Question 1

Which of the following would NOT be a step in the design of a successful management control system?
A) Specify organizational goals, subgoals and objectives.
B) Identify responsibility centres.
C) Measure and report financial performance but not nonfinancial performance.
D) Develop measures of performance for motivation and goal congruence.

Accepted Answer

A successful management control system should measure and report both financial and nonfinancial performance. Nonfinancial performance measures can include customer satisfaction, employee engagement, and quality control, among others. Ignoring nonfinancial performance can lead to a short-sighted view of the organization's overall success.

Question 2

The management control system is distinguished from a financial accounting system by its focus on all of the following EXCEPT
A) generally accepted accounting principles.
B) organizational goals and objectives.
C) internal management decision making.
D) motivation and evaluation of performance consistent with the organization's goals.

Accepted Answer

The management control system is not focused on generally accepted accounting principles, but rather on the organization's goals and objectives, internal management decision making, and motivation and evaluation of performance consistent with the organization's goals. Financial accounting systems, on the other hand, are focused on complying with generally accepted accounting principles to ensure accurate financial reporting.

Question 3

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

Accepted Answer

A management control system needs to be continuously assessed and adjusted to ensure it remains aligned with the organization's goals and is effective in achieving them. As the organization's goals, strategies, and circumstances change, the management control system will need to be adapted accordingly.

Question 4

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

Accepted Answer

Segments are identified as responsibility centres that are accountable for their own revenues and costs, and therefore require separate measures for each. This allows for better analysis and management of the segment's performance.

Question 5

A management control system is a logical integration of management accounting tools to gather and report data and to evaluate performance.

Accepted Answer

This statement is true. A management control system uses management accounting tools such as budgeting, variance analysis, and performance measurement to collect and report data, and to evaluate the performance of individuals, departments, and the entire organization.

Question 6

Which of the following is NOT a characteristic of a management control system?
A) It aids and coordinates the process of making decisions.
B) It encourages short-term profitability.
C) It motivates individuals throughout the organization to act in concert.
D) It coordinates forecasting sales and cost-driver activities, budgeting, and measuring and evaluating performance.

Accepted Answer

Encouraging short-term profitability is not necessarily a universal characteristic of a management control system as some systems may prioritize long-term goals or other objectives over immediate profitability.

Question 7

Productivity is a measure of inputs divided by outputs.

Accepted Answer

Productivity is indeed the ratio of inputs to outputs, reflecting how efficiently resources are being used to produce goods or services.

Question 8

Controllable costs should be ignored in evaluating the responsibility centre manager's performance.

Accepted Answer

Controllable costs are expenses that can be directly influenced and controlled by the responsibility centre manager. Therefore, they are a vital factor in evaluating the manager's performance. Ignoring the controllable costs would provide an incomplete picture of the manager's performance.

Question 9

A logical integration of management accounting tools to gather and report data and to evaluate performance is a(n)
A) internal control system.
B) quality control system.
C) financial reporting system.
D) management control system.

Accepted Answer

A management control system uses management accounting tools to gather, report, and evaluate data related to organizational performance. It is designed to help managers make informed decisions and monitor performance against goals and objectives. Internal control systems and quality control systems are important components of a management control system, but they do not encompass the entirety of the system. A financial reporting system is focused primarily on the preparation and dissemination of financial information and does not typically include tools for evaluating performance.

Question 10

A responsibility centre for controlling revenues as well as costs is called a profit centre.

Accepted Answer

A profit centre is responsible for generating profits by controlling both revenues and costs.

Question 11

Total quality management focuses on prevention of defects and on customer satisfaction.

Accepted Answer

Total quality management is a management approach that seeks to prevent defects and improve customer satisfaction by involving everyone in the organization in a continuous improvement process.

Question 12

To achieve goal congruence and managerial effort, designers of management control systems should focus on motivating employees.

Accepted Answer

Motivating employees is essential to achieve goal congruence and managerial effort in management control systems. Without proper motivation, employees are less likely to perform to the best of their abilities and align their goals with those of the organization. Therefore, management control systems should prioritize employee motivation to attain goal congruence and better managerial effort.

Question 13

Information to support the management control system often comes primarily from the organization's
A) internal control system.
B) top management.
C) stockholders.
D) financial accounting system.

Accepted Answer

The financial accounting system provides detailed financial data that is crucial for the management control system to monitor and evaluate organizational performance.

Question 14

Explicit coordination of individuals' activities, actions and choices is the hallmark of the
A) management control system.
B) responsibility centre.
C) internal control system.
D) quality-control chart.

Accepted Answer

The explicit coordination of individuals' activities, actions, and choices is a fundamental aspect of a management control system. It provides an overarching framework for aligning organizational goals and objectives with the efforts of individuals and teams, ensuring that everyone is working towards the same goals in a coordinated and efficient manner. Responsibility centers and internal control systems are important components of a management control system, but they do not capture the coordination aspect as explicitly. Quality-control charts are more specific to monitoring and improving the quality of production processes, and do not necessarily involve coordination of activities.

Question 15

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

Accepted Answer

Nonprofit organizations often have multiple goals and objectives that are difficult to quantify and measure, making it challenging to develop accurate control systems. In contrast, profit-seeking firms have a clear financial goal and can easily measure and track their progress towards that goal. However, this does not mean that nonprofits do not have any control systems in place, but they may be less developed and more focused on monitoring activities and outcomes rather than financial performance.

Question 16

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

Accepted Answer

As the business environment evolves, management control systems must also adapt in order to remain relevant and effective. Failure to update these systems can result in the organization's inability to efficiently manage its resources, leading to decreased performance and success.

Question 17

It is common in Canadian companies to ensure that an internal control system is in place to prevent errors and irregularities and promote operating efficiency.

Accepted Answer

It is indeed common in Canadian companies to have an internal control system in place to promote efficiency, prevent errors and detect irregularities. This helps ensure the accuracy and reliability of financial reporting and safeguard assets. Internal control system components may include policies and procedures, segregation of duties, appropriate authorization and approval processes, regular monitoring and oversight, and employee training and competence. Such measures also help organizations meet legal and regulatory requirements and build trust with stakeholders.

Question 18

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

Accepted Answer

A well-designed management control system should consider both financial and nonfinancial objectives in developing and reporting measures of performance, as nonfinancial objectives can be just as important in measuring overall organizational success. Ignoring nonfinancial objectives may lead to an incomplete and inaccurate assessment of performance.

Question 19

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

Accepted Answer

Goal congruence refers to the alignment of individual goals and objectives with the long-term goals of the organization, not a divergence in time focus between individual and group objectives.

Question 20

An investment centre's success is measured only by its income.

Accepted Answer

An investment centre's success is measured by more than just its income. Other factors such as return on investment, cash flow, and market share can also be used to assess its performance.

Quiz 13: Management Control Systems, the Balanced Scorecard, and Responsibility Accounting

Which of the following would NOT be a step in the design of a successful management control system?

The management control system is distinguished from a financial accounting system by its focus on all of the following EXCEPT