Deck 9: Management Control Systems and Responsibility Accounting

Question 1

Measuring the number of defects can assess the improvement in organizational learning.

Answer 1

True

Question 2

Good performance measures should only focus on long-term concerns.

Answer 2

False

Question 3

Good performance measures should be reasonably subjective.

Answer 3

False

Question 4

Objectives are specific tangible actions or activities that can be carried out and observed on a long-term basis.

Question 5

Financial measures often are lagging indicators that arrive too late to help prevent problems.

Question 6

Responsibility centers usually have a single goal that the management control system monitors.

Question 7

In the management control system, feedback and learning affect all phases.

Question 8

A responsibility center for controlling revenues as well as costs is called a revenue center.

Question 9

A profit center can exist in nonprofit organizations.

Question 10

Measures of performance should not be consistent with organizational goals.

Question 11

The term "cost center" is used indiscriminately to describe centers that may or may not be assigned responsibility for the capital investment.

Question 12

Nonfinancial measures include profit targets and required return on investment.

Question 13

A set of machines may be a responsibility center for a production supervisor.

Question 14

Investment center managers are responsible for controlling only revenues and expenses.

Question 15

A well-designed management control system ignores nonfinancial objectives and focuses on financial objectives to develop and report measures of performance.

Question 16

The entire organization may be a responsibility center for the president.

Question 17

The first and most basic component in a management control system is the employee's goals.

Question 18

Some management experts have said that the only sustainable competitive advantage is the rate at which a company's managers learn.

Question 19

The purpose of performance measures is to set direction and to motivate managers.

Question 20

Organizational learning may be monitored by measuring employee turnover.

Question 21

Managers on all levels are held responsible for the total segment contribution.

Question 22

A balanced scorecard is used by for-profit companies, nonprofit organizations, and governmental agencies.

Question 23

No cost is completely under the control of a manager.

Question 24

Evaluations of the responsibility center manager's performance should ignore uncontrollable costs.

Question 25

Managerial effort does not necessarily have to accompany goal congruence.

Question 26

The second step in designing a management control system is to determine how employees will react to evaluations that use agreed-upon performance measures.

Question 27

Managerial effort means just to work harder and faster.

Question 28

Goal congruence exists when individuals aim at short?term goals and groups aim at long?term organizational goals.

Question 29

Discretionary fixed costs are usually considered as uncontrollable when evaluating a segment manager.

Question 30

Financial indicators are not included in a balanced scorecard.

Question 31

Segments are responsibility centers for which a separate measure of revenues and costs is obtained.

Question 32

Key performance indicators for a balanced scorecard are usually grouped in two categories.

Question 33

Unallocated costs usually include central corporate costs when evaluating a segment manager.

Question 34

A management control system can become perfect.

Question 35

The vast majority of employees are motivated by the same thing.

Question 36

Determining controllability is rarely a problem when a company allocates service department costs to other departments.

Question 37

The contribution margin is especially helpful for predicting the impact on income of long-run changes in activity volume.

Question 38

The four categories of quality cost include production costs, appraisal costs, internal failure costs, and external failure costs.

Question 39

Fixed costs not controllable by a segment manager usually include depreciation and property taxes.

Question 40

Both benefits and costs of management control systems are often difficult to measure.

Question 41

When comparing productivity measures over time, changes in the process or in the rate of inflation can cause the comparison to be misleading.

Question 42

_____ is the logical integration of management accounting tools to gather and report data and to evaluate performance.

A)An internal control system
B)A quality control system
C)A financial reporting system
D)A management control system

Question 43

A management control system must evolve with changing times, or the organization risks not being able to manage its resources effectively or efficiently.

Question 44

Internal delays and lost sales are examples of opportunity costs for a company.

Question 45

The shorter a product or service is in process, the more costs it consumes.

Question 46

The key to successful management control in any organization is proper training and motivation of employees, and consistent monitoring of objectives.

Question 47

Total quality management is the application of quality principles to the most important of an organization's departments to satisfy customers.

Question 48

Increased productivity can be shown by maintaining the number of inputs but increasing the number of outputs.

Question 49

Critical failure factors are actions that must be done well to drive the organization towards its goal.

Question 50

Identify which of the following is not a characteristic of a management control system.

A)A management control system aids and coordinates the process of making decisions.
B)A management control system encourages short-term profitability.
C)A management control system motivates individuals throughout the organization to act in concert.
D)A management control system coordinates forecasting sales and cost-driver activities, budgeting, and measuring and evaluating performance.

Question 51

Systems designers in organizations must contend with particularly difficult trade-offs among objectives.

Question 52

Productivity is a measure of inputs divided by outputs.

Question 53

A management control principle that will not change is that nonfinancial performance measures are not as good as financial performance measures.

Question 54

Service organizations focus on increasing the productivity of labor.

Question 55

Control systems in nonprofit organizations will never be as highly developed as in profit-seeking firms because measurements are more difficult.

Question 56

Decreasing cycle time results in bringing products or services more quickly to customers.

Question 57

_____ are specific tangible achievements that can be observed on a short?term basis.

A)Key success factors
B)Guidelines
C)Objectives
D)Performance measures

Question 58

Once a management control system is designed for an organization, it will meet the organization's goals indefinitely.

Question 59

A measure of labor productivity may include sales revenue divided by number of employees.

Question 60

Cycle time is an important cost driver.

Question 61

An) _____ center is the responsibility center whose success is measured not only by its income, but also by relating that income to its invested capital.

A)profit
B)cost
C)investment
D)accounting

Question 62

_____ is are) the most basic component of a management control system.

A)The organization's long-range budget
B)The organization's goals
C)The stockholder's preferences
D)Top management's preferences

Question 63

Effective management control systems allow top managers to delegate _____.

A)decision making
B)planning
C)control
D)all of these answers are correct

Question 64

An effective management control system reports on all of the following except:

A)the results of activities
B)the manager's influence on those results
C)effects of uncontrollable events
D)effects of controllable events

Question 65

Identify which term below refers to the set of activities assigned to a manager or a group of managers or other employees.

A)internal control system
B)management control system
C)responsibility center
D)total quality control system

Question 66

_____ is an outcome of organizational learning.

A)Financial strength
B)Increased customer satisfaction
C)Continuous process improvement
D)All of these answers are correct

Question 67

Identify which of the following statements regarding responsibility centers is false.

A)Responsibility centers usually have one objective.
B)Management control systems monitor responsibility center objectives.
C)Responsibility centers are usually classified according to their financial responsibility.
D)Cost centers, profit centers, and investments centers are all examples of responsibility centers.

Question 68

An) _____ center is the responsibility center for which costs are accumulated.

A)profit
B)cost
C)investment
D)accounting

Question 69

A management control system includes the techniques to gather and control information to _____.

A)motivate employees
B)evaluate performance
C)make decisions
D)all of these answers are correct

Question 70

To achieve maximum benefits at minimum cost, a management control system must foster _____.

A)goal congruence and employee motivation
B)motivation and responsibility accounting
C)responsibility accounting and managerial effort
D)managerial effort and goal congruence

Question 71

An)_____ center is not a type of responsibility center.

A)investment
B)cost
C)profit
D)budget

Question 72

Good performance measures will be all of the following except _____.

A)unaffected by the actions of managers
B)used in evaluating and rewarding employees
C)readily understood
D)used consistently

Question 73

A management control system can be designed to emphasize all of the following simultaneously except _____.

A)cost behavior
B)customer satisfaction
C)controllability
D)manager performance

Question 74

To create a management control system that meets the organization's needs, designers must consider all of the following except _____.

A)existing constraints
B)external reporting requirements
C)internal controls
D)costs versus benefits

Question 75

_____ are characteristics or attributes that managers must achieve to drive the organization toward its goals.

A)Specific performance measures
B)Targets
C)Key success factors
D)Goals

Question 76

Responsibility accounting includes _____.

A)identifying what parts of the organization have primary responsibility for each objective
B)developing measures of achievement and objectives
C)creating reports
D)all of these answers are correct

Question 77

_____ is not a step in the design of a successful management control system.

A)Specifying organizational goals, subgoals, and objectives
B)Identifying responsibility centers
C)Measuring and reporting financial performance but not nonfinancial performance
D)Developing measures of performance for motivation and goal congruence

Question 78

_____ is the first step in designing a management control system.

A)Evaluating management's performance
B)Establishing organizational goals
C)Preparing financial statements
D)Distinguishing between profit centers and cost centers

Question 79

Profit centers are responsible for _____.

A)costs only
B)revenues and costs
C)invested capital and revenues
D)costs and invested capital

Question 80

_____ is the drive for some selected goal that creates effort and action toward that goal.

A)Motivation
B)Goal congruence
C)Managerial effort
D)Apathy