Question 1

Properly developed and implemented management control systems influence subordinates to act in the organization's best interest.

Accepted Answer

A) True 
 B)False

Question 2

It is important to not consider an organization's compensation and reward system when designing its performance evaluation system.

Accepted Answer

A) True 
 B)False

Question 3

Which one of the following firms is likely to experience dysfunctional motivation on the part of its managers due to its allocation methods? (CMA adapted)

Accepted Answer

A) To allocate depreciation of forklifts used by workers at its central warehouse,Shahlimar Electronics uses predetermined amounts calculated on the basis of the long term average use of the services provided by the warehouse to the various segments. 
B) Manhattan Electronics uses the sales revenue of its various divisions to allocate costs connected with the upkeep of its headquarters building.It also uses ROI to evaluate the divisional performance. 
C) Rainier Industrial does not allow its service departments to pass on their cost overruns to production departments. 
D) Tashkent Auto's management information system (MIS)is operated out of headquarters and serves its various divisions.Tashkent's allocation of MIS-related costs to its divisions is limited to costs the divisions will incur if they were to outsource their MIS needs. 
E) Golkonda Refineries separately allocates fixed and variable costs incurred by its service departments to its production departments.

Question 4

The least complex segment or area of responsibility for which costs are allocated is a(n)(CMA adapted)

Accepted Answer

A) profit center. 
B) investment center. 
C) contribution center. 
D) cost center. 
E) hybrid center.

Question 5

Which of the following statements is (are)false regarding the effective use of management control systems? (A)In general,single rate cost allocations should not be used in management control systems because clear control over the cost being allocated cannot be determined.
(B)The primary reason to use a dual rate allocation system is to focus a manager's performance evaluation on factors under the manager's direct control.

Accepted Answer

A) Only A is false. 
B) Only B is false. 
C) Both A and B are false. 
D) Neither A nor B is false.

Question 6

Examples of pressures that can lead to financial fraud do not include

Accepted Answer

A) unrealistic budgets. 
B) inappropriate bonus plans. 
C) overemphasis on long-term results. 
D) overemphasis on short-term results.

Question 7

Which of the following is not an internal control?

Accepted Answer

A) rotating personnel among tasks. 
B) separation of duties. 
C) setting limits on the amount of expenditures. 
D) using absolute performance standards.

Question 8

Rational managers will always make decisions that are in the best interest of the organization employing them.

Accepted Answer

A) True 
 B)False

Question 9

Controllable revenue is included in a performance report of a

Accepted Answer

A) a 
B) b 
C) c 
D) d

Question 10

An operating unit that is responsible for revenues only is commonly referred to as a(n)

Accepted Answer

A) expense center. 
B) revenue center. 
C) profit center. 
D) asset center.

Question 11

What is the allocation rate for the upcoming year assuming Fenway Telcom uses the single-rate method and allocates common costs based on the time on the network?

Accepted Answer

A) $20.00 
B) $16.00 
C) $4.00 
D) $2.86

Question 12

Fenway Telcom uses the single rate method and allocates common costs based on the time on the network.What is the total computer server network cost allocated to the Retail Division?

Accepted Answer

A) $429,000 
B) $600,000 
C) $657,800 
D) $3,000,000

Question 13

If the Copy Department uses a dual-rate for allocating its costs,how much cost will be allocated to the Marketing Department,assuming the Marketing Department actually made 3,000,000 copies during the year?

Accepted Answer

A) $135,000 
B) $150,000 
C) $155,000 
D) $170,000

Question 14

Fenway Telcom uses the single rate method and allocates common costs based on the number of connections.What is the total computer server network cost allocated to the Commercial Division?

Accepted Answer

A) $480,000 
B) $514,286 
C) $600,000 
D) $1,200,000

Question 15

Managers in a cost center are held responsible for both the costs and volumes of inputs used to produce a product or provide a service.

Accepted Answer

A) True 
 B)False

Question 16

What is the allocation rate for the upcoming year assuming Fenway Telcom uses the single-rate method and allocates common costs based on the number of connections?

Accepted Answer

A) $10.00 
B) $15.00 
C) $20.00 
D) $40.00

Question 17

An operating unit of an organization is called a cost center if it is responsible

Accepted Answer

A) only for costs. 
B) only for revenues. 
C) for costs and revenues. 
D) for investments in assets.

Question 18

Controllable revenue is included in a performance report of a

Accepted Answer

A) a 
B) b 
C) c 
D) d

Question 19

If the Copy Department uses a dual-rate for allocating its costs,how much cost will be allocated to the Marketing Department,assuming the Marketing Department actually made 3,800,000 copies during the year?

Accepted Answer

A) $135,000 
B) $150,000 
C) $155,000 
D) $175,000

Question 20

One advantage of decentralization is faster response time to changes in the organization's environment by local managers.

Accepted Answer

A) True 
 B)False

Exam 12: Fundamentals of Management Control Systems

Properly developed and implemented management control systems influence subordinates to act in the organization's best interest.

It is important to not consider an organization's compensation and reward system when designing its performance evaluation system.

Which one of the following firms is likely to experience dysfunctional motivation on the part of its managers due to its allocation methods? (CMA adapted)

The least complex segment or area of responsibility for which costs are allocated is a(n) (CMA adapted)

Examples of pressures that can lead to financial fraud do not include

Which of the following is not an internal control?

Rational managers will always make decisions that are in the best interest of the organization employing them.

Controllable revenue is included in a performance report of a

An operating unit that is responsible for revenues only is commonly referred to as a(n)

What is the allocation rate for the upcoming year assuming Fenway Telcom uses the single-rate method and allocates common costs based on the time on the network?

Fenway Telcom uses the single rate method and allocates common costs based on the time on the network.What is the total computer server network cost allocated to the Retail Division?

If the Copy Department uses a dual-rate for allocating its costs,how much cost will be allocated to the Marketing Department,assuming the Marketing Department actually made 3,000,000 copies during the year?

Fenway Telcom uses the single rate method and allocates common costs based on the number of connections.What is the total computer server network cost allocated to the Commercial Division?

Managers in a cost center are held responsible for both the costs and volumes of inputs used to produce a product or provide a service.

What is the allocation rate for the upcoming year assuming Fenway Telcom uses the single-rate method and allocates common costs based on the number of connections?

An operating unit of an organization is called a cost center if it is responsible

Controllable revenue is included in a performance report of a

If the Copy Department uses a dual-rate for allocating its costs,how much cost will be allocated to the Marketing Department,assuming the Marketing Department actually made 3,800,000 copies during the year?

One advantage of decentralization is faster response time to changes in the organization's environment by local managers.