Question 1

Exertion toward a goal or objective, including all conscious actions that result in more efficiency and effectiveness, is referred to as

Accepted Answer

Managerial effort refers to the exertion toward a goal or objective, including all conscious actions that result in more efficiency and effectiveness.

Question 2

All of the following are financial objectives of responsibility centres EXCEPT

Accepted Answer

Customer satisfaction is a non-financial objective, as it is not directly related to the financial performance of the responsibility centre. The other options (A, B, D) are financial objectives, as they are related to the management of financial resources and the achievement of financial targets.

Question 3

The drive for some selected goal that creates effort and action toward that goal is called

Accepted Answer

The definition provided clearly matches the concept of motivation, which is the inner drive that propels an individual towards achieving a desired goal or outcome. This drive creates effort and action towards the goal, which is the exact scenario described in the question. Goal congruence refers to the alignment of personal and organizational goals, managerial effort is a broader concept that encompasses all the activities undertaken by a manager, and apathy is the lack of motivation or interest in achieving any goal.

Question 4

Which of the following is NOT a synonym for an organization's subgoals?

Accepted Answer

Profit centres refer to specific units within an organization that are responsible for generating profits or revenue. Subgoals, on the other hand, are specific objectives or targets that contribute to the larger overall goals of the organization. Critical success factors, critical variables, and key result areas are all synonyms for subgoals, as they all refer to specific areas or factors that are critical to achieving the organization's objectives.

Question 5

A responsibility centre whose success is measured NOT only by its income, but also by relating that income to its invested capital is called a(n)

Accepted Answer

An investment centre is responsible for both generating income and managing the capital invested in the centre. This means that the investment centre's success is measured based on the return on investment (ROI) or the relationship of income generated to the capital invested. A profit centre is responsible for generating income, while a cost centre is responsible for controlling costs. There is no such thing as an accounting centre.

Question 6

The first step in designing a management control system is

Accepted Answer

The first step in designing a management control system is to establish organizational goals. This is because the control system should be aligned with the goals of the organization to ensure that they are achieved. Once the goals have been established, management can then develop appropriate strategies and tactics to achieve those goals, evaluate performance, and make necessary adjustments. Evaluating management's performance, preparing financial statements, and distinguishing between profit centres and cost centres are all important steps in the design and implementation of a management control system, but they come after the establishment of organizational goals.

Question 7

Profit centres

Accepted Answer

Profit centres have responsibility for both controlling costs and generating revenues. The profit centre manager is accountable for the profit or loss of the centre and has authority to make decisions related to pricing, cost control, and investments. Therefore, option A is the best choice. Option B is incorrect as profit centres also report revenues. Option C refers to investment centres, not profit centres. Option D is incorrect as investment centres are responsible for generating returns on invested capital, whereas profit centres are responsible for generating profits.

Question 8

Which of the following statements regarding responsibility centres is false?

Accepted Answer

Responsibility centres can have multiple objectives, not just one. It depends on the specific goals and responsibilities of the centre.

Question 9

An internal control system consists of all of the following EXCEPT

Accepted Answer

Internal control systems are designed to prevent and detect errors and irregularities, and to promote operating efficiency, but they do not specifically focus on promoting goal congruence.

Question 10

To create a management control system that meets the organization's needs, designers need to consider all of the following EXCEPT

Accepted Answer

External reporting requirements are not directly related to the internal management control system design, which focuses on internal processes and decision-making.

Question 11

An effective management control system gives each lower-level manager responsibility for a group of activities and objectives and then reports on all of the following EXCEPT

Accepted Answer

An effective management control system focuses on reporting the results of activities, the manager's influence, and the effects of uncontrollable events, but not specifically on the effects of controllable events, as these are typically within the manager's purview to manage and adjust.

Question 12

To achieve maximum benefits at minimum cost, a management control system must

Accepted Answer

A management control system should foster goal congruence, meaning that the goals of individuals and departments within the organization should align with the overall objectives of the company, and encourage managerial effort. This will maximize benefits while minimizing costs. Looking at the short term only or basing bonuses solely on quarterly performance may not take into account the long-term success of the organization. The management control system should complement, but not be the same as the financial accounting system.

Question 13

Specific tangible achievements that can be observed on a short-term basis are called

Accepted Answer

Specific tangible achievements that can be observed on a short-term basis are called objectives. Principles and guidelines are broad statements or recommendations, while assumptions are unproven beliefs or ideas.

Question 14

Goal congruence exists when

Accepted Answer

Goal congruence exists when individuals and groups aim at the same organizational goals. This means that everyone is working towards the same objectives, which helps to ensure that decisions are made in the best interest of the company. If employees are making decisions in their own best interest without regard to company goals, then goal congruence does not exist. Managers who are only focused on the short run may not be considering the long-term interests of the company, which can also undermine goal congruence. Being a stockholder does not necessarily mean that an employee is working towards the same goals as the company, so D is not the correct answer.

Question 15

All of the following are nonfinancial objectives of responsibility centres EXCEPT

Accepted Answer

The other options, quality, productivity, and customer satisfaction, are all nonfinancial objectives that responsibility centres may have. Operations budgets, on the other hand, are a financial objective as they involve setting and meeting financial targets for expenses and revenues.

Question 16

Good performance measures will do all of the following EXCEPT

Accepted Answer

Good performance measures should not be subjective as they should be based on objective data and facts. Therefore, option A is incorrect. The remaining options are all characteristics of good performance measures. They should relate to the goals of the organization, balance long-term and short-term concerns and reflect the management of key activities.

Question 17

A set of activities assigned to a manager or a group of managers or other employees is called a(n)

Accepted Answer

A responsibility centre is a part of an organization assigned to a manager or group of employees, where they are responsible for certain activities and outcomes.

Question 18

The process of identifying what parts of the organization have primary responsibility for each objective, developing measures of achievement and objectives, and creating reports of these measures by organization subunit or responsibility centre is known as

Accepted Answer

Responsibility accounting involves identifying the parts of an organization that are responsible for achieving specific objectives and creating reports to track their progress. This process includes developing measures of achievement and objectives for each responsibility center, which can be used to evaluate performance and allocate resources. Financial accounting focuses on reporting an organization's financial performance and position to external stakeholders, while management accounting focuses on providing information to internal stakeholders to aid in decision-making. Total quality accounting is a specific approach to accounting that focuses on improving product and service quality through measuring and managing quality-related costs.

Question 19

A responsibility centre for which costs are accumulated is called a(n)

Accepted Answer

A cost centre is a responsibility centre for which costs are accumulated. The other options are defined differently: a profit centre is a responsibility centre for which both revenues and costs are accumulated, an investment centre is a responsibility centre for which both revenues and costs are accumulated and that also has control over investments in assets, and an accounting centre is not a commonly recognized type of responsibility centre.

Question 20

Who is responsible for developing, maintaining and evaluating internal control systems?

Accepted Answer

Both managers and accountants are responsible for developing, maintaining and evaluating internal control systems. Managers are responsible for setting the tone at the top and implementing appropriate policies and procedures, while accountants are responsible for ensuring that financial reporting is accurate and complies with relevant regulations. It is a joint effort between both groups to establish and maintain effective internal controls. Stockholders are not directly responsible for internal controls.

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