Deck 14: Managing Control

Question 1

Effective managers make sure that activities are going as planned with the help of control.

Answer 1

True

Question 2

Control systems lay out a framework for the future, and, in this sense, provide a blueprint for control.

Answer 2

False

Question 3

Budgetary control is the process of finding out what's being done and comparing the results with the corresponding budget data to verify accomplishments or remedy differences.

Answer 3

True

Question 4

Control systems detect and correct significant variations, or discrepancies, in the results of planned activities.

Question 5

Summarizing balance sheet items over a long period of time uncovers important trends.

Question 6

The lack of controls can frequently cause irreparable damage to organizations.

Question 7

Budgeting information is confined to finances.

Question 8

The downside of establishing performance targets and standards is that they may not be supported by other elements of the control system.

Question 9

Traditional methods of cost accounting are still appropriate in today's business environment.

Question 10

With the principle of exception, the manager is concerned with performance that equals or closely approximates the expected results.

Question 11

The cash budget should be prepared before all other budget estimates are completed.

Question 12

When supervisors monitor behavior, they are exercising feedback control.

Question 13

In feedforward control, a manager waits for results and compares them with goals.

Question 14

Six sigma companies have a high level of product or service defects.

Question 15

The activity-based costing method allocates costs across business processes and provides a more accurate picture of how costs should be charged to products and services.

Question 16

The chief financial officer (CFO) needs to be more concerned with details than with recommending adjustments when needed.

Question 17

During challenging economic times when resources are limited and budgets need to be stretched, managerial control becomes insignificant for survival.

Question 18

Some means of control are necessary because once managers form plans and strategies, they must ensure that the plans are carried out.

Question 19

External audits provide essential feedback control when they identify legal and ethical lapses that could harm the organization and its reputation.

Question 20

Controlling by profit and loss is most commonly used for the entire enterprise.

Question 21

After individuals gain employment, market-based wages lose their importance.

Question 22

A company is said to lack _____ when there is an absence of policies and a lack of periodic reviews.

A) corporate social responsibility
B) economies of scale
C) environmental uncertainty
D) control
E) switching costs

Question 23

_____ control involves the use of prices, competition, and exchange relationships to regulate activities in organizations as though they were economic transactions.

A) Bureaucratic
B) Concurrent
C) Standard
D) Clan
E) Market

Question 24

The most effective standards tend to be subjective rather than objective.

Question 25

The use of rules, regulations, and authority to guide performance is referred to as _____ control.

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

Question 26

Control based on the norms, values, shared goals, and trust among group members is referred to as:

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

Question 27

At a town hall meeting, the CEO of a company spoke energetically about adopting cost-cutting measures due to the recent economic slump. However, a few days later, the employees found out that the CEO had gone on an exotic vacation using funds from the company. Which of the following is true about this company?

A) Key data are not measured and reported in a timely manner.
B) Reviews are not held periodically.
C) Employees are unclear about what needs to be achieved.
D) Senior managers set a bad example, implying a lack of control.
E) The firm's expectations are not established in writing.

Question 28

_____ control includes items such as budgets, statistical reports, and performance appraisals to regulate behavior and results.

A) Clan
B) Market
C) Bureaucratic
D) Concurrent
E) Feedforward

Question 29

Balanced scorecards are intended to keep CEOs focused on the company's longer-term health.

Question 30

Control based on the use of pricing mechanisms and economic information is referred to as:

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

Question 31

Control systems help create comfortable, cooperative relationships among employees.

Question 32

Which of the following is a definition of control?

A) It refers to the expected performance for a given goal.
B) It is any process that directs the activities of individuals toward the achievement of organizational goals.
C) It is an evaluation of the effectiveness and efficacy of various systems within an organization.
D) It is the process of investigating what is being done and comparing the results with the corresponding budget data.
E) It is the procedure used to verify accounting reports and statements.

Question 33

Employees are often benefited as diversified companies are repeatedly bought and sold based on market controls.

Question 34

Allowing people to initiate their own corrective action encourages self-control and reduces the need for outside supervision.

Question 35

Comprehensive control systems increase the accuracy of performance data and make employees more accountable for their actions.

Question 36

Empowering employees to make decisions implies giving up control.

Question 37

An effective approach for checking an enterprise's overall performance is to use key financial ratios.

Question 38

Relying exclusively on financial ratios is effective because they provide performance standards and indicators of what has occurred.

Question 39

Jane, an employee, received an e-mail from an angry client about a certain product. Although it was not Jane's fault, she hesitated to report it to her manager because she knew that she would be blamed for it and could even be fired. Based on this scenario, which of the following is true of Jane's company?

A) The firm's expectations are not established in writing.
B) Employees are unclear about what needs to be achieved.
C) "Shoot the messenger" management exists, implying a lack of control.
D) Reviews are not held periodically.
E) Key data are not measured and reported in a timely manner.

Question 40

Control and _____ have been called the Siamese twins of management.

A) planning
B) organizing
C) leading
D) directing
E) empowerment

Question 41

The control process used while plans are being carried out, including directing, monitoring, and fine-tuning activities as they are performed is known as _____ control.

A) feedback
B) concurrent
C) accounting
D) budget
E) feedforward

Question 42

The _____ states that control is enhanced by concentrating on the exceptions to, or significant deviations from, the expected result or standard.

A) return on investment
B) audit
C) myopia
D) principle of exception
E) debt-equity ratio

Question 43

Max Inc. has started a new system of allocating costs according to what their employees do, rather than what the company spends. For example, labor expenses are allocated to employee tasks rather than salary and benefits. This practice is referred to as:

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

Question 44

At Precision Instruments Corp., a rule has been made instructing all assembly workers to arrive early for their shift in order to wear specialized gear because the products are very sensitive to external particles. These products are assembled in a controlled environment. This requirement reflects _______ control.

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

Question 45

Which type of control is future oriented and aims to prevent problems before they arise?

A) Feedback control
B) Specialist control
C) Feedforward control
D) Operator control
E) Concurrent control

Question 46

_____ is the process of comparing a firm's practices and technologies with those of other organizations.

A) Benchmarking
B) Budgeting
C) Six Sigma
D) Management audit
E) Feedforward control

Question 47

The last step in a typical control system is:

A) taking action to correct problems.
B) setting performance standards.
C) measuring performance.
D) comparing performance against the standards.
E) revising standards.

Question 48

Kate is the financial manager at Flavors Inc., a lollipop manufacturer. One of her duties is to make a budget that shows the anticipated receipts and expenditures of the company. The budget also shows the amount of working capital available and the extent to which outside financing may be required. Kate makes this budget after all other budget estimates have been completed. Which of the following types of budget is Kate currently working on?

A) Master budget
B) Cash budget
C) Cost budget
D) Production budget
E) Sales budget

Question 49

Which of the following is the second stage of budgetary control?

A) Responding appropriately
B) Performing budgetary operations
C) Comparing Six Sigma data
D) Establishing expectancies
E) Taking action

Question 50

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

A) Setting performance standards
B) Comparing performance against the standards
C) Taking action to correct problems
D) Revising standards
E) Measuring performance

Question 51

An evaluation conducted by one organization of another organization is referred to as a(n):

A) external audit.
B) market control.
C) clan control.
D) budget.
E) activity-based costing.

Question 52

The level of expected performance for a given goal: a target that establishes a desired performance level, motivates performance, and serves as a benchmark against which actual performance is assessed is referred to as a(n):

A) liability.
B) balance sheet.
C) standard.
D) asset.
E) audit.

Question 53

Which of the following is a use of external audits?

A) Evaluating financial stability
B) Evaluating production efficiency
C) Evaluating sales effectiveness
D) Identifying possible mergers or acquisitions
E) Identifying earnings potential

Question 54

Which of the following budgets is used for areas of the organization that incur expenses but no revenue?

A) Sales budget
B) Production budget
C) Cost budget
D) Cash budget
E) Master budget

Question 55

Which of the following statements is true regarding Six Sigma?

A) The system was developed by General Electric.
B) It is designed to choose the correct organizational process for a job.
C) The lower the sigma number, the lower the level of defects.
D) It indicates how often defects in a process are likely to occur.
E) It always improves the bottom line.

Question 56

Assessing the planning, organizing, leading, and controlling efforts of one's own organization is the essential function of:

A) strategic audit.
B) feedforward control.
C) feedback control.
D) external audit.
E) internal audit.

Question 57

The Six Sigma approach is based on _____ that contribute(s) to customer satisfaction.

A) statistical analysis
B) budgetary control
C) a strategic vision
D) management audits
E) an increased customer base

Question 58

An evaluation of the effectiveness and efficiency of various systems within an organization is called a(n):

A) standard.
B) management audit.
C) innovation catalyst.
D) budget.
E) profit and loss statement.

Question 59

Which type of bureaucratic control takes place while plans are being carried out?

A) Feedback control
B) Specialist control
C) Preliminary control
D) Feedforward control
E) Concurrent control

Question 60

Jennifer, a manager, is in charge of production at Nanosystems, Inc. Part of her job is to ensure that the components for surgical devices are extremely accurate. In fact, it is important that they are perfectly produced. When Jennifer concentrates on the significant deviations from established standards, she is using the:

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

Question 61

Carlos noticed a pattern at the annual budgeting session of his company. Mid-level managers were asking for unrealistically high budgets while top management was attempting to limit budgets under last year's actual expenditures. The management's strategies are referred to as:

A) budget breakdowns.
B) bureaucratic budgeting.
C) budget resistance.
D) tactical behaviors.
E) rigid behaviors.

Question 62

Catherine has recently reviewed a number of indicators of financial control. The one that troubled her indicated that the company could have trouble meeting its short-term financial obligations. Which of the following was she concerned about?

A) Profit and loss statement
B) Profitability ratio
C) Leverage ratio
D) Current ratio
E) Return on investment

Question 63

_____ indicate management's ability to generate a financial return on sales or investment.

A) Liquidity ratios
B) Leverage ratios
C) Net working capital ratios
D) Profitability ratios
E) Current ratios

Question 64

A company enforced a rule that employees were required to submit their cell phones for safekeeping before entering their work bay. Employees followed the rule in order to avoid getting into trouble with the management. As a result, many of them missed important phone calls from their clients/customers. This scenario is an example of:

A) market control.
B) management myopia.
C) dysfunctional behavior.
D) rigid bureaucratic behavior.
E) resistance to control.

Question 65

The most common liquidity ratio is current assets to current liabilities, known as the:

A) debt-equity ratio.
B) current ratio.
C) profit and loss ratio.
D) return on investment ratio.
E) stockholders' equity ratio.

Question 66

_____ are the values of the various items the corporation owns.

A) Liabilities
B) Assets
C) Profits
D) Audits
E) Equities

Question 67

_____ indicates the company's ability to meet its long-term financial obligations.

A) Profitability ratio
B) Liquidity ratio
C) Debt-equity ratio
D) Current ratio
E) Net working capital ratio

Question 68

_____ is the amount accruing to the corporation's owners.

A) Stockholders' equity
B) Liability
C) Dividend
D) Audit
E) Asset

Question 69

_____ show the relative amount of funds in the business supplied by creditors and shareholders.

A) Liquidity ratios
B) Current ratios
C) Net working capital ratios
D) Leverage ratios
E) Profitability ratios

Question 70

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 71

When employees feel forced to attempt to "beat the system," their behavior is known as:

A) rigidly bureaucratic behavior.
B) tactical behavior.
C) resisting behavior.
D) defensive behavior.
E) myopic behavior.

Question 72

A liquidity ratio that indicates the extent to which short-term assets can decline and still be adequate to pay short-term liabilities is referred to as the:

A) current ratio.
B) return on investment.
C) debt-equity ratio.
D) leverage ratio.
E) profitability ratio.

Question 73

Which of the following relationships is true?

A) Assets + Liabilities + Stockholders' equity = 0
B) Assets + Liabilities = Stockholders' equity
C) Assets = Liabilities + Stockholders' equity
D) Assets + Stockholders' equity = Liabilities
E) Assets = Liabilities - Stockholders' equity

Question 74

Which of the following is a reason why employees resist control systems?

A) Control systems can change the power structure of the organization.
B) Control systems make employees less accountable for their performance.
C) refreezing.
D) Control systems insure the security of employees.
E) Control systems require cooperation between employees.

Question 75

_____ refers to the situation when managers focus on short-term earnings and profits at the expense of their longer-term strategic obligations.

A) Return on investment
B) Management audit
C) Balanced scorecard
D) Management myopia
E) Provincialism

Question 76

_____ indicate(s) a company's ability to pay short-term debts.

A) Liabilities
B) Stockholders' equity
C) Assets
D) Liquidity ratios
E) Audits

Question 77

To be effective, control systems must:

A) be based on subjective standards.
B) communicate needed information upward in the organization.
C) be acceptable to top stockholders.
D) use multiple approaches.
E) centralize decision making.

Question 78

When a control system prompts employees to do only tasks required in their formal job descriptions, it is causing:

A) excessive subordination.
B) tactical behaviors.
C) rigid bureaucratic behaviors.
D) resistance to supervision.
E) resistance to change.

Question 79

An itemized financial document of the income and the expenses of a company's operations is known as the:

A) balanced scorecard.
B) appropriation account.
C) surplus.
D) fiscal policy.
E) profit and loss statement.

Question 80

_____ are the amounts the corporation owes to various creditors.

A) Liabilities
B) Equities
C) Dividends
D) Profits
E) Assets