Deck 10: Controlling in Organizations

Question 1

Group control comprises formal policies, rules, and procedures for preventing or correcting deviations from plans.

Answer 1

False

Question 2

Employee relationship software at Siebel Systems makes first-line managers accountable by putting them in control of setting departmental goals.

Answer 2

False

Question 3

The first step in the corrective control model is to identify the key characteristics to be measured.

Answer 3

False

Question 4

Pareto's law holds that multinational firms should think globally but act locally.

Question 5

Most customers are not satisfied with the ways organizations handle their complaints.

Question 6

Barclays Bank zero defects culture teaches workers that although mistakes are inevitable, they are not acceptable.

Question 7

Activity-based costing is one of the less essential forms of accounting control.

Question 8

A sales budget is a forecast of the expected flow of monetary receipts and expenditures.

Question 9

The cost view of activity-based costing reflects the flow of costs from resources to activities and from activities to products and services.

Question 10

One limitation of activity-based accounting is that managers must still make some arbitrary cost allocations based on volume.

Question 11

Proxy statements are internal control mechanisms.

Question 12

Edgar Fleester could be imprisoned for up to 20 years if convicted for falsifying corporate records.

Question 13

Fiduciary responsibility indicates that final authority resides with the courts and congress.

Question 14

The designation of "independent" Audit Committee members at Newell Rubbermaid means that the board of directors cannot remove Audit Committee members from office.

Question 15

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.

Question 16

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

Question 17

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

Question 18

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

Question 19

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

Question 20

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

Question 21

McDonald's redesigned packaging is an example of organizational response to __________.

A) greenmail
B) green marketing
C) environmentalism
D) the EPA

Question 22

ERM software at Siebel Systems is specifically targeted at __________.

A) manufacturing operations
B) employees
C) executives
D) marketing cost-benefit

Question 23

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.

Question 24

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?

Question 25

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

Question 26

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

Question 27

Cost-benefit analysis addresses __________ basic questions.

A) two
B) three
C) five
D) ten

Question 28

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

Question 29

According to the text, __________ standards are increasingly being used as a base for control systems.

A) diversity
B) legal
C) performance
D) ethical

Question 30

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

Question 31

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.

Question 32

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

Question 33

Garrett Cullen owns a small business, and he thinks that the U.S. is not making good 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

Question 34

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

Question 35

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.

Question 36

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.

Question 37

__________ 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

Question 38

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.

Question 39

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

Question 40

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

Question 41

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

Question 42

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

Question 43

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

Question 44

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

Question 45

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

Question 46

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

Question 47

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

Question 48

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

Question 49

List and describe three of the five criteria upon which the effectiveness of organizational controls are evaluated.

Question 50

What are four of the six steps in the corrective control model? Explain each.

Question 51

Describe how Barclays Bank uses their communication competency to maintain high levels of customer satisfaction and to regain satisfaction when relations have been compromised.

Question 52

Discuss provisions of the Sarbanes-Oxley Act that offers external control mechanisms for corporate governance.