Chapter 9 Control Processes and Systems Verified Test Bank

Ch09: Control Processes and Systems

True/False

1. Controlling is the process of setting directions and allocating resources in an organization.

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Planning ensures that performance is consistent with plans, and that accomplishments throughout an organization are coordinated in a means–ends fashion.

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. An after-action review is a systematic assessment of lessons learned and results accomplished in an ongoing project.

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. The U.S. Army pioneered the after-action review.

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. The after-action review is an unstructured review of lessons learned and results in a completed project, task force assignment, or special operation.

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Feedforward control focuses on what happens during the work process.

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. The goal of concurrent controls is to solve problems as they occur.

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. Preliminary control is also known as steering control.

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Steering controls are largely reactive.

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. The feedback provided by the control process about mistakes already made may not be able to correct them, but it can help improve things in the future.

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. An internal control strategy requires a high degree of trust.

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Normative control flows through an organization’s hierarchy of authority.

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. The bureaucratic control system influences behavior through norms and expectations set by the organizational culture.

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. The clan control influences employees and members to display common behavior patterns.

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Business firms show the influence of market control in the way that they adjust products, pricing, promotions, and other practices in response to customer feedback and what competitors are doing.

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. The Pareto Principle states that 20% of consequences come from 80% of causes.

Learning Objective: 9.2

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. The Pareto Principle states that 80% of the real impact comes from 20% of the work accomplished.

Learning Objective: 9.2

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. Output standards measure work efforts that go into performing a task.

Learning Objective: 9.2

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Earnings per share, sales growth, and market share are the input standards used by businesses.

Learning Objective: 9.2

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Quality of production and error rates are output standards used by businesses.

Learning Objective: 9.2

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. The second step in the control process is to set the performance objectives and standards.

Learning Objective: 9.2

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Historical comparisons benchmark performance against that being achieved by other people, work units, or organizations.

Learning Objective: 9.2

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Management by exception is the practice of giving attention to situations that show the greatest need for action.

Learning Objective: 9.2

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Project management is the responsibility for overall planning, supervision, and control of projects.

Learning Objective: 9.3

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. CPM/PERT graphically displays the scheduling of tasks required to complete a project.

Learning Objective: 9.3

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. The critical path is the pathway from project start to conclusion that involves activities with the longest completion times.

Learning Objective: 9.3

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. Just-in-time scheduling automatically orders a fixed number of items every time an inventory level falls to a predetermined point.

Learning Objective: 9.3

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. A balance sheet shows profits or losses of a business at a point in time.

Learning Objective: 9.3

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Leverage measures the ability of a firm to meet short-term obligations.

Learning Objective: 9.3

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Inventory turnover is calculated as Sales/Total Assets.

Learning Objective: 9.3

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Developing a balanced scorecard for any organization begins with a clarification of the organization’s mission and vision.

Learning Objective: 9.3

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

Multiple Choice

1. _____ is a function of the controlling process.
2. Creating structures
3. Setting directions
4. Measuring performances
5. Allocating resources
6. Inspiring efforts

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Which of the following best describes controlling?
2. The process of deciding where an individual should go and how to best go about it
3. The process of inspiring people to best utilize the resources
4. The process of bringing people and material resources together in working combinations
5. The process of setting directions and allocating resources
6. The process of measuring performance and taking action to ensure desired results

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. The management function, which sees to it that the right things happen, in the right way, and at the right time, is known as _____.
2. controlling
3. organizing
4. planning
5. leading
6. staffing

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Which of the following is true of controlling?
2. It is all about setting goals and making plans.
3. It is primarily involved in creating structures.
4. It sees to it that the right things happen, in the right way, and at the right time.
5. It sets the directions and allocates resources.
6. It brings people and material resources together in working combinations.

Learning Objective: 9.1

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. _____ control is also known as preliminary control.
2. Concurrent
3. Steering
4. Feedback
5. Feedforward
6. Throughput

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Which of the following is true of feedforward control?
2. It focuses on what happens during the work process.
3. It is preventive in nature.
4. It is largely reactive.
5. It solves problems as they occur.
6. It focuses on the quality of end results rather than on inputs.

Learning Objective: 9.1

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. Feedforward control differs from feedback control, in that feedforward control:
2. corrects mistakes already made.
3. focuses on the quality of end results rather than inputs.
4. solves problems as they occur.
5. focuses on what happens during the work process.
6. takes place before a work activity begins.

Learning Objective: 9.1

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. _____ control is also known as steering control.
2. Feedback
3. Post-action
4. Concurrent
5. Feedforward
6. Preliminary

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Steering control takes place _____.
2. during the work process
3. reactively in an organization
4. before work begins
5. after the work is completed
6. to correct mistakes already made

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. The function of steering control is to _____.
2. focus on the quality of end results rather than throughputs
3. focus on activities before they begin
4. ensure a proactive and forward-thinking approach to problem solving
5. solve problems as they occur
6. correct mistakes already made

Learning Objective: 9.1

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. A manager spots and corrects problems in the manufacturing cycle. Which of the following types of control does the manager practice?
2. Output control
3. Concurrent control
4. Preliminary control
5. Feedback control
6. Post-action control

Learning Objective: 9.1

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. _____ controls are largely reactive.
2. Input
3. Concurrent
4. Steering
5. Post-action
6. Feedforward

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Feedback control takes place to:
2. ensure the results meet pre-determined expectations.
3. solve problems as they occur.
4. focus on activities before they begin.
5. ensure the implementation of a proactive approach to problem solving.
6. ensure direct supervision during the work process.

Learning Objective: 9.1

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. When a hair stylist at a salon asks a customer if she liked their services after a haircut, the hair stylist is engaging in _____ control.
2. feedforward
3. steering
4. feedback
5. concurrent
6. throughput

Learning Objective: 9.1

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. Through _____ control, managers can manage in ways that allow and expect people to control their own behavior.
2. normative
3. internal
4. regulatory
5. clan
6. bureaucratic

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. The potential for _____ is enhanced when capable people have a clear sense of organizational mission, know their goals, and have the resources necessary to do their jobs well.
2. bureaucratic control
3. normative control
4. regulatory control
5. clan control
6. internal control

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Which of the following increases the potential for self-control?
2. Enforcing authority, policies, procedures, job descriptions, budgets, and day-to-day supervision to make sure that people act in harmony with organizational interests
3. Ensuring participative organizational cultures in which everyone treats each other with respect and consideration
4. Preparing budgets for personnel, equipment, travel expenses, and the like to keep behavior targeted within set limits
5. Influencing behavior through norms and expectations set by the organizational culture
6. Harnessing the power of group cohesiveness and collective identity

Learning Objective: 9.1

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. Which of the following best describes bureaucratic control?
2. It refers to the controls that influence behavior through norms and expectations set by the organizational culture.
3. It refers to the influence of market competition on the behavior of organizations and their members.
4. It involves the use of authority, policies, procedures, job descriptions, budgets, and day-to-day supervision to make sure that people act in harmony with organizational interests.
5. It refers to the control that is implemented when capable people have a clear sense of the organizational mission, know their goals, and have the resources necessary to do their jobs well.
6. It refers to the existence of participative organizational cultures in which everyone treats each other with respect and consideration.

Learning Objective: 9.1

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. In which of the following systems of control do organizations use budgets for personnel, equipment, travel expenses, and so on to keep behavior targeted within set limits?
2. Bureaucratic control
3. Clan control
4. Normative control
5. Regulatory control
6. Self-control

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Which of the following is true of a bureaucratic control system?
2. It influences employees and members to display common behavior patterns.
3. It harnesses the power of group cohesiveness and collective identity.
4. It expects people to work on their own as they are given the freedom to do so.
5. It allows and encourages people to exercise self-discipline in performing their jobs.
6. It provides laws and regulations that govern the behavior of an organization’s top executives.

Learning Objective: 9.1

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. Bureaucratic control differs from clan control in that bureaucratic control:
2. influences behavior through norms and expectations set by the organizational culture.
3. emphasizes hierarchy and authority.
4. harnesses the power of group cohesiveness and collective identity.
5. gives people freedom to work on their own.
6. encourages participation, empowerment, and involvement.

Learning Objective: 9.1

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. _____ is also known as normative control.
2. Self-control
3. Bureaucratic control
4. Regulatory control
5. Clan control
6. Administrative control

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Which of the following is true of clan control?
2. It influences behavior through norms and expectations set by the organizational culture.
3. It uses budgets for personnel, equipment, travel expenses, and the like to keep behavior targeted within set limits.
4. It flows through the organization’s hierarchy of authority.
5. It refers to the influence of customers and competition on the behavior of organizations and their members.
6. It gives people freedom to work on their own.

Learning Objective: 9.1

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. Clan control influences:
2. behavior of organizations and the members through market competition.
3. managers to give workers freedom to work on their own.
4. hierarchy of authority.
5. budgets for personnel, equipment, and travel expenses.
6. employees and members to display common behavior patterns.

Learning Objective: 9.1

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. _____ is essentially the influence of customers and competition on the behavior of organizations and their members.
2. Normative control
3. Market control
4. Clan control
5. Bureaucratic control
6. Administrative control

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Which of the following is true of market control?
2. It is the way business firms use budgets for personnel, equipment, travel expenses, and the like to keep behavior targeted within set limits.
3. It is the way business firms emphasize hierarchy and authority.
4. It is the way business firms influence employees and members to display common behavior patterns.
5. It is the way business firms adjust products, pricing, promotions, and other practices in response to customer feedback and what competitors are doing.
6. It is the way business firms harness the power of group cohesiveness and collective identity.

Learning Objective: 9.1

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. The first step to the control process is to _____.
2. measure actual performance
3. compare results with objectives
4. establish performance objectives and standards
5. take corrective actions
6. compare results with standards

Learning Objective: 9.2

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Which of the following statements is true about the first step of the control process?
2. It involves the identification of key results that one wants to accomplish, by the performance objectives.
3. It first involves the identification of the standards of measuring performance and then the identification of key results.
4. It identifies the point where output standards and input standards are used to carefully document results.
5. It involves relative comparisons that benchmark performance against that being achieved by other people, work units, or organizations.
6. It focuses attention on substantial differences between actual and desired performance.

Learning Objective: 9.2

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. The Pareto Principle states that ___ of consequences come from ___ of causes.
2. 20; 80
3. 30; 70
4. 50; 50
5. 70; 30
6. 80; 20

Learning Objective: 9.2

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Output standards differ from input standards in that output standards measure _____.
2. work efforts
3. actual outcomes
4. efficiency in the use of resources
5. conformance with rules
6. work attendance

Learning Objective: 9.2

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Input standards differ from output standards in that input standards measure _____.
2. actual outcomes
3. earnings per share
4. work results
5. work efforts
6. error rates

Learning Objective: 9.2

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. After establishing standards of performance, which of the following is the next step in the control process?
2. Identifying the key results
3. Comparing results with standards
4. Comparing results with objectives
5. Implementing management by exception
6. Measuring the actual performance

Learning Objective: 9.2

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. In the context of the control process, which of the following statements is true about measuring actual performance?
2. It is the point where performance objectives identify key results that one wants to accomplish.
3. It involves a situation where outputs are difficult or expensive to measure.
4. It is the point where output standards and input standards are used to carefully document results.
5. It is the point where past experience becomes the baseline for evaluating current performance.
6. It is the practice of giving attention to situations that show the greatest need for action.

Learning Objective: 9.2

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. Which of the following is the control equation?
2. Need for Action = Desired Performance – Actual Performance
3. Breakeven Point = Fixed Costs – (Price – Variable Costs)
4. Acid Test = Current Assets – Inventories/Current Liabilities
5. Debt Ratio = Total Debts/Total Assets
6. Net Income = Sales – Expenses

Learning Objective: 9.2

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. A shoe manufacturing company produced 300,000 pairs of shoes at the end of a certain month. If the need for action was 150,000 pairs of shoes, calculate the desired performance using the control equation.
2. 650,000
3. 150,000
4. 250,000
5. 450,000
6. 750,000

Learning Objective: 9.2

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. Calculate the need for action from the following information:

Desired performance = 800 work units

Actual performance = 580 work units

1. 1380
2. 220
3. 800
4. 1600
5. 510

Learning Objective: 9.2

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. What is management by exception?
2. It is the point where performance objectives identify key results that one wants to accomplish.
3. It is the situation where outputs are difficult or expensive to measure.
4. It is the point where output standards and input standards are used to carefully document results.
5. It is the point where past experience becomes the baseline for evaluating current performance.
6. It is the practice of giving attention to situations that show the greatest need for action.

Learning Objective: 9.2

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. _____ are one-time activities with many component tasks that must be completed in proper order and according to budget.
2. Balanced scorecards
3. After-action reviews
4. Market controls
5. Output standards
6. Projects

Learning Objective: 9.2

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. A Gantt chart differs from a PERT chart in that a Gantt chart:
2. uses charts to break a project into a series of small sub-activities that each has clear beginning and end points.
3. represents the quickest time in which the entire project can be finished.
4. helps with event or activity sequencing to make sure that things get accomplished in time for later work to build upon them.
5. shows all the interrelationships that must be coordinated for the entire project to be successfully completed.
6. combines critical path method and the program evaluation and review technique.

Learning Objective: 9.3

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. _____ is a combination of the critical path method and the program evaluation and review technique.
2. Gantt chart
3. CPM/PERT
4. Pie chart
5. Bar diagram
6. Run chart

Learning Objective: 9.3

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Which of the following is true of critical path?
2. It is essential to perform what-if calculations under different projected cost and revenue conditions.
3. It acts as the foundation for analysis using financial controls by using the firm’s balance sheet and income statement.
4. It automatically orders a fixed number of items every time an inventory level falls to a predetermined point.
5. It represents the quickest time in which the entire project can be finished, assuming everything goes according to schedule and plans.
6. It gives top managers, a fast, but comprehensive view of the business.

Learning Objective: 9.3

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. The _____ form of inventory control automatically orders a fixed number of items every time an inventory level falls to a predetermined point.
2. just-in-time scheduling
3. breakeven
4. balanced scorecard
5. asset management
6. economic order quantity

Learning Objective: 9.3

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Managers rely on _____ to perform what-if calculations under different projected cost and revenue conditions.
2. CPM/PERT
3. Gantt charts
4. critical path method
5. breakeven analysis
6. just-in-time scheduling

Learning Objective: 9.3

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Which of the following is the formula for calculating breakeven point?
2. Fixed Costs/(Price – Variable Costs)
3. Fixed Costs – Variable Cost/Price
4. (Fixed Costs/Variable Costs) – Price
5. (Fixed Costs/Price) – Variable Costs
6. Fixed Cost – (Price + Variable Costs)

Learning Objective: 9.3

Difficulty: Hard

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Traxer shoes launches baby shoes at a price of $10 per unit. The fixed costs are $15,000 and variable costs are $5 per unit. What sales volume is required to break even?
2. 7500 units
3. 3000 units
4. 4000 units
5. 6500 units
6. 3500 units

Learning Objective: 9.3

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. Rex’s doughnuts can produce only 100 doughnuts a day. The variable cost incurred per unit is $2 and fixed costs incurred per day is $500. At what price should a doughnut be sold to break even?
2. $10
3. $5
4. $7
5. $4
6. $8

Learning Objective: 9.3

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. A bag manufacturing company proposed a selling price of $80 per bag for their new range of bags. Fixed costs are $10,000 and variable costs are $40 per bag. At this point their break even point was 250 units. What will be the breakeven point if the variable costs can be brought down to $30?
2. 150 units
3. 350 units
4. 300 units
5. 200 units
6. 100 units

Learning Objective: 9.3

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. According to financial controls, liquidity measures _____.
2. the ability to meet short-term obligations
3. the use of debt
4. asset and inventory efficiency
5. the ability to earn revenues greater than costs
6. the ability to operate at minimum cost

Learning Objective: 9.3

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. In the context of financial controls, which of the following best describes leverage?
2. It is the ability to operate at minimum cost.
3. It is the ability to earn revenues greater than costs.
4. It is the ability to earn more in returns than the cost of debt.
5. It is the ability to meet short-term obligations.
6. It is the ability to generate cash to pay bills.

Learning Objective: 9.3

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. In the context of financial controls, asset management refers to the ability to _____.
2. use resources efficiently and operate at minimum cost
3. earn more in returns than the cost of debt
4. earn revenues greater than costs
5. meet short-term obligations
6. generate cash to pay bills

Learning Objective: 9.3

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. Liquidity differs from leverage in that liquidity is the:
2. ability to operate at minimum cost.
3. ability to use resources efficiently.
4. ability to generate cash to pay bills.
5. ability to earn more in returns than the cost of debt.
6. ability to earn revenues greater than costs.

Learning Objective: 9.3

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. Leverage differs from profitability in that leverage measures:
2. the ability to operate at minimum cost.
3. the ability to meet short-term obligations.
4. the ability to earn revenues greater than costs.
5. the use of debt.
6. asset and inventory efficiency.

Learning Objective: 9.3

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. Acid Test = _____
2. Net Income/Total Assets
3. Net Income/Owner’s Equity
4. Sales – Expenses
5. Total Debts/Total Assets
6. Current Assets – Inventories/Current Liabilities

Learning Objective: 9.3

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Which of the following ratios is also known as acid test?
2. Current Ratio
3. Debt Ratio
4. Asset Turnover Ratio
5. Inventory Turnover Ratio
6. Quick Ratio

Learning Objective: 9.3

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Calculate the quick ratio from the following information of a manufacturing firm.

Cash in hand = $200,000

Cash at bank = $100,000

Inventories = $100,000.

Current Liabilities = $100,000

1. 2:1
2. 1:2
3. 3:1
4. 4:1
5. 2:2

Learning Objective: 9.3

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. _____ = Current Assets/Current Liabilities
2. Acid Test
3. Current Ratio
4. Debt Ratio
5. Assets Turnover ratio
6. Net Current Margin

Learning Objective: 9.3

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Calculate the current ratio from the following information:

Sales = $14,000

Bills receivable = $100,000

Cash in hand = $40,000

Current liabilities = $50,000

Inventories = $40,000

Net Income = $5,600

1. 8:5
2. 3.6:1
3. 0.4:1
4. 3:5
5. 2:3

Learning Objective: 9.3

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. Which of the following is the formula to measure debt ratio?
2. Average Inventory/Total Debts
3. Sales/Average Inventory
4. Net Income/Owner’s Equity
5. Total Debts/Total Assets
6. Current Assets/Current Liabilities

Learning Objective: 9.3

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Calculate the debt ratio from the following information.

Land and building = $500,000

Machinery = $300,000

Cash in hand = $400,000

Total debts = $300,000

1. 3:4
2. 1:4
3. 2:3
4. 2:2
5. 1:3

Learning Objective: 9.3

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. Karzon Ltd., a car manufacturing company, calculated its debt ratio to be 2:5. Calculate the total debt for Karzon Ltd., from the following information:

Cash in hand = $120,000

Cash at bank = $180,000

Bills receivable = $200,000

Bills payable = $180,000

Land and building = $250,000

Inventories = $50,000

Machinery = $100,000

1. $360,000
2. $240,000
3. $280,000
4. $300,000
5. $270,000

Learning Objective: 9.3

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. Which of the following is the formula for measuring asset turnover?
2. Current Assets/Current Liabilities
3. Current Assets – Inventories/Current Liabilities
4. Sales/Total Assets
5. Net Income/Total Assets
6. Total Debts/Total Assets

Learning Objective: 9.3

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Calculate assets turnover for a car manufacturing company from the following information:

Sales = $600,000

Land and building = $110,000

Cash at bank = $50,000

Inventories = $40,000

1. 2 times
2. 3 times
3. 5 times
4. 4 times
5. 6 times

Learning Objective: 9.3

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. Inventory turnover = _____
2. Current Assets – Inventories/Current Liabilities
3. Net Income/Total Assets
4. Total Debts/Total Inventories
5. Net Income/Owner’s Equity
6. Sales/Average Inventory

Learning Objective: 9.3

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Calculate average inventory if sales is $400,000 and the inventory turnover is 1.6.
2. $280,000
3. $250,000
4. $150,000
5. $180,000
6. $140,000

Learning Objective: 9.3

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. With reference to profitability, Net margin = _____.
2. Net Income/Owner’s Equity
3. Net Income/Sales
4. Net Income/Total Assets
5. Net Income/Inventories
6. Net Income/Debts

Learning Objective: 9.3

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Calculate net margin from the following information.

Sales $250,000

Net Income $100,000

1. 50%
2. 60%
3. 40%
4. 30%
5. 80%

Learning Objective: 9.3

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. Calculate the net income if the net margin is 75% and sales is $160,000.
2. $120,000
3. $240,000
4. $360,000
5. $570,000
6. $600,000

Learning Objective: 9.3

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. Calculate sales if the net income is $200,000 and the net margin is 50%.
2. $480,000
3. $400,000
4. $300,000
5. $570,000
6. $600,000

Learning Objective: 9.3

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. Return on assets = _____
2. Current Assets/Current Liabilities
3. Sales/Total Assets
4. Total Debts/Total Assets
5. Net Income/Total Assets
6. Current Assets – Inventories/Current Liabilities

Learning Objective: 9.3

Difficulty: Moderate

AACSB: Application of knowledge

Bloom’s Taxonomy: Knowledge

1. Calculate return on assets from the following information:

Net income $1,800,000

Current Assets $350,000

Land and building $250,000

1. 1:1
2. 3:2
3. 4:1
4. 2:2
5. 3:1

Learning Objective: 9.3

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. Calculate net income from the following information:

ROA = 35%

Sales = $250,000

Current assets = $30,000

Fixed assets = $70,000

1. $87,500
2. $35,000
3. $10,500
4. $24,500
5. $15,000

Learning Objective: 9.3

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. _____ = Net Income/Owner’s Equity
2. Return on Equity
3. Return on Assets
4. Net Margin
5. Inventory Turnover
6. Acid Test

Learning Objective: 9.3

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Calculate owner’s equity from the following information:

Expenses $700,000

Return on equity 40%

Total Assets $2,050,000

Sales $1,500,000

1. $2,000,000
2. $800,000
3. $375,000
4. $1,250,000
5. $820,000

Learning Objective: 9.3

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. Calculate the expenses incurred if the net income is $500,000 and sales is $1,500,000.
2. $800,000
3. $650,000
4. $500,000
5. $250,000
6. $1,000,000

Learning Objective: 9.3

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. Calculate return on equity from the following information:

Sales = $400,000

Expenses = $100,000

Debts incurred = $120,000

Owner’s equity = $180,000

1. 2:3
2. 3:2
3. 5:3
4. 4:5
5. 5:1

Learning Objective: 9.3

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. What is a balanced scorecard?
2. It shows profits or losses at a point in time, which is displayed in a Sales – Expenses = Net Income format.
3. It shows assets and liabilities at a point in time.
4. It tallies organizational performance in financial, customer service, internal process, and innovation and learning areas.
5. It occurs when revenues are equal to costs.
6. It reduces costs and improves workflow by scheduling materials to arrive at a workstation or facility just in time for use.

Learning Objective: 9.3

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. Cycle times, engineering efficiency, and new product time are sample measures of _____.
2. learning
3. internal process improvement
4. innovation
5. financial performance review
6. customer satisfaction

Learning Objective: 9.3

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Drelex, a jute bag manufacturing company, checks the consistency and quality of all the raw materials before forwarding them to the production department. This is done to ensure that the bags produced are tough and strong. Which of the following types of control is being implemented by the company?
2. Feedback control
3. Output control
4. Throughput control
5. Concurrent control
6. Feedforward control

Learning Objective: 9.1

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. Bake-It, a Spanish bread and biscuits producer, gave out a free batch of cookies to a few customers. These customers were then asked for suggestions to improve the cookies in terms of quality, taste, and variety. Which of the following types of control was implemented by Bake-It?
2. Feedback control
3. Steering control
4. Feedforward control
5. Concurrent control
6. Preliminary control

Learning Objective: 9.1

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. Dillon, a senior operations manager, was assigned the task of implementing the control process for a particular production process. He first identified the performance objectives and in doing so, he identified the key results that were to be accomplished. Next, he set standards and measured the actual performance. He compared the results with the objectives and standards. Finally, as part of the corrective action step, he implemented _____, a practice that involved focusing attention on substantial differences between the actual and desired performances.
2. economic order quantity
3. just-in-time scheduling
4. management by exception
5. breakeven analysis
6. critical path method

Learning Objective: 9.2

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. Antonio has been working very hard since the establishment of his retail business. He is not far from the time when his revenues will match his expenses. Which of the following would best represent the time described?
2. Just-in-time scheduling
3. Base period
4. Monetary overhang
5. Breakeven point
6. Buydown

Learning Objective: 9.3

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. Shaun, a production manager at Taxener Inc., receives a complaint from the company’s employees that raw materials were being used in an unorganized manner leading to production delays. Which of the following techniques will help Shaun to organize the flow of raw materials for production?
2. Breakeven point analysis
3. Just-in-time scheduling
4. Business process reengineering
5. Pareto principle
6. External control

Learning Objective: 9.3

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. Bill, a finance manager at Iridium Inc., desires to understand why the company’s profitability fell in the past 6 months. He must use _____ to understand this issue.
2. CPM statement
3. balanced scorecard
4. PERT chart
5. breakeven analysis account
6. income statement

Learning Objective: 9.3

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. Rachel, the CEO of Telexon Inc., finds that her company’s current ratio is 1:3. In this context, which of the following statements is true?
2. The company is performing financially well.
3. The company’s revenues are equal to their costs.
4. The company’s leverage is relatively low.
5. The company has lesser liquid assets than liabilities.
6. The company has high owner’s equity.

Learning Objective: 9.3

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. The CFO of a company wanted to analyze the financial strength of his company. He specifically asked for information on the company’s assets and liabilities. Which of the following would provide the necessary information?
2. Income statement
3. Balance sheet
4. Balanced scorecard
5. Gantt chart
6. Breakeven analysis account

Learning Objective: 9.3

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. Freddie, the CEO of MagTel Inc., found that employees are wasting time on unproductive tasks. To solve this issue, he measured one of his employees’ performances and provided regular feedback. This helped the employee to improve his productivity. In doing so, Freddie found that “what gets measured happens.” Therefore, in the context of project management and control, he must use _____ as a managerial review tool to improve financial performance and customer satisfaction of his company.
2. debt equity ratio
3. balanced scorecards
4. breakeven analysis
5. just-in-time technique
6. critical path analysis

Learning Objective: 9.3

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

1. Dilma, a finance manager at FinTel Inc., needs to understand the current financial position of the company in terms of meeting its short-term financial obligations. Dilma must calculate the _____ to accomplish this task.
2. debt ratio
3. asset turnover
4. return on assets
5. inventory turnover
6. acid test ratio

Learning Objective: 9.3

Difficulty: Hard

AACSB: Application of knowledge

Bloom’s Taxonomy: Application

Essay

1. Explain briefly the two broad options managers have with respect to control system.

Self-control: Managers can take advantage of this human capacity for self-control by unlocking and setting up conditions that support it. This means trusting people to be good at self-management, allowing and encouraging them to exercise self-discipline in performing their jobs. Any workplace that emphasizes participation, empowerment, and involvement will rely heavily on self-control.

Bureaucratic control: This form of external control uses authority, policies, procedures, job descriptions, budgets, and day-to-day supervision to make sure that people act in harmony with organizational interests.

Clan control: This form influences behavior through norms and expectations set by the organizational culture. Sometimes called normative control, it harnesses the power of group cohesiveness and collective identity.

Market control: This form is essentially the influence of customers and competition on the behavior of organizations and their members. Business firms show the influence of market control in the way that they adjust products, pricing, promotions, and other practices in response to customer feedback and what competitors are doing.

Learning Objective: 9.1

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. Briefly explain the four step control process.

(1) Establish performance objectives and standards: The control process begins with planning, when performance objectives and standards for measuring them are set. Performance objectives identify key results that one wants to accomplish. Once these key results are identified, standards can be set to measure their accomplishment.

(2) Measure actual performance: The second step in the control process is to measure actual performance. It is the point where output standards and input standards are used to carefully document results.

(3) Compare actual performance with objectives and standards: Step 3 in the control process is to compare objectives with results. The control equation states:

Need for Action = Desired Performance – Actual Performance

(4) Take corrective action: The final step in the control process is to take the action needed to correct problems or make improvements. Management by exception is the practice of giving attention to situations that show the greatest need for action. It saves time, energy, and other resources by focusing attention on high-priority areas.

Learning Objective: 9.2

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

1. What is project management? Explain the two techniques of project management.

A Gantt chart graphically displays the scheduling of tasks that go into completing a project. Use of the visual overview of what needs to be done on a project allows for progress checks to be made at different time intervals. It helps with event or activity sequencing to make sure that things get accomplished in time for later work to build upon them.

CPM/PERT is a combination of the critical path method and the program evaluation and review technique. Project planning based on CPM/PERT uses a network chart. Such charts break a project into a series of small sub-activities that each has clear beginning and end points. These points become “nodes” in the charts, and the arrows between nodes show in what order things must be done. Use of CPM/PERT techniques helps project managers track activities to make sure they happen in the right sequence and on time.

Learning Objective: 9.3

Difficulty: Moderate

AACSB: Analytical thinking

Bloom’s Taxonomy: Comprehension

Text Entry

1. ____ is the process of measuring performance and taking action to ensure desired results.

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. An after-action review is a(n) ____ assessment of lessons learned and results accomplished in a completed project.

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. ____ control ensures that directions and resources are right before the work begins.

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. ____ control takes places after an action is completed.

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Self-control is ____ control that occurs through self-management and self-discipline in fulfilling work and personal responsibilities.

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. ____ control influences behavior through norms and expectations set by the organizational culture.

Learning Objective: 9.1

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. The ___ Principle states that 80% of consequences come from 20% of causes.

Learning Objective: 9.2

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. A(n) ___ standard measures work efforts that go into a performance task.

Learning Objective: 9.2

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. The ____ equation states: Need for Action = Desired Performance – Actual Performance.

Learning Objective: 9.2

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Management by ____ focuses attention on substantial differences between actual and desired performance.

Learning Objective: 9.2

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. ____ are one-time activities with many component tasks that must be completed in proper order and according to budget.

Learning Objective: 9.3

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. A(n) ____ chart graphically displays the scheduling of tasks required to complete a project.

Learning Objective: 9.3

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. CPM/PERT is a combination of the ____ path method and the program evaluation and review technique.

Learning Objective: 9.3

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. The ____ path is the longest pathway in a CPM/PERT network.

Learning Objective: 9.3

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. Inventory ____ ensures that inventory is only big enough to meet immediate needs.

Learning Objective: 9.3

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. The ____ order quantity method places new orders when inventory levels fall to predetermined points.

Learning Objective: 9.3

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. The breakeven point occurs where ____ just equal costs.

Learning Objective: 9.3

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. ____ analysis performs what-if calculations under different revenue and cost conditions.

Learning Objective: 9.3

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. A balance sheet shows ____ and liabilities at one point in time.

Learning Objective: 9.3

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge

1. A balanced ____ tallies organizational performance in financial, customer service, internal process, and innovation and learning areas.

Learning Objective: 9.3

Difficulty: Easy

AACSB: Analytical thinking

Bloom’s Taxonomy: Knowledge