Deck 16: Managerial Control

Question 1

The targeted level of performance for a particular goal is known as a(n)

A)standard.
B)organization.
C)bureaucracy.
D)directive.
E)empowerment.

Answer 1

A

Question 2

Three key categories of financial ratios are liquidity, leverage, and profitability.

Answer 2

True

Question 3

The use of budgeting, statistical reports, and performance appraisals to regulate behavior and results is considered a component of

A)clan control.
B)market control.
C)bureaucratic control.
D)financial audits.
E)management audits.

Answer 3

C

Question 4

With market control, the activities of an organization are regulated through the use of

A)rules, regulations, and formal authority.
B)budgets, statistical reports, and performance appraisals.
C)shared values, expectations, and goals.
D)pricing mechanisms and economic information.
E)real-time monitoring and fine-tuning.

Question 5

How does clan control differ from bureaucratic control and market control?

A)Clan control uses formal controls more often than market control and bureaucratic control do.
B)Clan control does not assume that the interests of the organization and individuals naturally diverge.
C)Clan control is based on past performance, whereas the other two try to influence future performance.
D)Clan control is based on a more negative view of human character than the other two are.
E)Clan control is more heavily based on economic factors than market control and bureaucratic control are.

Question 6

"In implementing the control process for our new operation, I first established performance standards," said Karlin. "Next, I measured performance. But I'm not sure that my measurement of performance is accurate." His boss replied, "In measuring performance, you can gather performance data from three sources: ________. Furthermore, the data need to be timely."

A)written reports, oral reports, and personal observation
B)client satisfaction surveys, oral reports, and personal observation
C)written reports, the grapevine, and personal observation
D)competitors' performance data, oral reports, and personal observation
E)written reports, oral reports, and analysts' statements

Question 7

In large diversified companies, market controls are often used to regulate independent business units.

Question 8

Performance standards can only be set with respect to quantity or quality.

Question 9

One of the fundamental forces that keep an organization heading in the right direction is

A)competition.
B)control.
C)accounting.
D)myopia.
E)bureaucracy.

Question 10

Synthesis Products is a corporation that produces material for wallboard and other applications. They are a hierarchical organization, with a strict chain of command culture and a strict set of rules and regulations. They track a large amount of data using statistical techniques, and they use this data to regulate behavior and results. Synthesis Products follows a ________ control system.

A)bureaucratic
B)market
C)clan
D)feedforward
E)concurrent

Question 11

Dana's company relies on rules, as set forth in the employee handbook, the authority of managers, and regular employee reviews to guide performance. Dana's company uses ________ control.

A)bureaucratic
B)market
C)feedback
D)concurrent
E)clan

Question 12

Traditional methods of cost accounting tend to be inappropriate in today's business environment because they are based on outdated methods of rigid hierarchical organization.

Question 13

Because financial ratios usually are expressed in compressed time horizons, they often cause management myopia.

Question 14

Which of the following is a symptom of an out-of-control company?

A)flexible work hours for employees
B)highly challenging organizational goals
C)lack of periodic reviews
D)highly rigid work culture
E)lack of new employees

Question 15

Control is defined as

A)the function that concentrates on the significant deviations from the expected result or standard.
B)an itemized financial statement of the income and expenses of a company's operations.
C)valid performance standards that are expressed in quantitative terms.
D)the manipulation of information or the reporting of false performance data to beat the system.
E)any process that directs the activities of individuals toward the achievement of organizational goals.

Question 16

Which of the following is not an element of bureaucratic control?

A)rules
B)exchange relationships
C)authority
D)budgets
E)performance appraisals

Question 17

If an employee believes his or her control system is overly controlling, that employee is likely to exhibit dysfunctional behavior.

Question 18

Before you can measure performance, what must you do?

A)evaluate employees
B)improve performance
C)set performance standards
D)analyze market conditions
E)experiment with methods

Question 19

The executives at Old-Fashioned Evening Inc., a chain of restaurants that feature wholesome activities for young couples, believe that the company's employees share the corporate goals of service, quality, value, and "good clean fun." Because of this, corporate leadership believes that employees are motivated to work for the common good without a lot of formal controls. This is an example of ________ control.

A)feedforward
B)market
C)feedback
D)concurrent
E)clan

Question 20

Mobley thought, "I'm not surprised that the corporate office canceled our funding. Costs had spiraled upward, and unanticipated technical problems had cropped up. We just didn't keep our eye on the ball, even though we had a great plan and sound strategies. Fundamentally, we lacked an effective means of control to ensure that

A)our marketing strategies were reflective of the old product."
B)employees took steps to solve problems."
C)the plans were carried out."
D)management was creative."
E)communication was clear."

Question 21

Which of the following is one of the factors on which performance standards can be set?

A)the principle of exception
B)knowledge
C)market share
D)employee satisfaction
E)quality

Question 22

A managerial principle stating that control is enhanced by concentrating on the significant deviations from the expected result or standard is referred to as the principle of

A)budgeting.
B)concentration.
C)progression.
D)exception.
E)standardization.

Question 23

Which of the following is the first major step in a typical control process?

A)comparing performance with standards
B)setting standards
C)taking corrective action
D)developing values
E)measuring performance

Question 24

Motivating employees and setting benchmarks are two of the reasons to

A)detect performance deviations.
B)analyze market forces.
C)correct problems.
D)increase bureaucracy.
E)establish performance standards.

Question 25

Wilhelm oversees the shipping department in a warehouse for a major chain of stores. He knows some packages are being damaged, and he needs specific numbers so he can calculate the impact on departmental costs. What method will enable Wilhelm to efficiently collect accurate data so that he can make the calculations he needs in this situation?

A)asking his shift supervisors to tell him how many packages they estimate they lost each day
B)programming the machinery to count all shipped and damaged packages and generate a computerized report daily
C)observing the workers on the shipping conveyor as they process packages
D)interviewing a representative sample of workers in the shipping department to see how bad they think the damage is
E)contacting the shipping supply company to see if he has ordered significantly more supplies than last year

Question 26

A division manager whispered to his peer as they left the monthly executive meeting, "Our new CEO is going to play hardball. Any of us whose division is performing with significant negative deviation from the established budget is going to get a lot of her concentrated attention." "What do you expect?" countered Saif. "She told us in our meeting that she would be using ________ as part of her control system."

A)the balance sheet
B)management myopia
C)our employment relationship
D)the principle of exception
E)the balance scorecard

Question 27

After Denise's restaurant opened, she spent the first two weeks closely correcting any flaws she found in the way the business operated. This is an example of ________ control.

A)feedforward
B)concurrent
C)clan
D)market
E)proactive

Question 28

Which of the following is a commonly used source for obtaining performance data?

A)competitors
B)the human resource department
C)written reports
D)upper management
E)technical analysts from outside the company

Question 29

Laney uses the results of customer surveys to point out ways that her cashiers can improve their service. This is an example of ________ control.

A)feedforward
B)concurrent
C)clan
D)market
E)feedback

Question 30

Alvita works for a company that extracts minerals from the ground. Her new CEO wants to be sure the company can keep extracting minerals and continue to work with landowners to get mineral rights for many years. The CEO asks Alvita to audit how the likely the company will be able to sustain its operations long-term. What should Alvita keep in mind while conducting this audit?

A)She needs to realize she is subject to more regulation than if she were conducting a financial audit.
B)She will need to report her results in the same format as any other audit.
C)She should consider company profits, the local people, and the local environment.
D)She can ignore financial and profitability data for the purposes of this audit.
E)She should do what pleases the local landowners, even if it is not profitable.

Question 31

Jason is in charge of production at Pulleys Galore Inc. His job responsibilities include eliminating defects in the equipment parts the factory produces. However, he has advised his crew to alert him only when defects exceed 200 per million, which he considers a serious deviation from standards. In this case, Jason is using

A)a management audit.
B)the principle of deviation.
C)clan control.
D)the principle of exception.
E)behavioral standards.

Question 32

A(n)________ is the level of expected performance for a given goal; it is a target that establishes a desired performance level, motivates performance, and serves as a benchmark against which actual performance is assessed.

A)goal
B)objective
C)standard
D)control process
E)audit

Question 33

Wayne oversees a small chain of restaurants. He has noticed that he seems to be working harder and spending more time managing than his peers. In order to save himself time and effort, Wayne should

A)check every detail to make sure everything is configured perfectly.
B)focus his attention on situations that sharply deviate from what is expected.
C)work to ensure that the restaurants do not deviate even a little from expected results.
D)ignore results that are exceptions to what is expected and write them off as flukes.
E)remove specific expectations from his employees and see if his job gets easier.

Question 34

Which of the following is the second major step in a typical control system?

A)measuring performance
B)setting performance standards
C)developing values
D)comparing performance with standards
E)determining deviations

Question 35

Which of the following statements about the six-sigma approach to quality is true?

A)It is an excellent method for delivering business results.
B)It usually improves the bottom line.
C)It focuses on eliminating defects in a process.
D)It looks at whether a process is the best one available.
E)It has little practical use in the business world.

Question 36

Which of the following would be a likely target of an internal audit?

A)a corporation's charitable-giving program
B)a corporation's potential merger partner
C)a corporation's possible acquisition
D)a corporation's current competitor
E)a corporation's potential supplier

Question 37

Kartik's company is about to start manufacturing a new product. Before beginning operations, Kartik and several other managers develop procedures to ensure that the planned activities are carried out properly. This is an example of ________ control.

A)feedforward
B)concurrent
C)clan
D)market
E)reactive

Question 38

While doing an external audit of a potential distribution partner, Tyrone uncovered some serious legal problems that could cause trouble for his company if it goes through with the deal. Tyrone's external audit provided essential ________ control.

A)feedforward
B)concurrent
C)clan
D)market
E)feedback

Question 39

According to the principle of exception, which deviations from the expected standard require corrective action?

A)the most common deviations
B)most of the deviations
C)the most significant deviations
D)any and all deviations
E)no type of deviation

Question 40

What is the last step in the control process?

A)measuring performance based on standards
B)defining what constitutes performance
C)setting performance standards
D)taking action to correct problems and reinforce successes
E)comparing performance to the standards and determining deviations

Question 41

The ________ budget is used for areas of an organization that incur expenses but no revenue, such as human resources and other support departments.

A)sales
B)production
C)cost
D)cash
E)capital

Question 42

A ________ budget is used for the cost of fixed assets, such as plants and equipment, that are usually treated as investments instead of as regular expenses.

A)master
B)cash
C)capital
D)production
E)sales

Question 43

Stevie is preparing a budget that shows the company's expected sales receipts and expenditures for the year, a projection of how much cash will be available each month, and the extent of outside financing the company might need. This is a ________ budget.

A)capital
B)cash
C)cost
D)production
E)sales

Question 44

Which of the following controls is future oriented and aims to prevent problems before they arise?

A)feedback control
B)proactive control
C)feedforward control
D)reactive control
E)concurrent control

Question 45

"Listen up," said, Dwayne Thompson, dive team leader, as his team finished suiting up. "This is a hazardous dive. We've been properly trained and properly equipped with the necessary gear and tools to rescue the trapped cavers. Stay in physical contact with the divers in front of and behind you. After we complete the rescue, meet me to debrief what we did well and what we can improve." In this case, the proper training and equipment is an example of ________ control.

A)feedback
B)specialist
C)feedforward
D)operator
E)concurrent

Question 46

Electronic monitoring of telemarketers' conversations with potential clients is an example of ________ control.

A)feedback
B)concurrent
C)preliminary
D)clan
E)feedforward

Question 47

An evaluation conducted by one organization on another organization is referred to as a(n)________ audit.

A)external
B)competitive
C)comparative
D)intrinsic
E)parallel

Question 48

In his new employee orientation training, Francisco heard Meibeth, his new accounting supervisor, explain, "At Wrightfield Corporation, we do not use traditional cost accounting. Rather, we use activity-based costing, or ABC. According to ABC, we ________ costs according to what our employees do, rather than what the company spends."

A)audit
B)expend
C)trade
D)allocate
E)benchmark

Question 49

Xena has been put in charge of a group of young employees who were recently hired by her company. In her new role as a supervisor, she is careful to keep an eye on the new employees to ensure that they work efficiently and avoid making serious mistakes. Which of the following types of control is Xena using?

A)organizational modification
B)concurrent control
C)management adjustment
D)feedback control
E)feedforward control

Question 50

Procedures used to verify accounting reports and statements are referred to as

A)lean accounting.
B)accounting audits.
C)activity-based costing.
D)accounting reforms.
E)budget audits.

Question 51

"After a long and costly two weeks, I have lots of data, that I don't know how to analyze. I don't know what constitutes good performance as opposed to bad performance," said Malcolm to his boss. His boss replied, "Malcolm, it sounds as if you failed to first establish a(n)________ by which to assess your data."

A)parameter
B)locus
C)measurement
D)standard
E)index

Question 52

Which of the following statements about six sigma is true?

A)Six sigma was developed at the Ford Company during the 1970s.
B)The lower the sigma number, the lower the level of defects.
C)Six sigma is designed only to reduce product defects.
D)Six sigma indicates how often defects in a process are likely to occur.
E)Six sigma always improves the bottom line.

Question 53

Bella is a financial manager at Fiber Fundamentals Inc., a producer of fiber optics for use in high speed communication devices. She makes a budget that shows the anticipated receipts and expenses of the company. As the last budget that she creates for the upcoming year, it also shows the amount of working capital available and whether the company will need loans. Which of the following types of budgets has Bella created?

A)a master budget
B)a cash budget
C)a cost production budget
D)a production budget
E)a sales budget

Question 54

The process of investigating what is being done and comparing the results with the corresponding budget data to verify accomplishments or remedy differences is referred to as

A)activity-based costing.
B)budgetary auditing.
C)budgetary control.
D)financial audits.
E)budget planning.

Question 55

An important purpose of external audits is to

A)assess what a company has done for itself.
B)evaluate production efficiency.
C)evaluate sales effectiveness.
D)investigate possible targets for mergers or acquisitions.
E)assess what a company has done for its customers.

Question 56

The ________ budget is thought of as a "budget of budgets."

A)capital
B)cost
C)master
D)production
E)sales

Question 57

Which of the following is not periodically assessed as an essential part of a company's internal audits?

A)planning
B)organizing
C)leading
D)controlling efforts
E)competing against rivals

Question 58

At Key Agricultural Supply Co., all assembly workers must wear specialized gear to reduce possible injuries from minute particles in the manufacturing environment. This requirement best reflects ________ control.

A)feedback
B)proactive
C)feedforward
D)reactive
E)concurrent

Question 59

In today's complex organizations, the budget process is most likely to be

A)top-down.
B)bottom-up.
C)horizontal.
D)circular.
E)compartmentalized.

Question 60

Which of the following controls takes place before operations begin?

A)feedback control
B)clan control
C)initial control
D)feedforward control
E)concurrent control

Question 61

The activity-based costing system

A)is the most appropriate method of cost accounting for rigid hierarchical organizations.
B)effectively departmentalizes an organization based on its core functions, such as human resources and maintenance.
C)provides a more accurate picture of how costs should be charged to products and services.
D)assumes that organizations are bureaucratic "machines" that can be separated into component functions.
E)fails to allocate costs across business processes and is less effective than traditional methods of cost accounting.

Question 62

"Many of your management trainees do not have formal educations or degrees in accounting or finance. And that is OK," said the corporate trainer. "That's why this training module will cover control by ________, which is most commonly used for the entire enterprise and, in the case of a diversified corporation such as ours, its divisions."

A)profit and loss
B)assets
C)liabilities
D)financial ratios
E)expenses

Question 63

Evelyn had to buy a lot of equipment to open her beauty salon. She bought most of it on credit. The amounts of money that she owes her creditors are called

A)assets.
B)capital.
C)investments.
D)liabilities.
E)equity.

Question 64

"The amount of information in the accounting reports is so overwhelming that I cannot understand it," said Ripley to his division manager, Sotol. "Yes," said Sotol, "The sheer volume of the numbers in the reports is daunting. That's why we have decided that an effective approach for checking our firm's overall performance is to use ________, which indicate strengths and weaknesses."

A)profit and loss statements
B)key financial ratios
C)assets
D)liabilities
E)balance sheets

Question 65

A report that shows the financial picture of a company at a given time and itemizes assets, liabilities, and stockholders' equity is referred to as a(n)

A)profit and loss statement.
B)balance sheet.
C)expense report.
D)income statement.
E)budget report.

Question 66

A company's balance sheet shows its

A)areas of improvement.
B)projected profit.
C)strengths, weaknesses, and threats.
D)financial picture at a given time.
E)performance over time.

Question 67

The Southern Educational Technology Alliance has begun a new system of allocating costs according to the tasks their employees perform and the amount of time they spend on the particular tasks. This practice is referred to as

A)unit-based accounting.
B)time-based auditing.
C)task accounting.
D)activity-based costing.
E)allocation costing.

Question 68

"Why is the ________ budget for next year 35 percent higher than this year's actual expenses?" asked Alli Truelove, CEO of PremierHealth Group. Her CFO, Blake Barnstone, replied, "We need to hire two additional human resources professionals to oversee the new benefits program and an additional attorney to handle claims. Also, our new lease for Building 13 will go into effect, and that includes a 14 percent increase in the first year." Alli replied, "Ouch. It's tough to absorb those kinds of increases from parts of our organization that generate no revenue."

A)cash
B)cost
C)production
D)master
E)maintenance

Question 69

Which of the following can be drawn tentatively and used as a goal against which actual performance can be measured?

A)statements of cash flow
B)profit and loss statements
C)balance sheets
D)external audits
E)capital budgets

Question 70

________ ratio is a liquidity ratio that indicates the extent to which short-term assets can decline and still be adequate to pay short-term liabilities.

A)Debt-equity
B)Current
C)Profitability
D)Return on investment
E)Stockholders' equity

Question 71

Liquidity ratios indicate a company's

A)ability to pay short-term debts.
B)ability to generate a financial return on sales.
C)relative amounts of funds supplied by creditors.
D)ability to meet its long-term financial obligations.
E)profitability and leverage ratios.

Question 72

Gina developed a revised balance sheet for her company. She used the balance sheet to show her company's _________, or the amounts the company owes to various creditors.

A)liabilities
B)assets
C)budgets
D)diseconomies
E)expenses

Question 73

Which of the following are the basic elements of a balance sheet?

A)income, expenses, and outcome
B)operations, sales, and growth
C)assets, liabilities, and stockholders' equity
D)receipts, deductions, and taxes
E)budgets, controls, and corrective actions

Question 74

The debt-equity ratio is an example of a ________ ratio.

A)net working capital
B)profitability
C)leverage
D)current
E)liquidity

Question 75

Angus interviews and observes his employees as part of his managerial duties at Shipko, a large packing supplies manufacturer. During the interviews, Angus receives a wide array of facts, figures, and predictions, and his observations reveal a variety of behaviors. He suspects some of the employees are telling him things and doing things that are designed to outsmart management rather than to give him an honest report. What type of behavior might be a clue for Angus that an employee is trying to beat management's control system?

A)purposefully estimating that they can produce 20,000 feet of cardboard in a day when they can actually produce 50,000 feet
B)following Shipko rules regarding safety without question, even if they seem counterproductive or inefficient
C)sorting and packaging only the minimal number of boxes per day that company expectations require
D)focusing on required behaviors, such as ensuring machines remain unclogged, instead of building relationships with managers
E)emphasizing sticking with the tried and true shipping container designs instead of experimenting with models that use fewer materials

Question 76

Which of the following best describes what a profitability ratio is?

A)It shows the relative amount of funds in the business supplied by shareholders.
B)It indicates a company's ability to pay short-term debts.
C)It indicates management's ability to generate a financial return on sales or investment.
D)It shows a company's profit margins for the last six months.
E)It indicates a company's future profits from its current customer base.

Question 77

An itemized financial statement of the income and expenses of a company's operations is called the

A)statement of financial ratios.
B)balance sheet.
C)cash flow statement.
D)assets and liabilities statement.
E)profit and loss statement.

Question 78

On the balance sheet, the amount accruing to a corporation's owners is referred to as

A)a liability.
B)transfer price.
C)an asset.
D)stockholders' equity.
E)return on investment.

Question 79

"Phil, if our top-level management wants us to produce a new line of lawn tractors over the next ten years, we will need to invest in another factory assembly line. And that's going to cost big bucks," said Bob Lawson, factory manager for TopLawn, Inc. "Please start greasing the skids internally. I don't want the home-office executives to be surprised when they see high-dollar fixed assets in my ________ budget."

A)sales
B)production
C)capital
D)master
E)operational

Question 80

Leverage ratios indicate

A)the relative amount of funds in the business supplied by creditors and shareholders.
B)a company's ability to pay its short-term debts.
C)management's ability to generate a financial return on sales or investment.
D)a company's profit margins for the last six months.
E)the future profits the company can expect from its current customer base.