Question 1

Which of the following would be considered an example of an element of an informal control system?
A) procedures developed by first level managers to help guide staff in their daily work
B) a policy that requires all employees to take at least two weeks of vacation each year
C) Shared values within an organization's culture
D) the master budget

Accepted Answer

Shared values within an organization's culture are considered an example of an element of an informal control system. These values influence the behavior and decisions of employees without being explicitly stated or enforced through policies or procedures. A, B, and D are examples of formal control systems as they involve specific rules, policies, or budgets implemented by management to regulate behavior and achieve organizational goals.

Question 2

In a management control system, which of the following is described as the extent to which managers strive or endeavor in order to achieve a goal?
A) Efficiency
B) Effectiveness
C) Effort
D) Variance

Accepted Answer

Effort refers to the degree to which managers work towards achieving a goal. Efficiency refers to the ability to minimize waste and maximize output with the given resources. Effectiveness refers to the ability to achieve the desired outcome or result. Variance refers to the deviation from a standard or expected value.

Question 3

Which of the following is a part of the formal management control system?
A) mutual commitments among the members of the organization
B) the accounting information system provides metrics about costs, revenues, and contribution margins
C) shared values and loyalties among the members of the organization
D) general understanding about acceptable behavior for managers

Accepted Answer

The accounting information system is a formal part of the management control system as it provides financial metrics that help managers make informed decisions.

Answer: A, D 
 Mutual commitments and general understanding of acceptable behavior are part of the informal management control system, which is based on trust and shared values. While important, they are not formal elements of the management control system.

Question 4

Effective management control systems should also motivate managers and other employees.

Accepted Answer

Effective management control systems should not only monitor and evaluate the performance of managers and employees, but also provide feedback and incentive to motivate them to improve their performance and achieve organizational objectives.

Question 5

The formal management control system includes the shared values, loyalties, and mutual commitments among members of the organization.

Accepted Answer

The informal management control system includes the shared values, loyalties, and mutual commitments among members of the organization.

Question 6

Effort refers to physical exertion, such as a worker producing at a faster rate, but excludes non-physical aspects like acumen and diligence of a worker.

Accepted Answer

Effort is the extent to which managers strive or endeavor in order to achieve a goal. Effort goes beyond physical exertion, such as a worker producing at a faster rate, to include mental actions as well.

Question 7

An organization should design its management control system independently of its strategies, so that the system is not affected by change of strategies in future.

Accepted Answer

To be effective, management control systems should be closely aligned with the organization's strategies and goals.

Question 8

If a computer manufacturer used its common stock price as a Balanced Scorecard control measure, it would be utilizing which of the following?
A) an external measure
B) customer related measure
C) internal business process measure
D) learning and growth measure

Accepted Answer

The common stock price is an external financial measure that does not directly relate to any of the four perspectives (customer, internal business process, learning and growth, financial) of the Balanced Scorecard framework. Therefore, it is used as an external measure to assess the overall performance of the company.

Question 9

Management control systems utilize information gathered within a company and from external sources so as to aid management with their planning and control decision making.

Accepted Answer

This statement is true. Management control systems are designed to gather and analyze information from various sources in order to help management make informed decisions about planning and control within the organization.

Question 10

The management accounting system is an informal management control system which provide information about the firm's costs, revenues, and income.

Accepted Answer

The management accounting systems is a formal management control system which provide information about the firm's costs, revenues, and income.

Question 11

Goal congruence exists when individuals work toward achieving one goal, and groups work toward achieving a different goal.

Accepted Answer

Goal congruence exists when individuals and groups work toward achieving the same goal.

Question 12

Line managers supervising individual refineries are concerned with ________.
A) obtaining information about the firm's opportunity costs
B) obtaining information about the firm's sunk costs
C) obtaining information about the firm's equipment downtime and product quality
D) obtaining information about customer satisfaction and market share

Accepted Answer

Line managers supervising individual refineries are primarily concerned with ensuring that the refinery is operating efficiently and producing high-quality products. Therefore, they would be most interested in obtaining information about equipment downtime and product quality. Information about opportunity costs and sunk costs would be more relevant to higher-level managers making strategic decisions, while information about customer satisfaction and market share would be more relevant to sales and marketing managers.

Question 13

Management control systems should be designed to support the organizational responsibilities of individual managers.

Accepted Answer

Management control systems are designed to facilitate the accomplishment of organizational goals by individual managers. These systems provide information and feedback to managers, enabling them to monitor progress, make decisions, and take actions that contribute to the achievement of organizational objectives. The design of management control systems should take into account the unique responsibilities and decision-making requirements of individual managers, as well as the overall organizational structure and strategy.

Question 14

Management control systems is designed only for top level managers and is not applicable to line managers.

Accepted Answer

Management control systems is applicable throughout an organization and is applicable to line managers also.

Question 15

Which of the following is a characteristic of a management control system?
A) It gathers key information that aids in the process of making decisions
B) It encourages short-term profit planning
C) Helps managers to act rapidly and with autonomy
D) It deals with coordinating planning across the organization and is not concerned with behavioral aspects of managing

Accepted Answer

Gathering key information that aids in decision-making is a primary characteristic of a management control system. The system provides data needed for planning, controlling, and evaluating performance.

Answer: B 
 Encouraging short-term profit planning is not a characteristic of a management control system. While management control systems do focus on financial performance, they also consider non-financial measures and are concerned with long-term success.

Answer: C 
 The characteristic of helping managers act rapidly and with autonomy is not specific to a management control system. Instead, it is a feature of decision-making frameworks or organizational structures that delegate decision-making authority to managers.

Answer: D 
 Coordinating planning across the organization is a characteristic of management control systems, but it is not the only one. Management control systems are also concerned with evaluating and correcting performance, providing feedback to managers, and using information to achieve organizational goals. Additionally, while management control systems do not ignore behavioral aspects of managing, they primarily emphasize financial and operational control.

Question 16

A well-designed management control system uses information from ________.
A) internal sources only as they are the most reliable sources of information
B) external sources only as they are more dynamic and future oriented
C) both internal and external sources as a wide range of information is required
D) external sources only as they are the most reliable sources of information

Accepted Answer

A well-designed management control system should gather information from both internal and external sources. Internal sources provide information on the company's performance and operations, while external sources provide information on market trends, competitors, and economic conditions. A wide range of information is required to make effective decisions and develop strategies for the success of the organization. Choosing option A or D, which suggest relying on only one type of source, would limit the scope and quality of the information available for decision making. Option B is also incorrect as external sources are not necessarily more reliable, and internal sources are essential for evaluating the efficiency of the company's internal processes.

Question 17

The formal management control system includes shared values, loyalties, and mutual commitments among members of the company, company culture, and norms about acceptable behavior for managers and other employees.

Accepted Answer

The informal management control system includes shared values, loyalties, and mutual commitments among members of the company, company culture, and norms about acceptable behavior for managers and other employees.

Question 18

Effort in terms of management control systems is defined in terms of physical exertion such as a worker producing at a faster rate.

Accepted Answer

Effort goes beyond physical exertion and includes both physical and mental actions.

Question 19

Which of the following is true of goal congruence?
A) It exists when the management's strategy is in line with the shareholders' requirements.
B) It exists when individuals and groups work toward achieving the organization's goals.
C) It exists when both internal and external stakeholders of an organization have similar goals.
D) It exists when an organization's goals are in line with the social acceptability of organizational goals.

Accepted Answer

Goal congruence refers to the alignment of individual and group goals with the overall goals of the organization. It exists when individuals and groups work toward achieving the organization's goals. While the other choices may be related to aspects of goal congruence, they do not fully capture the concept.

Question 20

The human resources systems is a part of the formal management control systems of an organization.

Accepted Answer

The human resources systems include policies, procedures, and practices related to staffing, training, performance management, compensation, and employee relations which are designed to manage and control the behavior and output of employees in an organization. Therefore, they are an essential part of the formal management control systems.

Quiz 22: Management Control Systems, Transfer Pricing, and Multinational Considerations

Which of the following would be considered an example of an element of an informal control system?

In a management control system, which of the following is described as the extent to which managers strive or endeavor in order to achieve a goal?

Which of the following is a part of the formal management control system?