Question 1

A management control system is a means of gathering and using information to aid and coordinate the process of making planning and control decisions throughout the organization, and to guide employee behaviour.

Accepted Answer

This statement accurately describes the purpose of a management control system.

Question 2

Management control systems motivate managers and other employees to exert effort through a variety of rewards tied to the achievement of goals.

Accepted Answer

Management control systems are designed to incentivize managers and employees to work towards achieving specific goals by offering rewards when those goals are met. These rewards can include bonuses, promotions, and other benefits, and are intended to motivate individuals to put forth their best efforts in their work.

Question 3

Subunit managers are better informed about their suppliers than top management is.

Accepted Answer

Subunit managers are typically more involved in day-to-day operations and have more direct communication with suppliers than top management does. This gives them a better understanding of the suppliers' capabilities, performance, and potential risks.

Question 4

Suboptimal decision making is also called congruent decision making.

Accepted Answer

Suboptimal decision making refers to making a decision that is not the best or most optimal solution, while congruent decision making refers to making a decision that is in alignment with our values and beliefs. These are two separate concepts.

Question 5

The degree of freedom to make decisions is known as decentralization.

Accepted Answer

The answer of The degree of freedom to make decisions...

Question 6

The essence of decentralization is the freedom for managers at lower levels of the organization to make decisions.

Accepted Answer

Decentralization means delegation of decision-making authority to lower levels of the organization. It empowers managers to take decisions independently, without referring to higher levels of the management hierarchy. Therefore, the essence of decentralization is the freedom for managers at lower levels to make decisions.

Question 7

The goal of a management control system is to improve the collective decisions in an organization in an economically feasible way.

Accepted Answer

The main aim of a management control system is to enhance the quality of collective decisions in a feasible manner. It is not about maximizing profits or minimizing costs but taking into account all factors that affect decision-making and optimizing them for better results.

Question 8

A decentralized organizational structure may result in duplication of activities.

Accepted Answer

In a decentralized organizational structure, various units or teams have greater autonomy and decision-making power. This may result in duplication of activities as each unit may be pursuing its own goals and objectives without coordination or communication with other units. Without a central authority to oversee and coordinate activities, duplication may occur, leading to inefficiencies and waste of resources.

Question 9

A benefit of decentralization should be increased motivation of subunit managers.

Accepted Answer

Decentralization allows subunit managers to have more autonomy and responsibility in decision-making. This can lead to increased motivation as they feel more ownership and control over their unit's success.

Question 10

A well-designed management control system obtains all of its information from within the company.

Accepted Answer

A well-designed management control system may obtain information from both internal and external sources, such as customer feedback, market trends, and industry benchmarks.

Question 11

Management control systems reflect only financial data.

Accepted Answer

Management control systems do not only reflect financial data, but also non-financial data such as customer satisfaction, employee productivity, and quality control measures.

Question 12

Which of the following is False concerning profit centres and cost centres?
A) A profit centre can exist within a centralized organization.
B) A profit centre can exist within a decentralized organization.
C) A cost centre can exist within a centralized organization.
D) A cost centre can exist within a decentralized organization.
E) If a profit centre exists within a centralized organization, there cannot be any cost centres in the organization.

Accepted Answer

A profit centre and cost centre can coexist within a centralized organization. The existence of one does not preclude the existence of the other.

Question 13

A management control system would include both formal as well as informal control mechanisms.

Accepted Answer

A management control system typically includes both formal mechanisms such as budgets, performance evaluations, and reports, as well as informal mechanisms such as culture, norms, and communication patterns.

Question 14

A management control system should have all of the following characteristics, EXCEPT
A) it should motivate employees.
B) it should be closely aligned to organizational goals and objectives.
C) it should provide information for individual managers for decision making.
D) it should motivate managers.
E) it should always focus on customer satisfaction.

Accepted Answer

While customer satisfaction is a crucial element of a management control system, it is not essential for all systems to always focus on it. Therefore, the option that does not fit is E.

Question 15

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 in terms of management control systems refers to the level of motivation and dedication of employees towards achieving the goals of the organization, rather than just physical exertion. It includes aspects such as initiative, creativity, and persistence towards achieving desired outcomes.

Question 16

Motivation is the desire to attain a selected goal combined with the resulting drive or pursuit toward that goal.

Accepted Answer

This is the definition of motivation as per most psychologists and academic sources.

Question 17

The costs of decentralization include all of the following, except
A) management development and learning.
B) duplication of activities.
C) increased costs of information-gathering.
D) too many cost centres.
E) decreased loyalty to the organization as a whole.

Accepted Answer

Management development and learning is generally considered a benefit of decentralization, not a cost.

Question 18

Management control systems collect which type of data?
A) financial
B) non-financial
C) data from outside of the company
D) financial and non-financial
E) financial and non-financial, including data from both within the company and outside of the company

Accepted Answer

The answer of Management control systems collect which type of...

Question 19

One benefit of centralization is an increase in development of an experienced pool of management talent to fill higher-level management positions.

Accepted Answer

The answer of One benefit of centralization is an increase...

Question 20

An important advantage of decentralized operations is that it improves corporate control.

Accepted Answer

Decentralized operations often result in a more diffused decision-making process, which can make it more difficult for the top management to exert control over all aspects of the business. However, decentralized operations can offer other benefits such as increased innovation, faster response time, and better adaptation to local markets.

Quiz 23: Transfer Pricing and Multinational Management Control Systems