Chap 016

Chapter 16 - Managerial Control
Chapter 16 Managerial Control

True / False Questions
1. (p. 574) Control is a managerial necessity. TRUE
AACSB: Other management-specific knowledge/abilities Blooms taxonomy: Comprehension Difficulty: Easy Learning Objective: 1
2. (p. 574) Employees simply wasting time costs U.S. employers billions of dollars each year. TRUE
3. (p. 575) Market control is the use of rules, regulations and formal authority to guide performance. FALSE
AACSB: Other management-specific knowledge/abilities Blooms taxonomy: Knowledge Difficulty: Easy Learning Objective: 1
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4. (p. 575) Clan control is based on the norms, values, shared goals and trust among group members. TRUE
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5. (p. 576) Standards are established in order to set performance expectations. TRUE
6. (p. 576) Performance standards can be set with respect to quantity, quality, time and effort. FALSE
AACSB: Other management-specific knowledge/abilities Blooms taxonomy: Comprehension Difficulty: Medium Learning Objective: 2
7. (p. 578) According to the principle of exception, any deviation from the goal requires corrective action. FALSE
8. (p. 578) Personal observation involves going to the area of activities and watching what is occurring. TRUE
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9. (p. 579) The last step in the control process is to compare performance with the standard. FALSE
10. (p. 580) When supervisors monitor employee behavior, they are exercising feedback control. FALSE
AACSB: Other management-specific knowledge/abilities Blooms taxonomy: Knowledge Difficulty: Medium Learning Objective: 2
11. (p. 583) By definition, management audits are internal not external. FALSE
12. (p. 583) External audits are often used for feedback control but can also be useful for preliminary control. TRUE
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13. (p. 584) Budgeting information is expressed in monetary units. FALSE
14. (p. 586) The biggest mistake for an entrepreneur is to invest too much time in budgeting. FALSE
15. (p. 587) Traditional methods of accounting, such as activity-based costing, are still appropriate today. FALSE
16. (p. 587) A master budget includes every activity of the business. FALSE
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17. (p. 592) A control system cannot be effective without consideration of how people will react to it. TRUE
18. (p. 592) Bureaucratic control has a perceived negative connotation. TRUE
19. (p. 596) If an employee does not believe his or her performance standard is realistic, he or she is not likely to accept the standard. TRUE
20. (p. 599) Formal bureaucratic control systems have always been the most pervasive and the most effective in organizations. FALSE
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21. (p. 599) In contrast to market controls, bureaucratic controls involve the use of economic forces to regulate performance. FALSE
22. (p. 600) In large diversified companies, market controls are often used to regulate independent business units. TRUE
23. (p. 600) Ideally the transfer price should reflect less than the price that the receiving business unit would have to pay for that product/service in the market place. FALSE
24. (p. 601) Increasingly, managers are discovering that control systems based solely on bureaucratic and market mechanisms are insufficient for directing today's workforce. TRUE
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25. (p. 602) Organization culture is the foundation of clan control. TRUE
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Multiple Choice Questions
26. (p. 574) Control has been called one of the Siamese Twins of management. The other twin is: A. Planning B. Organizing C. Leading D. Directing E. Empowerment
27. (p. 574, Table 16.1) Which of the following is not a symptom of an out-of-control company? A. Lax top management B. Excessive policies C. Lack of periodic reviews D. Bad information systems E. Lack of ethics in the culture
AACSB: Other management-specific knowledge/abilities Blooms taxonomy: Comprehension Difficulty: Hard Learning Objective: 1
28. (p. 574) A process that directs the activities of individuals toward achieving organizational goals is: A. Policies B. Control C. Directing D. Control points E. None of the above
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29. (p. 574) Any process that directs the activities of individuals toward the achievement of organizational goals is referred to as: A. Planning B. Control C. Organizing D. Leading E. Decision making
30. (p. 574) The use of rules, regulations and authority to guide performance is referred to as: A. Clan control B. Bureaucratic control C. Market control D. Concurrent control E. Feedback control
31. (p. 574) 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. Feed forward control E. Bureaucratic control
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32. (p. 575) 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. Feed forward control E. Market control
33. (p. 575) Bureaucratic control deals with: A. Rules and regulations B. Markets forces C. Economic forces D. Pricing mechanisms E. All of the above
34. (p. 575) Using budgeting, statistical reports and performance appraisals to regulate behavior and results are all considered components of: A. Clan control B. Market control C. Bureaucratic control D. Isolation E. Avoidance
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35. (p. 575) Which of the following is NOT one of the four major steps in the control process? A. Comparing performance with standards: B. Setting standards C. Taking corrective action D. Revising standards E. Measuring performance
36. (p. 575) The last step in the control process is: A. Taking corrective action B. Setting performance standards C. Measuring performance D. Comparing performance E. Determining deviations
37. (p. 576) Performance standards can be set with respect to any of the following EXCEPT: A. Quantity B. Quality C. Time used D. Cost E. All of the above could be set
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38. (p. 576) 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: A. Standard B. Management audit C. Budget D. Debt-equity ratio E. Control process
39. (p. 577) Where are performance data commonly obtained? A. Oral and written reports and personal observation B. Supervisors, line managers and co-workers C. Top, middle and lower management D. Competitors E. Technical analysts from outside the company
40. (p. 578) When Jennifer concentrates on the significant deviations from established standards, she is using A. Unreasonable control B. The principle of deviation C. Inefficient control D. The principle of exception E. Behavioral standards
AACSB: Other management-specific knowledge/abilities Blooms taxonomy: Application Difficulty: Hard Learning Objective: 2
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41. (p. 578) A managerial principle stating that control is enhanced by concentrating on the exceptions or significant deviations from the expected result or standard is referred to as the: A. Principle of control B. Management audit C. Management myopia D. Principle of exception E. Control stages
42. (p. 580) The control process used while plans are being carried out, including directing, monitoring and fine-tuning activities as they are performed is referred to as: A. Feed forward control B. Concurrent control C. Feedback control D. Budgeting E. Market control
43. (p. 580) Which type of control takes place while plans are being carried out? A. Feedback control B. Specialist control C. Preliminary control D. Feedforward control E. Concurrent control
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44. (p. 580) At Precision Instruments, it was recently announced that all assembly workers are to arrive 15 minutes early for their shift in order to be outfitted in specialized gear that will reduce minute particles from the environment from entering products being assembled. Products are then assembled in a controlled environment. This requirement reflects _______ control. A. Feedback B. Specialist C. Feedforward D. Operator E. Concurrent
45. (p. 580) Which type of control is future oriented? A. Feedback control B. Specialist control C. Feedforward control D. Operator control E. Concurrent control
46. (p. 580) The heart of any control system is: A. Rewards/punishments B. Concurrent control C. Attitudes D. Feedback control E. None of the above
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47. (p. 580) Electronic monitoring of telemarketers' conversations with potential clients is an example of _______ control. A. Operator B. Concurrent C. Preliminary D. Technological E. Feedback
48. (p. 580) Advances in information technology have created powerful: A. Feedback controls B. Auditing capabilities C. Market controls D. Concurrent controls E. Organization links
49. (p. 581) Control that focuses on the use of information about previous results to correct deviations from the acceptable standard is referred to as: A. Feedforward control B. Quality control C. Feedback control D. Return on investment (ROI) E. Liquidity control
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50. (p. 581) Which of the following statements is NOT true regarding Six Sigma? A. It is one of the most important quality-control tools to emerge B. The system was developed by Sony C. It is designed to reduce defects in all organizational processes D. The lower the sigma number, the higher the level of defects E. All of the above are correct
51. (p. 582) The Six Sigma approach is based on ____________ analyses that contribute to ____________. A. Statistical, increased customer base B. Budgetary, customer satisfaction C. Strategic analysis, customer satisfaction D. Statistical, customer satisfaction E. None of the above
52. (p. 583) Managers conduct _____ audits of other companies and ____ audits of their own company. A. Competition, supplier B. External, internal C. Illegal, legal D. Internal, external E. Subversive, legitimate
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53. (p. 583) An evaluation of the effectiveness and efficiency of various systems within an organization is called a(n): A. Internal audit B. Management audit C. External audit D. Budget audit E. Budget
54. (p. 583) External audits can be used for all of the following EXCEPT: A. Possible merger or acquisition B. Judge soundness of potential major supplier C. Uncover strengths and weaknesses of a competitor D. External audits could be used for all of the above E. None of the above is appropriate
55. (p. 583) Assessing your own company's planning, organizing, leading and controlling efforts is the essential function of: A. Strategic managers B. Feedforward control C. Feedback control D. External audits E. Internal audits
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56. (p. 583) An internal audit assesses: A. Planning processes B. Organizing processes C. Leading processes D. Controlling processes E. All of the above
57. (p. 583) An evaluation conducted by one organization on another organization is referred to as a(n): A. External audit B. Management audit C. Internal audit D. Accounting audit E. Budget audit
58. (p. 583) A periodic assessment of a company's own planning, organizing, leading and controlling processes is referred to as a(n): A. Internal audit B. Accounting audit C. Management audit D. Current ratio E. Management audit
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59. (p. 584) 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 (ABC) B. Stockholders' equity C. Budgeting D. Return on investment (ROI) E. Management audit
60. (p. 584) Practices commonly uncovered by a management audit include: A. Performance of unnecessary work B. Procedures that are unnecessarily costly C. Duplication of work D. Poor inventory control E. Any of the above
61. (p. 585) Which of the following is NOT a stage in budgetary control? A. Taking corrective action B. Budgetary operations C. Comparing Six Sigma data D. Establishing expectancies E. All of the above
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62. (p. 586-587) Which of the following is not a type of budget? A. Sales budget B. Production budget C. Cost budget D. External budget E. Master budget
63. (p. 587) Bruce Genero is a financial manager at Flavors, Inc., a lollipop manufacturer. One of his duties as manager is to provide a budget that shows the anticipated receipts and expenditures of his department. The budget also shows the amount of working capital available and the extent to which outside financing may be required. Bruce produces this budget after all other estimation is complete. Which type of budget is Bruce currently working on? A. Master budget B. Cash budget C. Cost production budget D. Production budget E. Sales budget
64. (p. 587) Procedures used to verify accounting reports and statements are referred to as: A. Management audits B. Accounting audits C. Activity-based costing (ABC) D. Return on investment (ROI) E. Budget audit
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65. (p. 588) Paper Enterprises has begun a new system of allocating costs according to what they do, rather than what they spend. 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
66. (p. 588) Perhaps the greatest benefit of activity based costing is: A. The simplicity B. The acknowledgment of employee effort C. The ability to highlight and monitor costly activities D. The acceptance by stockholders and other sources of financing E. All of the above
67. (p. 589) An itemized financial statement of the income and the expenses of a company's operations is called: A. An income and expense statement B. A balance sheet C. A cash flow statement D. A financial ratio E. None of the above
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68. (p. 589) The balance sheet shows: A. Annual profit B. Potential profit C. Relative labor costs D. A financial picture of a company at a given time E. A company's performance over time
69. (p. 589, Table 16.5) Which of the following are the basic elements of a balance sheet? A. Income, expenses, profit/loss B. Operations, sales, growth C. Assets, liabilities, owner's equity D. Reading, writing and arithmetic E. None of the above
70. (p. 589, Table 16.6) Which of the following are the basic elements of a profit and loss statement? A. Income, expenses, profit/loss B. Operations, sales, growth C. Assets, liabilities, owner's equity D. Income, deductions, taxes E. Wins, losses, ties
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71. (p. 589) Liquidity ratios: A. Indicate the company's ability to pay short-term debts B. Include current ratios and debt-equity ratios C. Indicate management's ability to generate a financial return on sales or investment D. Include profitability and turnover ratios E. Include/indicate none of the above
72. (p. 589) Caroline has just reviewed a number of indicators of financial control. The one that troubles her indicates that the company may have trouble meeting its short-term financial obligations. Caroline is concerned about: A. The profit and loss statement B. The profitability ratio C. A leverage ratio D. Current assets to current liabilities ratio E. The return on investment ratio
73. (p. 589) Leverage ratios: A. Show the relative amount of funds in the business supplied by creditors and shareholders B. Indicate a company's ability to pay short-term debts C. Indicate management's ability to generate a financial return on sales or investment D. Show the profit margins for the last six months E. Indicate the future profits from the current customer base
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74. (p. 589) The most common liquidity ratio is current assets to current liabilities, which is also called: A. Debt-equity ratio B. Current ratio C. Profit loss ratio D. Return on investment ratio E. Stockholders equity ratio
75. (p. 589) 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
76. (p. 589) The values of the various items the corporation owns are referred to as: A. Liabilities B. Owner's equity C. Debt-equity ratio D. Assets E. Cost analysis
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77. (p. 589) The amounts a corporation owes to creditors are referred to as: A. Liabilities B. Assets C. Stockholders' equity D. Financial ratios E. ROI
78. (p. 589) The amount accruing to the corporation's owners is referred to as: A. Liabilities B. Management myopia C. Transfer pricing D. Stockholders' equity E. ROI
79. (p. 589) An itemized financial statement of the income and expenses of a company's operations is referred to as the: A. Income statement B. Profit and loss statement C. Balance sheet D. Expense report E. Financial ratio statement
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80. (p. 589) 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 (ROI) C. Debt-equity ratio D. Transfer price E. Profitability ratio
81. (p. 591) Profitability ratios A. Show the relative amount of funds in the business supplied by creditors and shareholders B. May indicate a company's ability to meet its long-term financial obligations C. Indicate management's ability to generate a financial return on sales or investment D. All of the above E. None of the above
82. (p. 591) "Management myopia" is a condition that means: A. Managers lack motivation to reach their performance targets and in turn find it difficult to motivate subordinates B. Managers limit their focus to short-term profits at the expense of longer-term concerns C. By managers who find themselves unable to rise beyond a certain level in the organizational hierarchy D. Managers are promoted to their "level of incompetence" E. Managers find they cannot progress within an organization due to corporate downsizing/paring of middle management layers
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83. (p. 591) A ratio of profit to capital used or a rate of return from capital is referred to as: A. Debt-equity ratio B. Management myopia C. Return on investment (ROI) D. Activity-based costing (ABC) E. None of the above
84. (p. 592) Rigid bureaucratic controls can result in: A. Inflexible behavior B. Slow reaction times C. Poor customer service D. All of the above E. None of the above
85. (p. 592) 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
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86. (p. 592) When employees feel forced to attempt to "beat the system" their behavior might be classified as: A. Rigidly bureaucratic B. Tactical C. Resisting D. Any of the above E. None of the above
87. (p. 593) Carlos was new to this organization but quickly recognized the annual budgeting session. Mid-level managers were asking for unrealistically high budgets while top management was attempting to require budgets under last year's actual expenditures. These strategies are referred to as: A. Budget breakdowns B. Bureaucratic budgeting C. Budget resistance D. Tactical behaviors E. Rigid behaviors
88. (p. 594) People resist control systems for which of the following reasons? A. Control systems can change the social structure of the organization B. Control systems make employees less accountable for their performance C. Control systems maintain power structures and expertise D. Control systems motivate employees because of low resistance E. All of the above
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89. (p. 594) To be effective, control systems need to: A. Be heavily based on subjective standards B. Communicate needed information upward in the organization C. Be acceptable to top managers D. Use multiple control approaches E. All of the above
90. (p. 594) In order to be considered valid, performance standards should be: A. Objective rather than subjective B. Should not be able to be easily faked or sabotaged C. Should incorporate all important aspects of performance D. All of the above E. None of the above
91. (p. 596) A manager designing a control system should evaluate the information provided by the system in terms of which of the following questions? A. Does the system provide people with data relevant to the decisions they have to make? B. Does the system provide information about how other parts of the organization are doing? C. Does the system provide the right amount of information to decision makers throughout the organization? D. All of the above are appropriate considerations E. None of the above is an appropriate consideration
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92. (p. 596) In order to gain employee acceptance of useful performance standards, a manager can: A. Set standards that employees view as possible to achieve B. Set standards low C. Disregard standards D. Focus on controlling negative behavior E. None of the above
93. (p. 598) Casinos control card dealers by using multiple controls. Which of the following would NOT be a correct tool used as one of the multiple controls? A. Requiring them to have a card dealer's license before being hired B. Using various forms of direct scrutiny, including closed-circuit cameras, two way mirrors and direct supervision C. Requiring detailed paperwork to audit transfers of cash and cash equivalents D. All of the above could be used E. None of the above could be used
94. (p. 599) Market controls involve: A. The use of rules and regulations B. The use of economic standards C. The use of authority D. The use of sales and variable costs levels E. None of the above
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95. (p. 600) Use of market control mechanism has been criticized by those who believe that: A. They rely too heavily on rules and procedures B. Economic measures do not adequately reflect the complete value of an organization C. They are too dependent on the organizational culture D. Economic measures are the only reflection of the complete value of an organization E. All of the above
96. (p. 600) The price charged by one unit of an organization that supplies to another unit in the same organization is referred to as: A. Substitute price B. Transfer price C. Department price D. Organizational price E. None of the above
97. (p. 601) Traditionally, boards have tried to control CEO performance mainly through: A. Salary schedules B. Bonuses tied to productivity C. Perks D. Base pay and incentive plans E. All of the above
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98. (p. 601) The increasing need for clan control is caused by: A. Changes in the employment relationship B. The changes in the economics of work C. The changes in government regulations D. Employees lack of interest in corporate decisions E. All of the above
99. (p. 601) Empowerment is important in organizations because: A. The nature of management has changed B. Employees' jobs have changed C. Employment relationships have changed D. All of the above E. None of the above
100. (p. 601) The text book equates the effective use of clan control with: A. Reduced bureaucracy B. Enhanced vertical communication C. Empowerment D. Job security E. A lack of individual judgment
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101. (p. 602, Table 16.7) Which of the following is NOT a guideline provided by your text for managing in an empowered setting? A. Put control where the operation is B. Build on trust C. Use real-time controls D. Base control on market norms E. Reinforce teamwork
102. (p. 602) Control that is based on the idea that employees may share the values, expectations and goals of the organization and act in accordance with them is called: A. Corporate culture control (CCC) B. Authority control C. Bureaucratic control D. "No control" E. Clan control
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Essay Questions
103. (p. 574) Explain the two "Siamese Twins" of management. How does this idea relate to the control function of management? Answer will vary.
104. (p. 575) There are three broad strategies for achieving organizational control. Describe these strategies and provide an example of each. Answer will vary.
AACSB: Other management-specific knowledge/abilities Blooms taxonomy: Application Difficulty: Medium Learning Objective: 1
105. (p. 576) List and give an example of each of the four measures upon which performance standards might be based. Answer will vary.
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106. (p. 580) Describe feedforward, feedback and concurrent control. Give an example of each. Answer will vary.
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107. (p. 592) Discuss the downside of bureaucratic control. Answer will vary.
108. (p. 600) Briefly describe market control at the corporate level, business unit level and the individual level. Answer will vary.
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Multiple Choice Questions
Use the following to answer questions 109-111: Owners from two businesses have asked you which type of control system they should utilize. To help you make your decision, they have each provided a brief description of their organization. Alpha Omega, Inc. is a large corporation built in the 1950s. They produce chemical concentrates for industrial cleaning. Their organization uses a strict set of rules and regulations with their workforce. They have the ability to track a large amount of data using statistical techniques. Mid-Atlantic Health is a regional medical center. They want to use a control system that will allow them to tie pricing of services and profits to specific services in the medical center.
109. (p. 575) Which control system should Alpha Omega, Inc. utilize? Assume they should not change their current method of operation. A. Bureaucratic B. Market C. Clan D. Feedforward E. Concurrent
110. (p. 575) Which control system should Mid-Atlantic Health utilize? Assume they should not change their current method of operation. A. Bureaucratic B. Market C. Clan D. Feedforward E. Concurrent
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111. (p. 575) The control systems that should be used in the scenarios above were developed by: A. W. Edwards Deming B. William Ouchi C. Frederick Taylor D. Xerox E. Motorola
Use the following to answer questions 112-114: Your manager is speaking to a group of employees about a problem in your department. Employees are not complying with the rules regarding clocking in and clocking out each day. The rules in this situation are very important as employees will not receive their correct pay if the clocking procedures are not followed. There are three suggestions being considered to address this problem. Employees will be monitored at the entrance during shift changes to make sure that each complies with the procedure. Reports will be reviewed at the end of each pay period. The reports will contain data tracking the number of employees not complying with the procedures each shift. Employees violating the procedure will be counseled to correct the problem. A new procedure will be developed describing an easier procedure for employees to follow. Training will be conducted so that each employee knows the policy and the procedure before it is enacted.
112. (p. 580) Option 1 describes which approach to bureaucratic control? A. Feedback B. Feedforward C. Concurrent D. Market E. Clan
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Use the following to answer questions 115-117: Suppose you are a middle manager in a biotechnology research firm. The organization has undergone a dramatic transformation over the last few years. Historically, employees had been managed using a wide array of rules, regulations and procedures. Offending employees were punished "after the fact" for their violations. Today, employees are encouraged to make decisions and come up with innovative solutions to problems they discover. Most employees are much more satisfied under the new scenario; they like using their brains. However, you have one employee who is constantly disgruntled and challenges "the new way" at every chance. For example, this employee believes that you should not be his manager because you can't technically perform every job title that you manage. Other than this employee, the group is much more cohesive and is committed not only to the overall success of the organization but to its standards and reputation.
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115. (p. 575) Which of the following types of control system did this organization most likely use in the past? A. Clan B. Market C. Bureaucratic D. Subjective E. Feedforward
116. (p. 575) Which of the following types of control system does the organization use now? A. Clan B. Market C. Bureaucratic D. Subjective E. Feedforward
117. (p. 602) Which of the following statements is TRUE regarding the employee described in the above scenario? A. The employee is an excellent example of empowerment B. The employee is unable to appreciate the changing nature of management C. The employee is a perfect match for clan control D. The employee is a perfect match for market control E. None of the above is true
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Chapter 16 - Managerial Control

Chapter 16 Managerial Control

1. (p. 574) Control is a managerial necessity. TRUE

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

13. (p. 584) Budgeting information is expressed in monetary units. FALSE

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Multiple Choice Questions

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Multiple Choice Questions

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

Chapter 16 - Managerial Control

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