CHAPTER 10: CONTROLLING IN ORGANIZATIONS

Test Correlation Table               Question Types/Level of Difficulty

   LEAR...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS


      True/False Questions
      Learning Objective 1

1.    Control involves t...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS

      ANSWER: T, Knowledge, Easy, p. 274

12.   When formal controls put an emph...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS

21.   Organic controls rely on a centralized authority structure.

      ANSWER:...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS

      Learning Objective 4

31.   Proxy statements are governance rules for a co...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS


      Multiple Choice Questions
      Preview
1.    Instituting effective manag...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS

6.    Controls help maintain or redirect __________ behaviors and results.
     ...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS

11.   Mechanisms that are intended to reduce errors and thereby minimize the nee...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS

16.   Waste Management tracked data on customer complaints and truck driver acci...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS

21.   At Xyllar University, the management class is required to write a ten-page...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS

26.   ERM software at Siebel Systems is specifically targeted at __________.
   ...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS

31.   In the cost-benefit model, the horizontal axis indicates the amount of org...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS

36.   Max Wilhelm is the CEO of the MCW Corporation. At the annual banquet, Wilh...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS

41.   The fifth step in the corrective control model involves __________.
      ...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS

47.   Rocky Swanson is involved in an attempt to reduce absenteeism at Sprocket
...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS

      Learning Objective 3

      Primary Methods of Control
52.   The text desc...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS

57.   __________ controls include flexible authority, relatively loose job descr...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS
      financial decisions. Specifically, Cullen predicts a period of inflation wi...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS

68.   __________ controls refer to the mechanisms for preventing or correcting t...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS
      it indicates how efficiently the organization is using its resources.
     ...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS
      b. to assist in allocating resources
      c. to enable a manager to domina...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS

85.   Gattis & Glenwood, Inc. decided that it wanted to downsize by reducing the...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS

90.   Information that is generated in an activity-based accounting system can b...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS

95.   Valery Murphy is a division manager for a large computer manufacturing com...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS

100.   HyCon Materials no longer needs full-time employees at its smaller factor...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS

105.   External control mechanisms include all of the following except _________...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS

111.   The duties of Newell Rubbermaid’s Audit Committee are to __________.
    ...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS

3.    List and describe three of the five criteria upon which the effectiveness ...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS

      Learning Objective 3

6.    List and describe three of the six primary typ...
CHAPTER 10: CONTROLLING IN ORGANIZATIONS

      Learning Objective 4

8.    Describe the key terms of corporate governance...
Upcoming SlideShare
Loading in …5
×

Tb10

7,005 views

Published on

0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
7,005
On SlideShare
0
From Embeds
0
Number of Embeds
4
Actions
Shares
0
Downloads
80
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Tb10

  1. 1. CHAPTER 10: CONTROLLING IN ORGANIZATIONS Test Correlation Table Question Types/Level of Difficulty LEARNING OBJECTIVES Easy Moderate Difficult 1. Explain the foundations of TF 1, 3 2, 4, 5, 7 6 control. MC 1, 5, 7, 10, 13, 2, 6, 8, 9, 11, 12, 3, 4, 20, 27, 30, 16, 23, 24, 34 14, 15, 17, 18, 31, 36, 37 19, 21, 22, 25, 26, 28, 29, 32, 33, 34, 35 ES — 1, 2, 3 — 2. Identify the six phases of the TF 10, 11, 13, 15, 8, 9, 17, 18 12, 14, 19 corrective control model. 16 MC 39, 43, 49, 51 38, 42, 44, 45, 40, 41, 47, 48 46, 50 ES — 5 4 3. Describe the primary methods of TF 21, 26 20, 22, 23, 24, 25, 27, 29, 30 organizational control. 28 MC 58, 77, 79, 81, 52, 53, 54, 56, 55, 60, 66, 75, 84, 87, 93, 98, 59, 60, 61, 62, 76, 89, 90, 92, 100 63, 64, 65, 67, 94, 95, 99 68, 69, 70, 71, 72, 73, 74, 78, 80, 82, 83, 85, 86, 88, 91, 92, 96, 97 ES — 7 6 4. Explain several key corporate TF 33, 34, 36 31, 32, 35, 38 37, 39 governance issues and control mechanisms. MC 101, 106, 108, 102, 103, 107, 104, 105, 112 110 109, 111 ES — 8, 9 — 245
  2. 2. CHAPTER 10: CONTROLLING IN ORGANIZATIONS True/False Questions Learning Objective 1 1. Control involves the processes for ensuring that behaviors and performance conform to an organization’s standards, including rules, procedures, and goals. ANSWER: T, Knowledge, Easy, p. 266 2. Planning prescribes actual behaviors and results, while controls maintain desired behaviors and results. ANSWER: F, Knowledge, Moderate, p. 267 3. In most modern corporations, planning and control are substitutes for each other. ANSWER: F, Knowledge, Easy, p. 267 4. There are four primary sources of control in most organizations. ANSWER: T, Knowledge, Moderate, p. 268 5. Pressure from a union for an organization to change is an example of shareholder control. ANSWER: F, Knowledge, Moderate, p. 269 6. Group control comprises formal policies, rules, and procedures for preventing or correcting deviations from plans. ANSWER: F, Knowledge, Difficult, p. 269 7. Employee relationship software at Siebel Systems makes first-line managers accountable by putting them in control of setting departmental goals. ANSWER: F, Knowledge, Moderate, pp. 269–270 Learning Objective 2 8. The corrective control model detects deviations from established standards. ANSWER: T, Knowledge, Moderate, p. 272 9. The first step in the corrective control model is to identify the key characteristics to be measured. ANSWER: F, Knowledge, Moderate, p. 272 10. Pareto's law holds that multinational firms should think globally but act locally. ANSWER: F, Knowledge, Easy, p. 273 11. There are five functional areas of controls performance standards. 246
  3. 3. CHAPTER 10: CONTROLLING IN ORGANIZATIONS ANSWER: T, Knowledge, Easy, p. 274 12. When formal controls put an emphasis on rewards, group controls may emerge to distort any negative information reported to management. ANSWER: F, Knowledge, Difficult, p. 274 13. Most customers are not satisfied with the ways organizations handle their complaints. ANSWER: T, Knowledge, Easy, p. 276 14. Barclays Bank zero defects culture teaches workers that although mistakes are inevitable, they are not acceptable. ANSWER: F, Knowledge, Difficult, p. 276 15. The corrective control model is a process for detecting and eliminating or reducing deviations from an organization’s established standards. ANSWER: T, Knowledge, Easy, p. 272 16. A formal control subsystem might be created and maintained for an employee, a department, or an entire organization. ANSWER: T, Knowledge, Easy, p. 272 17. The principle of selectivity is also known as Pareto’s law. ANSWER: T, Knowledge, Moderate, p. 273 18. Rules are criteria for evaluating qualitative and quantitative characteristics and should be set for each characteristic measured. ANSWER: F, Knowledge, Moderate, p. 273 19. When identifying the key characteristics needed for efficient operations, a manager decides that it is important to determine if there is a difference between what is happening at the company and what should be happening. This manager is involved in the fifth step of the corrective control model. ANSWER: T, Application, Difficult, p. 275 Learning Objective 3 20. The text discusses six primary types of organizational control: mechanistic, organic, market, financial, accounting, and automation. ANSWER: T, Knowledge, Moderate, p. 277 247
  4. 4. CHAPTER 10: CONTROLLING IN ORGANIZATIONS 21. Organic controls rely on a centralized authority structure. ANSWER: F, Knowledge, Easy, p. 277 22. Market controls emerged from economics. ANSWER: T, Knowledge, Moderate, p. 278 23. Budget control includes the mechanisms for preventing or correcting the misallocation of resources. ANSWER: F, Knowledge, Moderate, p. 279 24. Ratio analysis involves selecting two significant figures, expressing their relationship as a fraction, and comparing its value for two periods of time or with the same ratio of similar organizations. ANSWER: T, Knowledge, Moderate, p. 280 25. Denise Logan is a manager at Nextel. Recently she has been informed that some of the telephone operators have been very rude to customers seeking assistance. In order to confirm whether or not this is true, Logan approves of a plan to randomly record the conversations of her operators. This is known as customer monitoring. ANSWER: F, Application, Difficult, p. 279 26. Budgeting is a form of financial control. ANSWER: T, Knowledge, Easy, p. 280 27. Activity-based costing is one of the less essential forms of accounting control. ANSWER: F, Knowledge, Difficult, p. 280 28. A sales budget is a forecast of the expected flow of monetary receipts and expenditures. ANSWER: F, Knowledge, Moderate, p. 281 29. The cost view of activity-based costing reflects the flow of costs from resources to activities and from activities to products and services. ANSWER: T, Knowledge, Difficult, p. 282 30. One limitation of activity-based accounting is that managers must still make some arbitrary cost allocations based on volume. ANSWER: T, Knowledge, Difficult, p. 285 248
  5. 5. CHAPTER 10: CONTROLLING IN ORGANIZATIONS Learning Objective 4 31. Proxy statements are governance rules for a corporation that are adopted by its board of directors. ANSWER: F, Knowledge, Moderate, p. 287 32. Proxy statements are internal control mechanisms. ANSWER: F, Knowledge, Moderate, p. 287 33. Conflicts of interest are included in the general provisions of the Sarbanes-Oxley Act. ANSWER: T, Knowledge, Easy, p. 287 34. Edgar Fleester could be imprisoned for up to 20 years if convicted for falsifying corporate records. ANSWER: T, Application, Easy, p. 288 35. An independent board of directors member would be a person who has never worked for the company. ANSWER: T, Knowledge, Moderate, p. 288 36. The board of directors is responsible if executives are allowed to be overpaid. ANSWER: T, Knowledge, Easy, p. 289 37. Fiduciary responsibility indicates that final authority resides with the courts and congress. ANSWER: F, Knowledge, Difficult, p. 289 38. Board of directors member Wendy Applegate has a duty to exercise fiduciary responsibility. This means that she can be fined or imprisoned if convicted of corporate crimes. ANSWER: F, Application, Moderate, p. 289 39. The designation of “independent” Audit Committee members at Newell Rubbermaid means that the board of directors cannot remove Audit Committee members from office. ANSWER: F, Knowledge, Difficult, p. 290 249
  6. 6. CHAPTER 10: CONTROLLING IN ORGANIZATIONS Multiple Choice Questions Preview 1. Instituting effective managerial controls at Waste Management led to all of the following achievements except: a. reduction of company debt by 33 percent. b. hiring of higher quality employees. c. becoming the largest in its industry. d. increasing its stock value by 85 percent. ANSWER: B, Knowledge, Easy, p. 266 2. Waste Management CEO Maurice Myers reestablished the position of ethics officer as a __________. a. credibility strategy b. stakeholder control c. compliance strategy d. preventative control ANSWER: D, Knowledge, Moderate, p. 266 3. The new CEO of Waste Management discovered a big control problem in __________. a. no safety records being kept b. not knowing how many trucks they owned c. poor relations with large companies they had acquired d. unproductive high seniority employees that should be fired ANSWER: A, Knowledge, Difficult, p. 266 Learning Objective 1 Foundations of Control 4. Jared Hanson is the manager of a group of convenience stores. He has installed surveillance cameras on the fuel pump islands. For Jared, video monitoring is a means of __________ customers. a. controlling b. restraining c. manipulating d. watching ANSWER: A, Application, Difficult, pp. 266–267 5. Since the September 11, 2001 attacks, governments and businesses have substantially increased their use of __________ controls. a. preventive b. corrective c. security-based d. profile-based ANSWER: C, Knowledge, Easy, pp. 266–267 250
  7. 7. CHAPTER 10: CONTROLLING IN ORGANIZATIONS 6. Controls help maintain or redirect __________ behaviors and results. a. planned b. desired c. actual d. forecasted ANSWER: C, Knowledge, Moderate, p. 267 7. ___________ involves the processes for ensuring that behaviors and performance conform to an organization’s standards, including rules, procedures, and goals. a. Organizational structure b. Monitoring c. Control d. Planning ANSWER: C, Knowledge, Easy, p. 266 8. The need for controls can be illustrated in the way control interacts with planning. One example of this interaction is the fact that planning prescribes __________ behaviors while controls help to maintain or redirect _________ behaviors. a. desired; actual b. correct; incorrect c. process-oriented; result-oriented d. long-term; short-term ANSWER: A, Knowledge, Moderate, p. 267 9. According to the text, control systems in organizations __________. a. have a negative connotation to most people b. are both useful and necessary c. should interact with planning activities d. all of the above ANSWER: D, Knowledge, Moderate, pp. 266–267 10. Latoya Elliott is concerned that her company needs to take some steps to ensure that the actions of workers conform to the expectations of the company. Latoya is advocating the implementation of a(n) __________. a. automated network b. stakeholder education program c. control system d. none of the above ANSWER: C, Application, Easy, p. 266 251
  8. 8. CHAPTER 10: CONTROLLING IN ORGANIZATIONS 11. Mechanisms that are intended to reduce errors and thereby minimize the need for corrective action are known as __________ controls. a. predictive b. invasive c. preventive d. organic ANSWER: C, Knowledge, Moderate, p. 267 12. All of the following are given in the text as examples of preventive controls except __________. a. rules and regulations b. recruitment and selection procedures c. training and development programs d. early retirement incentives ANSWER: D, Knowledge, Moderate, p. 267 13. __________ controls are mechanisms intended to reduce or eliminate unwanted behaviors or results and thereby achieve conformity with the organization’s regulations and standards. a. Reactive b. Interactive c. Punitive d. Corrective ANSWER: D, Knowledge, Easy, p. 267 14. Rosa Sanchez works as a manager at a diamond mine. Because there is a great incentive for the miners to steal some of the diamonds they find, Sanchez spends a great deal of time and effort recruiting, selecting, and training only those workers who are less likely to steal from the firm. Sanchez is relying on __________ controls. a. corrective b. preventive c. organic d. machine ANSWER: B, Application, Moderate, p. 267 15. Donna Norman has been given the responsibility to reduce behaviors of employees that are outside of those allowed by company rules and regulations. Norman will probably rely on __________ controls. a. recruitment b. financial c. corrective d. stakeholder ANSWER: C, Application, Moderate, p. 267 252
  9. 9. CHAPTER 10: CONTROLLING IN ORGANIZATIONS 16. Waste Management tracked data on customer complaints and truck driver accidents as input for __________. a. corrective controls b. preventive controls c. individual controls d. cost-benefit controls ANSWER: A, Knowledge, Easy, p. 267 17. __________ is (are) not one of the four primary sources of control in most organizations. a. Competitors b. Stakeholders c. The organization itself d. Groups ANSWER: A, Knowledge, Moderate, p. 268 18. __________ control refers to pressures on organizations from outside sources, such as governmental agents and customers, to change the organization’s behaviors. a. Consensus b. Media c. Shareholder d. Stakeholder ANSWER: D, Knowledge, Moderate, p. 268 19. Recently a consumer watch organization sued a television network for knowingly misinforming the public with its investigative reports on a U.S. manufacturer. Thus, the television network is feeling the effects of __________ controls. a. shareholder b. stakeholder c. financial d. political ANSWER: B, Application, Moderate, p. 268 20. McDonald's redesigned packaging is an example of organizational response to __________. a. greenmail b. green marketing c. environmentalism d. the EPA ANSWER: B, Knowledge, Difficult, p. 268 253
  10. 10. CHAPTER 10: CONTROLLING IN ORGANIZATIONS 21. At Xyllar University, the management class is required to write a ten-page term paper. Xiang Lee and his friends discovered that two of his classmates were cheating by using term papers written by other students in other courses. Instead of telling the teacher, Lee and his friends confronted the two students and convinced them not to cheat. This type of control is best described as a(n) __________ source of control. a. organizational b. organic c. group d. ethical ANSWER: C, Application, Moderate, p. 269 22. The formal rules and procedures for preventing or correcting deviations from plans and for achieving desired goals is also known as a(n) __________ control. a. community b. stakeholder c. proactive d. organizational ANSWER: D, Knowledge, Moderate, p. 269 23. A(n) __________ control refers to the norms and values that team members share and maintain through rewards and punishments. a. peer-pressure b. adaptive reinforcement c. group d. behavioral ANSWER: C, Knowledge, Easy, p. 269 24. __________ control consists of the guiding mechanisms that operate consciously and subconsciously within each person. a. Moral b. Ethical c. Individual self- d. Self-actualization ANSWER: C, Knowledge, Easy, p. 269 25. One way to assess the amount of needed formal organizational controls is to examine __________. a. appropriateness b. objectiveness c. costs and benefits d. acceptability ANSWER: C, Knowledge, Moderate, p. 271 254
  11. 11. CHAPTER 10: CONTROLLING IN ORGANIZATIONS 26. ERM software at Siebel Systems is specifically targeted at __________. a. manufacturing operations b. employees c. executives d. marketing cost-benefit ANSWER: B, Knowledge, Moderate, pp. 269–270 27. A major criticism of employee relationship management (ERM) is __________. a. overly structured systems reduce creativity b. top-down organizational controls stifle individual self-control c. insufficient linkage is made to strategic goals of the organization d. All of the above are criticisms of ERM software. ANSWER: B, Knowledge, Difficult, p. 270 28. One way to develop effective, formal organizational controls is to use a cost-benefit analysis. A cost-benefit analysis addresses each of the following questions except __________. a. For what desired behaviors and results should organizational controls be developed? b. What are the costs and benefits of the control system required to achieve the organization’s desired behaviors and results? c. What chance does a competitor have of creating a better control system? d. What are the costs and benefits associated with alternative control systems? ANSWER: C, Knowledge, Moderate, p. 271 29. The cost-benefit model suggests that __________. a. benefits increase as controls increase b. costs outweigh benefits if a group control is used when an organizational control was needed c. beyond a certain point, effectiveness declines with increases in the amount of control exercised d. effectiveness and costs are not related ANSWER: C, Knowledge, Moderate, p. 271 30. In the cost-benefit model, the vertical axis indicates the relationship between costs and benefits of control, ranging from __________ to __________. a. stable, unstable b. zero, high c. unprofitable, profitable d. inefficient, efficient ANSWER: B, Knowledge, Difficult, p. 271 255
  12. 12. CHAPTER 10: CONTROLLING IN ORGANIZATIONS 31. In the cost-benefit model, the horizontal axis indicates the amount of organizational control, ranging from ________ to _________. a. low, high b. negligible, extreme c. bureaucratic, organic d. moderate, excessive ANSWER: A, Knowledge, Difficult, p. 271 32. After calculating the savings and expenditures related to the implementation of a new computer assembly machine, Murdock Construction Company realized that after a certain point adding any more machines would actually result in a decrease in profitability. Murdock Construction probably made this determination using a(n) __________. a. pay-down chart b. expert system c. cost-benefit analysis d. proforma balance sheet ANSWER: C, Application, Moderate, p. 271 33. To be effective, control systems should be __________. a. timely b. objective c. complete d. all of the above ANSWER: D, Knowledge, Moderate, pp. 270–271 34. A(n) __________ control is impartial and cannot be manipulated by employees for personal gain. a. ethical b. objective c. legitimate d. standardized ANSWER: B, Knowledge, Easy, p. 270 35. __________ controls are recognized as necessary and appropriate. a. Legitimate b. Acceptable c. Bureaucratic d. Unqualified ANSWER: B, Knowledge, Moderate, p. 271 256
  13. 13. CHAPTER 10: CONTROLLING IN ORGANIZATIONS 36. Max Wilhelm is the CEO of the MCW Corporation. At the annual banquet, Wilhelm praised the supervisor of the marketing division for minimizing costs through reducing errors at work. Wilhelm said the marketing department completely met all its projected goals by providing objective rules that were applied in a timely manner. Thus, only the __________ criterion for effective control systems was not mentioned. a. subjectivity b. acceptability c. ethical d. financial ANSWER: B, Application, Difficult, pp. 270–271 37. Cost-benefit analysis addresses __________ basic questions. a. two b. three c. five d. ten ANSWER: B, Knowledge, Difficult, p. 271 Learning Objective 2 Corrective Control Model 38. The __________ is a process for detecting and eliminating or reducing deviations from an organization’s established standards. a. punitive reinforcement scale b. corrective control model c. adaptive result process d. organic control system ANSWER: B, Knowledge, Moderate, p. 272 39. The corrective control model involves __________ interconnected steps. a. three b. five c. six d. ten ANSWER: C, Knowledge, Easy, p. 272 40. The third step in the corrective control model involves __________. a. making comparisons b. collecting information c. setting standards d. creating a strategic plan ANSWER: C, Knowledge, Difficult, p. 272 257
  14. 14. CHAPTER 10: CONTROLLING IN ORGANIZATIONS 41. The fifth step in the corrective control model involves __________. a. defining the subsystem b. identifying key characteristics to be measured c. receiving approval from top management d. making comparisons ANSWER: D, Knowledge, Difficult, p. 272 42. All of the following are steps in the corrective control model except __________. a. collecting information b. defining the system c. setting goals d. identifying key characteristics to be measured ANSWER: C, Knowledge, Moderate, p. 272 43. Formal controls might be created and maintained for all of the following except __________. a. an employee b. a competitor c. a work team d. an entire organization ANSWER: B, Knowledge, Easy, p. 272 44. The __________ holds that a small number of characteristics always account for a large number of effects. a. 10/90 rule b. principle of large numbers c. Peter principle d. principle of selectivity ANSWER: D, Knowledge, Moderate, p. 273 45. Many global organizations have adopted the strategy of __________. a. evaluating qualitative standards for each country b. thinking globally but acting locally c. integrating cross-cultural differences into their standards d. all of the above ANSWER: B, Knowledge, Moderate, p. 273 46. According to the text, __________ standards are increasingly being used as a base for control systems. a. diversity b. legal c. performance d. ethical ANSWER: C, Knowledge, Moderate, p. 274 258
  15. 15. CHAPTER 10: CONTROLLING IN ORGANIZATIONS 47. Rocky Swanson is involved in an attempt to reduce absenteeism at Sprocket Manufacturing. At present, he is identifying the key characteristics that need to be measured before corrective actions can be taken. Rocky is in the __________ stage of the corrective control model. a. first b. second c. third d. fourth ANSWER: B, Application, Difficult, p. 273 48. Abdul Rafanjani has been assigned to create a set of corrective controls that will help to eliminate high theft rates by employees at the Charpon Company. He has already defined the system of concern and identified the key characteristics that need to be measured. __________ is the next step Rafanjani should take. a. Consulting with an attorney b. Collecting information about competitor operations c. Setting standards d. Diagnosing problems and making corrections ANSWER: C, Application, Difficult, p. 273 49. In the process of creating corrective controls, Jake Horton needs to determine whether there is a difference between what is happening and what should be happening in his department at work. Horton is __________. a. setting standards b. performing a cost-benefit analysis c. relying on group norms d. making comparisons ANSWER: D, Application, Easy, p. 275 50. Which of the following is not part of Barclays Bank’s complaint management process? a. Customers are encouraged to complain. b. Complaints are acknowledged within 24 hours. c. Reply with full explanation is made within 5 working days. d. All of the above are included in Barclays’ process. ANSWER: D, Knowledge, Moderate, p. 276 51. Top management at Barclays Bank views complaints as __________. a. a necessary evil b. a contributor to their long-term success c. a method to evaluate employee performance d. something to be avoided ANSWER: B, Knowledge, Easy, p. 276 259
  16. 16. CHAPTER 10: CONTROLLING IN ORGANIZATIONS Learning Objective 3 Primary Methods of Control 52. The text describes __________ primary types of organizational control. a. three b. six c. eight d. ten ANSWER: B, Knowledge, Moderate, p. 277 53. The six primary types of organizational controls include all of the following except __________. a. mechanistic and organic b. financial c. legal d. automation ANSWER: C, Knowledge, Moderate, p. 277 54. __________ controls involve extensive rules and procedures, top-down authority, and tightly written job descriptions. a. Mechanistic b. Adaptive c. Objective d. Authoritative ANSWER: A, Knowledge, Moderate, p. 277 55. Rebecca Lockhart owns a company that relies on extensive rules and procedures, top- down authority, and tightly written job descriptions. Lockhart’s company could be described as using __________ organizational controls. a. financial b. organic c. tactical d. mechanistic ANSWER: D, Application, Difficult, p. 277 56. Carla Lorek at Xerox predicts that a(n) __________ approach will cause workers to drive up numbers without putting effort into quality. a. financial b. mechanistic c. organic d. market ANSWER: B, Knowledge, Moderate, p. 277 260
  17. 17. CHAPTER 10: CONTROLLING IN ORGANIZATIONS 57. __________ controls include flexible authority, relatively loose job descriptions, and individual self-controls. a. Organic b. Subjective c. Mechanistic d. Objective ANSWER: A, Knowledge, Moderate, p. 277 58. __________ controls are consistent with a clan culture. a. Market b. Accounting c. Financial d. Organic ANSWER: D, Knowledge, Easy, p. 277 59. Peachtree Savings and Loan just established a rule that branch managers are evaluated based on the ratio of nonperforming loans to total branch assets. This type of rule is indicative of a(n) __________ type of organizational control. a. mechanistic b. organic c. prescriptive d. market ANSWER: D, Application, Moderate, p. 278 60. The idea of market controls emerged from __________. a. mathematics b. sociology c. economics d. management theory ANSWER: C, Knowledge, Difficult, p. 278 61. __________ controls involve the use of data to monitor sales, prices, costs, and profits to guide decisions and evaluations. a. Activity-based b. Opportunistic c. Stakeholder d. Market ANSWER: D, Knowledge, Moderate, p. 278 62. Market controls generally require that the __________. a. inflation rate is below 30 percent b. amount of governmental regulation be minimal c. costs of the resources used in producing outputs be measured monetarily d. prices of the goods and services produced be set by governmental committees ANSWER: C, Knowledge, Moderate, p. 278 63. Garrett Cullen owns a small business, and he thinks that the U.S. is not making good 261
  18. 18. CHAPTER 10: CONTROLLING IN ORGANIZATIONS financial decisions. Specifically, Cullen predicts a period of inflation will occur within the next seven years due to a high federal deficit, skyrocketing costs for entitlement programs, and a global loss of confidence in the U.S. government’s conviction to make appropriate cuts in spending. As a result, he decides to move his company overseas to cut costs and limit the risk associated with operating in the United States. Cullen used __________ controls to make this decision. a. political b. multidomestic c. mechanistic d. market ANSWER: D, Application, Moderate, p. 278 64. __________ provide employees with supplemental income based on the profitability of an entire organization or a selected subunit. a. Profit-sharing plans b. Employee stock ownership plans c. Bonus-sharing plans d. Gain-sharing plans ANSWER: A, Knowledge, Moderate, p. 278 65. The four goals that profit-sharing plans generally have include all of the following except __________. a. increasing employee identification with the profit goals of the organization b. achieving a more flexible wage structure c. attracting and retaining employees more easily d. increasing the financial performance of the organization ANSWER: D, Knowledge, Moderate, p. 278 66. In order for profit-sharing plans to achieve their goals, employees must do all of the following must occur except __________. a. believe that the plan is based on a reasonable and equitable formula b. believe that their efforts contribute to profitability c. have a hand in the creation of the profit-sharing plan d. believe that the size of profit-based incentives will increase proportionally as profitability increases ANSWER: C, Knowledge, Difficult, p. 279 67. Efforts to obtain feedback from customers concerning the quality of goods and services provided by a firm are ___________. a. considered in activity-based controls b. referred to as benchmarking c. often used to intimidate competitors d. referred to as customer monitoring ANSWER: D, Knowledge, Moderate, p. 279 262
  19. 19. CHAPTER 10: CONTROLLING IN ORGANIZATIONS 68. __________ controls refer to the mechanisms for preventing or correcting the misallocation of resources. a. Market b. Financial c. Operational d. Strategic ANSWER: B, Knowledge, Moderate, p. 279 69. The primary responsibility of external auditors is to the __________. a. top management b. IRS c. shareholders d. government ANSWER: C, Knowledge, Moderate, pp. 279–280 70. Which of the following is not an example of a financial control mechanism? a. comparative financial analysis b. output-based costing c. activity-based costing d. budgeting ANSWER: B, Knowledge, Moderate, p. 280 71. Evaluation of a firm’s financial condition for two or more time periods is called __________. a. zero based budgeting b. sales budgeting c. comparative financial analysis d. competitive financial analysis ANSWER: C, Knowledge, Moderate, p. 280 72. The most common method of comparative financial analysis is __________. a. ratio analysis b. budget analysis c. multi-unit comparisons d. accounting analysis ANSWER: A, Knowledge, Moderate, p. 280 73. Gino Austin is the Executive Vice President of Retailing for the Southern Region of Wal-Mart. Gino compares the financial records for all of the stores in the Southern Region for ____________ purposes. a. budgeting b. inventory c. control d. advertising ANSWER: C, Application, Moderate, p. 280 74. __________ is generally considered to be the most important profitability ratio because 263
  20. 20. CHAPTER 10: CONTROLLING IN ORGANIZATIONS it indicates how efficiently the organization is using its resources. a. Return on investment b. The current ratio c. Inventory turnover d. Return on sales ANSWER: A, Knowledge, Moderate, p. 280 75. If a company has a current ratio of _________, it should be financially sound. a. 1:1 b. 2:1 c. 1:2 d. 0.50 ANSWER: B, Knowledge, Difficult, p. 280 76. Danielle Jarrett is the owner of Designer Boutique. Her store has an inventory turnover ratio of about 10 (unusually high for this type of business). Which of the following statements is not true? a. This ratio suggests efficient operations. b. This suggests a relatively small amount of money is tied up in inventory. c. This suggests that Cheryl may be able to use some of her resources elsewhere. d. A ratio of 10 means that Cheryl has $10 in sales for every $1 of total assets. ANSWER: D, Application, Difficult, p. 280 77. __________ is computed to assess an organization’s ability to meet its long-term financial commitments. a. Debt ratio b. Equity ratio c. Asset ratio d. Sales ratio ANSWER: A, Knowledge, Easy, p. 280 78. A new company has a debt ratio of 0.35. What does this mean? a. The company has $0.35 in assets for every $1.00 of liabilities. b. The company has $0.35 in liabilities for every $1.00 of assets. c. The company has $0.35 in sales for every $1.00 of liabilities. d. The company has $0.35 in liabilities for every $1.00 of sales. ANSWER: B, Application, Moderate, p. 280 79. __________ is the process of categorizing proposed expenditures and linking them to goals. a. Planning b. Stewardship c. Administration d. Budgeting ANSWER: D, Knowledge, Easy, p. 281 80. Which of the following is not one of the primary purposes of budgeting? a. to help in planning work effectively 264
  21. 21. CHAPTER 10: CONTROLLING IN ORGANIZATIONS b. to assist in allocating resources c. to enable a manager to dominate his competition d. to aid in controlling and monitoring resource utilization ANSWER: C, Knowledge, Moderate, p. 281 81. A(n) __________ budget targets spending for the refinement or development of products, materials, and processes. a. engineering b. inventory c. research and development d. patent ANSWER: C, Knowledge, Easy, p. 282 82. Budgets based on the number of individuals and dollars for each job category are usually known as __________ budgets. a. recruitment b. selection c. union d. labor ANSWER: D, Knowledge, Moderate, p. 282 83. __________ budgets focus on the expected flow of monetary receipts and expenditures and are usually developed at least once a year for each month of the year. a. Revenue b. Cash c. Sales d. Net Income ANSWER: B, Knowledge, Moderate, p. 282 84. Carlyle Corporation decided to increase its spending on activities related to creating a more efficient version of its best selling product. This increase in spending is likely to be found in the __________ budget. a. marketing b. public relations c. research and development d. information systems ANSWER: C, Application, Easy, p. 282 265
  22. 22. CHAPTER 10: CONTROLLING IN ORGANIZATIONS 85. Gattis & Glenwood, Inc. decided that it wanted to downsize by reducing the number of middle managers employed by the firm by 10 percent over the next 3 years. This projection should be specifically detailed in the __________ budget. a. raw materials b. labor c. financial d. accounting ANSWER: B, Application, Moderate, p. 282 86. Kathryn Yang has made plans to add a new warehouse to her moving and storage business next year. Most likely, the spending for this project is contained in her __________ budget. a. warehouse b. planning c. capital d. cash ANSWER: C, Application, Moderate, p. 282 87. A(n) __________ is a forecast of expected revenues, generally stated by product line on a monthly basis and revised at least annually. a. revenue budget b. sales budget c. income budget d. linear regression analysis ANSWER: B, Knowledge, Easy, p. 281 88. __________ costing is a system that focuses on activities as the fundamental cost centers. a. Inventory-centered b. Geographically-separated c. Activity-based d. Stakeholder-driven ANSWER: C, Knowledge, Moderate, p. 282 89. In activity-based costing, an activity is described as any event that is a cost driver. All of the following were given in the text as examples of cost drivers except __________. a. energy consumed b. miles driven c. computer hours logged d. All of the above are cost drivers. ANSWER: D, Knowledge, Difficult, p. 282 266
  23. 23. CHAPTER 10: CONTROLLING IN ORGANIZATIONS 90. Information that is generated in an activity-based accounting system can be viewed from two different perspectives. The ___________ view reflects the lateral flow from costs of input information to activities and from activities to performance evaluation. a. profit-center b. cost-center c. primary-input d. process ANSWER: D, Knowledge, Difficult, p. 283 91. The __________ reflects the lateral flow from costs of input information to activities and from activities to performance evaluation, or the observed transactions associated with an activity. a. cost view b. activity view c. bureaucratic controls d. process view ANSWER: D, Knowledge, Moderate, p. 283 92. The managers of the Hospice of Central Kentucky used activity-based costing (ABC) to accomplish all of the following except ______________. a. communicate the need to cut costs b. manage the hospice more effectively c. reduce the death rate of terminally ill patients d. negotiate more favorable rates from insurance carriers ANSWER: C, Knowledge, Difficult, p. 283 93. When the Hospice of Central Kentucky changed over to activity-based costing, the cost categories translated to terminology that was more __________. a. common b. itemized c. technical d. coded ANSWER: A, Knowledge, Easy, p. 284 94. Benefits of using activity-based accounting include all of the following except ________. a. costs are pinpointed by activity instead of being charged to overhead b. cost allocations are based on the portion of activities that can be directly traced to a finished product c. allocation of costs can be traced to the volume of production d. costs associated with an activity for a particular product can now be traced ANSWER: C, Knowledge, Difficult, p. 285 267
  24. 24. CHAPTER 10: CONTROLLING IN ORGANIZATIONS 95. Valery Murphy is a division manager for a large computer manufacturing company. It has been determined that Murphy’s division has operating costs that are 50 percent greater than similar divisions of competitor organizations. To reduce the waste in her division, Murphy decides to install a system that focuses on identifying specific cost centers in an organization. This type of system is frequently referred to as __________. a. profit-center marketing b. activity-based costing c. performance-related analysis d. waste-reduction controls ANSWER: B, Application, Difficult, p. 282 96. High measurement costs are associated with multiple activity centers and cost drivers. This reflects a(n) __________ of activity-based accounting control systems. a. benefit b. limitation c. bureaucratic control d. organic control ANSWER: B, Knowledge, Moderate, p. 285 97. __________ refer(s) to the use of devices and processes that are self-regulating and operate independently of people. a. Artificial intelligence b. Machine control c. Internet systems d. Automation ANSWER: D, Knowledge, Moderate, p. 285 98. __________ controls are methods that use instruments or devices to prevent and correct deviations from desired results. a. Financial b. Accounting c. Market d. Machine ANSWER: D, Knowledge, Easy, p. 285 99. According to the text, research on the effects of introducing automated systems at one large factory indicated a(n) __________ in middle management jobs. a. reduction of 34 percent b. reduction of 7 percent c. increase of 2 percent d. none of the above ANSWER: A, Knowledge, Difficult, p. 285 268
  25. 25. CHAPTER 10: CONTROLLING IN ORGANIZATIONS 100. HyCon Materials no longer needs full-time employees at its smaller factories. When machines malfunction, they send a signal to a central operations facility and a technician is sent out. This is known as a(n) __________. a. unattended operation b. lights-out system c. machine-control concept d. remote access facility ANSWER: B, Knowledge, Easy, p. 286 Learning Objective 4 Corporate Governance 101. A __________ is a government-approved form of organization that allows different parties to contribute capital, expertise, and labor. a. foundation b. charity c. trust d. corporation ANSWER: D, Knowledge, Easy, p. 286 102. The pattern of controls between stockholders and a company’s top management is __________. a. stakeholder relations b. corporate governance c. binding arbitration d. lateral communication ANSWER: B, Knowledge, Moderate, p. 286 103. The rules of internal governance for a corporation are stated in its __________. a. corporate disclosure b. annual report c. bylaws d. proxy statement ANSWER: C, Knowledge, Moderate, p. 286 104. Carter Technologies needed to inform their shareholders about subjects to be voted on at their next shareholder meeting. They used a(n) __________. a. proxy statement b. notification of annual meeting c. annual report d. form 10-K ANSWER: A, Application, Difficult, p. 287 269
  26. 26. CHAPTER 10: CONTROLLING IN ORGANIZATIONS 105. External control mechanisms include all of the following except __________. a. proxy statements b. corporate bylaws c. laws and regulatory agencies d. possibility of being sued ANSWER: B, Knowledge, Difficult, p. 287 106. The Sarbanes-Oxley Act was prompted by the occurrence of __________. a. insider trading b. terrorist attacks c. corporate scandals d. all of the above ANSWER: C, Knowledge, Easy, p. 287 107. Under the __________ mandates of the Sarbanes-Oxley Act, companies must report changes in financial condition as soon as they occur. a. corporate accountability b. certifiability c. auditability d. disclosure ANSWER: D, Knowledge, Moderate, p. 288 108. Penalties for corporate officers who falsify corporate records can include __________. a. punitive damages of up to $100 million b. imprisonment of up to 20 years c. both a and b d. individuals are not liable for corporate wrongs ANSWER: B, Knowledge, Easy, p. 288 109. All of the following are proposed as new requirements for sharpening the accountability of boards of directors except __________. a. direct experience as a former employee b. oversight of executive compensation c. critical evaluation of CEO d. involvement in resource allocation ANSWER: A, Knowledge, Moderate, pp. 288–289 110. Fiduciary responsibility of the board of directors refers to prevention of __________. a. financial mismanagement b. fraud and corruption c. corporate crime d. all of the above ANSWER: D, Knowledge, Easy, pp. 289–290 270
  27. 27. CHAPTER 10: CONTROLLING IN ORGANIZATIONS 111. The duties of Newell Rubbermaid’s Audit Committee are to __________. a. present financial findings to the SEC b. explain financial reports to shareholders c. oversee the work of the company’s auditors d. all of the above ANSWER: C, Knowledge, Moderate, p. 290 112. Members of Rubbermaid’s Audit Committee are not allowed to __________. a. fire independent auditors b. stay if the Board wants them to leave c. intercede in disagreements between management and auditors d. be involved in audit staffing decisions ANSWER: B, Knowledge, Difficult, p. 290 Essay Questions Learning Objective 1 1. Define preventive and corrective controls. Give an example of each type. a. Preventive controls—Mechanisms intended to reduce errors and thereby minimize the need for corrective action. Examples: Rules and regulations, standards, recruitment and selection, procedures, and training and development. b. Corrective controls—Mechanisms intended to reduce or eliminate unwanted behaviors or results and thereby achieve conformity with the organization’s regulations and standards. Examples: Air traffic controller instructing pilot to change altitude and direction to avoid another plane. Revising a report you have written because you are dissatisfied with it. Moderate, p. 267 2. What are three of the four primary sources of control? Give an example for each source. a. Stakeholders. Examples: Unions, government agencies, customers, shareholders, others. b. The organization itself. Examples: Rules, standards, budgets, audits. c. Groups. Examples: Punishments such as giving a group member the silent treatment. d. Individuals. Examples: Standards of professionalism including acquiring detailed knowledge, specialized competencies, and specific attitudes and ways of behaving. Moderate, p. 269 271
  28. 28. CHAPTER 10: CONTROLLING IN ORGANIZATIONS 3. List and describe three of the five criteria upon which the effectiveness of organizational controls are evaluated. a. Linkage to strategic goals. Control should be linked to the desired goals of the organization (e.g. improving customer service, protecting the organization’s assets, improving the quality of its goods and/or services). b. Objective. Control is impartial and cannot be manipulated by employees for personal gain. c. Complete. Control encompasses all the desired behaviors and goals. d. Timely. Control provides information when it is needed most. e. Acceptable. Control is recognized as necessary and appropriate. Moderate, pp. 270–271 Learning Objective 2 4. What are four of the six steps in the corrective control model? Explain each. a. Define the system. A system can be an employee, a department, or an entire organization. b. Identify the key characteristics to be measured. c. Set standards. Criteria for evaluating qualitative and quantitative characteristics for each characteristic measured. d. Collect information. Can be collected manually or automatically. e. Make comparisons. Determine whether there is a difference between what is happening and what should be happening. f. Diagnose problems and make corrections. Assess the types, amounts, and causes of deviations from standards. Difficult, pp. 272–276 5. Describe how Barclays Bank uses their communication competency to maintain high levels of customer satisfaction and to regain satisfaction when relations have been compromised. Barclays Bank customers are actually encouraged to complain and comment. The bank’s policy is to acknowledge complaints within 24 hours and to furnish a full reply within five working days of an investigation completion. Included is an explanation of the causes and details of actions to be taken. In addition, the bank calls customers on the phone whenever possible. A no-blame culture encourages staff to take initiatives to satisfy complaining customers and look for solutions without fear of being punished. Top management at Barclays considers complaints to be a contributor to operational improvement and long-term success of the organization. Information on complaints is published in staff newsletters for the purpose of making employees aware of problems and ways to solve them. Moderate, p. 276 272
  29. 29. CHAPTER 10: CONTROLLING IN ORGANIZATIONS Learning Objective 3 6. List and describe three of the six primary types of organizational control. a. Mechanistic and organic. (1) Mechanistic includes extensive rules and procedures, top-down authority, tightly written job descriptions, and other formal methods for preventing and correcting deviations from desired behaviors and results. (2) Organic includes flexible authority, relatively loose job descriptions, individual self-controls, and other informal methods for preventing and correcting deviations from desired behaviors and results. b. Market. Involves the collection and evaluation of data related to sales, prices, costs, and profits to guide decisions and evaluate results. c. Financial and accounting. (1) Financial. Includes mechanisms for preventing or correcting the misallocation of resources. Comparative financial analysis and budgeting are given as examples in the text. (2) Accounting. Text discusses activity-based costing systems that focus on activities as the fundamental cost centers. d. Automation. Refers to the use of devices and processes that are self-regulating and operate independently of people. Difficult, pp. 277–286 7. List and describe three of the six types of budgets discussed in the text. a. Sales budget—A forecast of expected revenues, generally stated by product line. b. Materials budget—Expected purchases, generally stated by specific categories. c. Labor budget—Expected staffing, generally stated by number of individuals and dollars for each job category. d. Capital budget—Targeted spending for major tangible assets. e. Research and development budget—Targeted spending for the refinement or development of products, materials, and processes. f. Cash budget—Expected flow of monetary receipts and expenditures. Moderate, pp. 281–282 273
  30. 30. CHAPTER 10: CONTROLLING IN ORGANIZATIONS Learning Objective 4 8. Describe the key terms of corporate governance. a. Annual meeting. Usually held at the end of a fiscal year in which shareholders and management discuss performance and goals. Directors are elected and shareholder concerns are addressed. b. Annual report. An audited document that complies with Securities and Exchange Commission regulations. c. Board of directors. A group elected individually by shareholders to oversee management of the corporation. d. Bylaws. Rules of internal governance for the corporation as adopted by its board of directors. e. Disclosure. Public dissemination of material, market-influencing information. f. Proxy statement. Document sent by the corporation to its shareholders informing them about items that may be voted on at the shareholders meeting. Moderate, pp. 286–287 9. Discuss provisions of the Sarbanes-Oxley Act that offers external control mechanisms for corporate governance. The Sarbanes-Oxley Act, passed into law in 2002, was prompted by corporate scandals. It furnishes safeguards relating to auditor independence, corporate responsibility, financial disclosures, conflicts of interest, and corporate accountability. Three broad categories are covered: certification, auditability, and disclosure. Certification is the best known section that applies to top executives (CEO, CFO) in criminal liability for the falsification of financial statements. Fines of up to $5 million can be combined with imprisonment of up to 20 years for executives who are convicted. Auditability requires internal processes to be set up to ensure that appropriate controls are in place. The disclosure mandates require companies to promptly report financial information that makes significant changes in their financial condition. Moderate, pp. 287–288 274

×