transfer price that is too high 
B) the manager of the downstream division gets rewarded for 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 gets rewarded for a transfer price that is too high 
B) the manager of the downstream division gets rewarded for 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 7

When a transfer price is set higher

Accepted Answer

A) the profits of the division producing the intermediate product will rise 
B) the profits of the division producing the intermediate product will fall 
C) the costs of the division producing the intermediate product will rise 
D) the costs of the division producing the intermediate product will fall 
A) the profits of the division producing the intermediate product will rise 
B) the profits of the division producing the intermediate product will fall 
C) the costs of the division producing the intermediate product will rise 
D) the costs of the division producing the intermediate product will fall

Question 8

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 have ample incentives 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 have ample incentives to run their division efficiently

Question 9

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 10

Which is a possible solution to a divisional conflict regarding a decision

Accepted Answer

A) change the division that has the authority to make the decision 
B) change the information flow so that the decision maker is better informed 
C) change the evaluation and reward scheme governing the decision maker 
D) all of the above 
A) change the division that has the authority to make the decision 
B) change the information flow so that the decision maker is better informed 
C) change the evaluation and reward scheme governing the decision maker 
D) all of the above

Question 11

The advantages of the U-Form of firm organization is

Accepted Answer

A) workers develop a high degree of functional expertise 
B) information can be easily shared between similarly trained employees within units 
C) evaluating employees is easier because managers typically are similarly trained 
D) all of the above 
A) workers develop a high degree of functional expertise 
B) information can be easily shared between similarly trained employees within units 
C) evaluating employees is easier because managers typically are similarly trained 
D) all of the above

Question 12

The features of the U-Form of firm organization are

Accepted Answer

A) workers have trouble developing a high degree of functional expertise 
B) it is difficult for employees to share information across positions within a division 
C) employee evaluation is hampered by managers having different skill sets than workers 
D) coordination across divisions is essential and is a burden on management 
A) workers have trouble developing a high degree of functional expertise 
B) it is difficult for employees to share information across positions within a division 
C) employee evaluation is hampered by managers having different skill sets than workers 
D) coordination across divisions is essential and is a burden on management

Question 13

A cost center is

Accepted Answer

A) evaluated based on minimizing costs within the division 
B) evaluated based on maximizing costs within the division 
C) evaluated based on minimizing profits generated by the division 
D) evaluated based on maximizing profits generated by the division 
A) evaluated based on minimizing costs within the division 
B) evaluated based on maximizing costs within the division 
C) evaluated based on minimizing profits generated by the division 
D) evaluated based on maximizing profits generated by the division

Question 14

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 15

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 16

The features of the U-Form of firm organization are

Accepted Answer

A) workers have trouble developing a high degree of functional expertise 
B) employees can easily share information across positions within a division 
C) employee evaluation is hampered by managers having different skill sets than workers 
D) coordination across divisions is simple and does not take much management time 
A) workers have trouble developing a high degree of functional expertise 
B) employees can easily share information across positions within a division 
C) employee evaluation is hampered by managers having different skill sets than workers 
D) coordination across divisions is simple and does not take much management time

Question 17

A division of a firm is

Accepted Answer

A) a logical sub-organization of the firm 
B) a level within the firm in which a large degree of autonomy is vested 
C) a level of hierarchy within a firm that defines the scope of a manager 
D) all of the above 
A) a logical sub-organization of the firm 
B) a level within the firm in which a large degree of autonomy is vested 
C) a level of hierarchy within a firm that defines the scope of a manager 
D) all of the above

Question 18

When a transfer price is set higher

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 19

All of the following describe the conflict between divisions EXCEPT

Accepted Answer

A) some activities across divisions benefit from coordination 
B) managers of profit centers care too little about the effects of their decisions on other divisions 
C) corporate executives reward managers who are able to become more efficient 
D) corporate executives cannot tell when one divisional manager's decision is appropriate or not 
A) some activities across divisions benefit from coordination 
B) managers of profit centers care too little about the effects of their decisions on other divisions 
C) corporate executives reward managers who are able to become more efficient 
D) corporate executives cannot tell when one divisional manager's decision is appropriate or not

Question 20

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

Exam 22: Getting Divisions to Work in the Firms Best Interest

An example of organizational architecture based on production of intermediate products is when divisions are defined as

If it is particularly difficult for the corporate headquarters to determine the correct transfer price

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

When a transfer price is set lower

The features of the M-Form of firm organization are

A reason there are divisional conflicts over the transfer price

When a transfer price is set higher

In profit centers

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 is a possible solution to a divisional conflict regarding a decision

The advantages of the U-Form of firm organization is

The features of the U-Form of firm organization are

A cost center is

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

The efficient transfer price is

The features of the U-Form of firm organization are

A division of a firm is

When a transfer price is set higher

All of the following describe the conflict between divisions EXCEPT

Managers of profit centers earn more when their divisions

The One Lessor of Business

Benefits, Costs, and Decisions

Extent How Muchdecisions

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 Indirect 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