Deck 11: Evaluation and Control

Question 1

Behavior controls specify how something is to be done through policies, rules, standard operating procedures, and orders from a superior.

Answer 1

True

Question 2

The revenue center is measured in terms of efficiency.

Answer 2

False

Question 3

ROI stands for return on incentives.

Answer 3

False

Question 4

ISO 2000 Standards Series, developed by the International Standards Association of Geneva, Switzerland, is an example of a behavior control.

Question 5

Operating cash flow is also known as free cash flow.

Question 6

One example of a steering control used by retail stores is the inventory turnover ratio, which shows how hard an investment in inventory is working.

Question 7

Behavior, output, and input controls are all interchangeable.

Question 8

Unlike ROI, managers cannot manipulate the numbers of EVA.

Question 9

The balanced scorecard combines financial measures that tell the results of actions already taken with operational measures on customer satisfaction, internal processes, and the corporation's innovation and improvement activities.

Question 10

Enterprise risk management is being adopted because of the increasing amount of environmental uncertainty that can affect an entire corporation.

Question 11

One advantage of using ROI is that it is a single comprehensive figure that includes all revenues, costs, and expenses.

Question 12

The evaluation and control process ensures that the company is achieving what it set out to accomplish.

Question 13

Performance is the end result of activity.

Question 14

Stickiness and eyeballs are two non-financial performance measures used by Internet business ventures.

Question 15

ABC accounting allows accountants to charge costs more accurately than the traditional method because it allocates overhead far more precisely.

Question 16

One of the obstacles to effective control is the difficulty in developing appropriate measures of important activities and outputs.

Question 17

Evaluation and control information consists only of performance data.

Question 18

Management audits have been developed to evaluate activities such as corporate social responsibility, functional areas such as the marketing department, and divisions such as the international division.

Question 19

EVA will never replace ROI as the standard performance measure.

Question 20

ACB is an accounting method for allocating direct and fixed costs to individual products.

Question 21

Benchmarking involves openly learning how others do something better than one's own company so that one not only can imitate, but perhaps even improve on their current techniques.

Question 22

Benchmarking has been decreasing in popularity as companies emphasize uniqueness.

Question 23

ERP software provides instant access to critical information to everyone in the organization from the CEO to the factory floor worker.

Question 24

International transfer pricing is primarily used to evaluate performance.

Question 25

A profit center is typically established whenever an organizational unit has control over both its resources and its products or services.

Question 26

The over-billing of customers in Sears's auto repair shops was an example of suboptimization.

Question 27

Among the most important barriers to international trade are the different standards for products and services.

Question 28

Which type of control specifies how something is to be done through policies, rules, standard operating procedures, and orders from a superior?

A)tactical control
B)strategic control
C)output control
D)functional control
E)behavior control

Question 29

Which one of the following is NOT a part of the evaluation and control of performance?

A)Establish corporate strategies.
B)Determine what to measure.
C)Establish standards for performance.
D)Measure actual performance.
E)Take corrective actions.

Question 30

The use of timely, quantifiable standards guarantees good performance.

Question 31

The long-term evaluation method encourages executives to look at developmental expenses as being different from expenses required for current operations.

Question 32

Controls that measure variables that influence future profitability are called

A)steering controls.
B)activity controls.
C)behavior controls.
D)output controls.
E)influencing controls.

Question 33

The multi-domestic MNC and the global MNC should use loose controls on its foreign units.

Question 34

According to the 80/20 rule, companies should monitor the 20% of the factors that determine 80% of the results.

Question 35

If performance data and activity reports indicate undesirable performance as a result of inappropriate use of the strategic management process, operational managers must

A)immediately notify the board of directors.
B)change the strategic management model.
C)know about it so that they can correct the employee activity.
D)allow sufficient time to pass to verify if it is the process or just the usage that is the problem.
E)check the performance data to ensure their accuracy and take two more measurements.

Question 36

The inventory turnover ratio is an example of a(n)

A)steering control.
B)activity control.
C)behavior control.
D)output control.
E)influencing control.

Question 37

The end result of activity is known as

A)measurement.
B)gratuity.
C)performance.
D)return on equity.
E)achievement.

Question 38

People tend to substitute behaviors that are recognized and rewarded for those behaviors that are ignored, without regard to their contribution to goal accomplishment.

Question 39

One of the key reasons for the success of Wal-Mart has been management's use of the company's sophisticated information system to control purchasing decisions.

Question 40

In one study, 95% of the corporate officers interviewed stated that they use different evaluation techniques for foreign and domestic operations.

Question 41

The present value of the anticipated future stream of cash flows from the business plus the value of the company if liquidated is referred to as

A)return on assets.
B)ROVA.
C)shareholder value.
D)earnings per share.
E)ROI.

Question 42

Which of the following is not considered an adequate measure by itself of corporate performance?

A)ROI
B)EPS
C)ROE
D)Operating cash flow
E)all of the above

Question 43

Annual cost savings for a company from ISO 9000 are approximately

A)$100,000.
B)$175,000.
C)$200,000.
D)$300,000.
E)$400,000.

Question 44

Because of the belief that accounting-based numbers such as ROI, ROE, and EPS are not reliable indicators of a corporation's economic value, which method of corporate performance is now preferred?

A)shareholder value
B)basic earning power
C)price/earnings ratio
D)profit margin on sales
E)return on assets

Question 45

Which of the following is a way in which managers can improve their company's or business unit's EVA?

A)earning more profit without using more capital
B)using more capital
C)investing capital in multiple low-return projects
D)extending their line of credit
E)all of the above

Question 46

The measure which is after-tax operating income minus the total annual cost of capital is called

A)ROI.
B)EPS.
C)ROE.
D)EVA.
E)MVA.

Question 47

The balanced scorecard approach to evaluation and control assigns to each goal/objective in an area one or more measures that are each essential for achieving a desired strategic option.These measures are called

A)critical success factors.
B)key performance measures.
C)strategic factors.
D)behavioral measures.
E)responsibility centers.

Question 48

Which type of control specifies what is to be accomplished by focusing on the end result of behaviors through the use of objectives and performance targets or milestones?

A)tactical control
B)strategic control
C)output control
D)functional control
E)behavior control

Question 49

All of the following are examples of behavior controls EXCEPT

A)following company procedures.
B)making sales calls to potential customers.
C)getting to work on time.
D)following up on sales calls with current customers.
E)Sales quotas.

Question 50

Corporations will emphasize all types of controls (output, input, behavior)when they are following a strategy of

A)conglomerate diversification.
B)concentric diversification.
C)retrenchment.
D)divestment.
E)vertical integration.

Question 51

Some takeover specialists look at the amount of money a new owner can take out of the firm without harming the business.This is known as

A)leveraged buy-out.
B)operating cash flow.
C)free cash flow.
D)dividends.
E)shareholder measure.

Question 52

Which is the MOST commonly used measure of corporate performance (in terms of profit)?

A)EPS
B)ROE
C)DPS
D)ROI
E)ROVA

Question 53

________ is a corporate-wide, integrated process to manage the uncertainties that could negatively or positively influence the achievement of the corporation's objectives.

A)ISO 14000 Series
B)Input controls
C)Activity-based costing
D)Enterprise Risk Management
E)Market Value Added

Question 54

Corporations will emphasize output controls when they are following a strategy of

A)conglomerate diversification.
B)concentric diversification.
C)retrenchment.
D)divestment.
E)vertical integration.

Question 55

The ISO 9000 Standards Series is one example of

A)tactical control.
B)strategic control.
C)output control.
D)functional control.
E)behavior control.

Question 56

Activity-based costing is a method of accounting which is very useful in making outsourcing decisions by doing

A)total quality management.
B)value-chain analysis.
C)reengineering.
D)MBO.
E)benchmarking.

Question 57

All of the following are examples of output controls EXCEPT

A)sales quotas.
B)specific cost reduction objectives.
C)profit objectives.
D)getting to work on time.
E)surveys of customer satisfaction.

Question 58

An advantage of ROI as a measure of performance is that

A)it is sensitive to book value.
B)it provides an incentive to use existing assets efficiently.
C)the time span of concern is short range.
D)the business cycle strongly affects ROI performance often despite managerial performance.
E)it is very sensitive to depreciation policy.

Question 59

Which of the following is NOT one of the areas in which goals or objectives should be developed for use in the balanced scorecard approach?

A)customer
B)innovation and learning
C)financial
D)stakeholder
E)internal business perspective

Question 60

A limitation of ROI as a measure of performance is that

A)it is a single comprehensive figure examining only one facet of the firm.
B)it provides disincentive to use existing assets efficiently.
C)it provides a disincentive to acquire new assets.
D)it is very sensitive to depreciation policy.
E)it does not provide the basis for common comparison.

Question 61

RFID

A)is radio frequency identification.
B)is an electronic tagging technology.
C)reduces losses from counterfeiting.
D)is used as wireless computer passes for toll roads.
E)all of the above

Question 62

A multi-domestic MNC should use what type of controls on its foreign units?

A)Management should be given considerable latitude, but be required to meet some predetermined performance targets.
B)Management should use a matrix structure allowing some limited autonomy of the foreign unit.
C)Management needs to exert tight controls over its many units using a centralized strategic operational decision-making format.
D)Management should use a functional approach assigning distinct and separate responsibilities to each department throughout the MNC.
E)Management should use a divisional approach assigning goals and targets for each product-group throughout the MNC.

Question 63

A responsibility center which measures performance in terms of the difference between revenues (which measure production)and expenditures (which measure resources)is a(an)

A)investment center.
B)revenue center.
C)expense center.
D)profit center.
E)standard cost center.

Question 64

The continual process of measuring products, services, and practices against the toughest competitors or those companies recognized as industry leaders is

A)total quality management.
B)benchmarking.
C)action planning.
D)reengineering.
E)management by objectives.

Question 65

Which of the following is NOT a reason why ERP could fail?

A)insufficient tailoring of the software to fit the company
B)inadequate training
C)simplicity of system
D)insufficient implementation support
E)all of the above

Question 66

Return on investment (ROI)is the most widely used measure of performance in what responsibility center?

A)revenue center
B)expense center
C)investment center
D)profit center
E)standard cost center

Question 67

Transferring profits from a foreign subsidiary to the parent corporation through dividends, royalties, or management fees is called

A)technology transfer.
B)activity-based costing.
C)transfer pricing.
D)repatriation of profits.
E)transnational funding.

Question 68

A multidivisional corporation like GE would tend to use what type of responsibility center?

A)investment center
B)expense center
C)profit center
D)standard cost center
E)revenue center

Question 69

Which of the following is NOT one of the steps followed in the benchmarking process?

A)Develop tactical programs for closing performance gaps.
B)Implement tactical programs, measure the results, and compare the results with those of the best-in-class company.
C)Link parallel activities instead of integrating their results.
D)Identify the area or process to be examined.
E)Calculate the differences among the company's performance measurements and those of the best-in-class company.

Question 70

A type of responsibility center which is typically established whenever an organizational unit has control over both its resources and its products or services is a(an)

A)investment center.
B)revenue center.
C)expense center.
D)profit center.
E)standard cost center.

Question 71

The union of all of a company's major business activities from order processing to production within a single family of software modules is known as

A)enterprise resource planning.
B)enterprise strategic planning.
C)information system planning.
D)united resource planning.
E)united strategic planning.

Question 72

A study by Bain & Company revealed what percentage of companies using benchmarking in some manner?

A)10%
B)30%
C)50%
D)70%
E)90%

Question 73

The average benchmarking study may cost approximately ________, and involves 30 weeks of effort.

A)$5,000
B)$20,000
C)$50,000
D)$100,000
E)$500,000

Question 74

A responsibility center which measures resources in dollars without consideration of service or product costs is called a(n)

A)investment center.
B)revenue center.
C)expense center.
D)profit center.
E)standard cost center.

Question 75

The German company SAP AG originated the concept of ERP with its

A)activity-based costing.
B)transfer pricing.
C)spreadsheet software.
D)R/3 software system.
E)transnational software integrator.

Question 76

A study of 79 MNC's revealed that international transfer pricing from one county unit to another is primarily used to

A)evaluate performance.
B)minimize taxes.
C)increase profits.
D)improve communication.
E)all of the above

Question 77

What responsibility centers are judged for effectiveness rather than efficiency?

A)investment center
B)revenue center
C)standard cost center
D)profit center
E)expense center

Question 78

Which of the following is NOT descriptive of responsibility centers?

A)They are used to isolate a unit so that it can be evaluated separately from the rest of the corporation.
B)Each responsibility center has its own budget and is evaluated on its use of budgeted resources.
C)The responsibility center coordinates all the functional areas and project developments to implement the strategic decision plan.
D)The center uses resources to produce a service or a product.
E)A responsibility center is headed by the manager responsible for the center's performance.

Question 79

The comparison of the expected cost of production against the actual cost of production typically occurs in the

A)investment center.
B)revenue center.
C)standard cost center.
D)profit center.
E)expense center.

Question 80

A global MNC should use what type of controls over its foreign units?

A)Management should be given considerable latitude, but be required to meet some predetermined performance targets.
B)Management should use a matrix structure allowing some limited autonomy of the foreign unit.
C)Management needs to exert tight controls over its many units using a centralized strategic operational decision-making format.
D)Management should use a functional approach assigning distinct and separate responsibilities to each department throughout the MNC.
E)Management should use a divisional approach assigning goals and targets for each product-group on all its foreign units collectively.