Chapter.23 Architecture & Mgmt Innovation Full Test Bank 7e

Student name:__________

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question.
1) In the Humana Hospital case study, the hospital, before reorganization, devoted only ________ of each health care dollar spent on direct patient care.

A) $0.5
B) $0.16
C) $0.35
D) $0.6

2) The text makes it clear that the management innovations of the 1980s and 1990s

A) were almost all instant successes.
B) waxed and waned in use and popularity.
C) were indispensable for improving returns on business investments.
D) were creations of the press and were never implemented in business.

3) A key factor in TQM is the

A) reduction of defects.
B) reliance on unskilled workers.
C) reduction in the prices of supplies.
D) reliance on simple production techniques.

4) Which of the following is a key factor that encouraged companies to focus on total quality management in the mid-1980s?

A) expansion of worldwide competition
B) a fall in the cost of labor
C) an increase in the supply of skilled labor force
D) enforcement of property rights

5) A key to understanding the difference between TQM and reengineering is TQM's emphasis on

A) one-time reengineering of production processes.
B) the reorganization of inventory control.
C) outsourcing.
D) continuous improvement.

6) Which of the following is a major by-product of the technological change that took place in the 1980s?

A) rapid product obsolescence
B) reorganization of inventory control methods
C) well-defined property rights
D) an increase in outsourcing

7) JIT stands for

A) juried information technology systems.
B) just improved transportation systems.
C) just-in-time production.
D) justice, integrity, and transcendence in management ethics.

8) Just-in-time production and inventory control can result in

A) a fall in inventories and an increase in efficiency.
B) excess inventories that mess up production schedules.
C) a lack of coordination between suppliers and retailers.
D) decreased risk bearing on the part of retailers.

9) Outsourcing is a management innovation that emphasizes

A) vertical integration of production and service.
B) assignment of management and production responsibilities to another firm.
C) reduction in the purchase of resources to the bare essentials.
D) hiring only managers educated in another state.

10) Which of the following is a possible problem faced by potential management innovators?

A) Property rights in management innovations are ill-defined.
B) Companies implementing managerial innovations need to pay higher corporate taxes.
C) Implementation of managerial innovations leads to the entry of new firms in the industry.
D) The supply of skilled workers decreases after the implementation of innovations.

11) An improvement in product quality leads to an increase in a firm’s value by

A) reducing inspection cost.
B) reducing the cost of raw materials.
C) reducing labor cost.
D) reducing the opportunity cost of production.

12) Value-maximizing managers will undertake quality improvements only if

A) the management overestimates the cost of enhancement.
B) the incentive and reward systems are well defined and functional.
C) the incremental benefits fall below the incremental costs of enhancement.
D) the incremental benefits exceed the incremental costs of enhancement.

13) The curve that shows the relation between quality and firm value is

A) a vertical line.
B) a flat line.
C) in the shape of an inverted U.
D) U-shaped.

14) TQM and other management innovations fail because

A) workers don't underestimate the costs of change.
B) management estimates the costs of change correctly but workers don't.
C) management overestimates the costs of change.
D) management underestimates the costs of change.

15) Which of the following management techniques that were popular during the 1990s can be applied to all three components of an organization’s architecture?

A) Benchmarking
B) TQM
C) Economic Value Added
D) Just-In-Time Production and Inventory Control

16) If a management innovation is going to be successful, it needs to address

A) the personal problems of its workers.
B) incentive and reward systems.
C) the concerns of its rivals.
D) the problem of unemployment.

17) When a management successfully implements innovations, it usually makes more than one change in the corporation's organizational structure. It is important to remember that the changes are

A) dysfunctional.
B) substitutes for one another.
C) complementary.
D) reversible

18) In pushing decision rights down to the people with the knowledge about processes or customer preferences, it is important that companies

A) use their reward systems to reinforce their performance or evaluation systems.
B) integrate production management with production control.
C) keep their reward systems independent of other factors.
D) keep issues of organizational architecture out of the picture.

19) Monetary and non-monetary incentives are

A) basically the same.
B) perfect substitutes.
C) mutually exclusive.
D) not mutually exclusive.

20) A cost of reengineering programs is that they change

A) performance-evaluation systems but not decision rights.
B) decision rights but not performance-evaluation systems.
C) the external market forces as well as the organizational architecture.
D) the measures used to evaluate high-level executives.

21) By creating smaller, flatter organizations, reengineering

A) reduces outsourcing opportunities.
B) reduces replacement opportunities.
C) increases advancement opportunities.
D) reduces advancement opportunities.

22) Economic Value Added is a technique that attempts to make the idea of residual income the basis for

A) decision-making authority.
B) risk-bearing capacity.
C) incentive compensation.
D) activity-based costing.

23) Economic Value Added

A) is used to reduce inventory expenditure.
B) is used to reward the small shareholders fairly.
C) can backfire if top-level managers do not add any value.
D) can backfire if it fails to take into account the limited decision rights of lower-level employees.

24) ABC

A) has been very successful in recent years and is adopted widely.
B) has been very successful in recent years but is not adopted widely.
C) has been very unsuccessful but is still adopted because of legal requirements.
D) has been very unsuccessful and has been replaced with traditional methods.

25) Under ABC, different categories of ________ are assigned to products based on underlying cost drivers of that department.

A) overhead costs
B) opportunity costs
C) average costs
D) sunk costs

26) ABC

A) has been very successful because the interests of those who undertake it and those who are being evaluated are aligned.
B) has been very successful because the use of this technique has no opportunity cost.
C) has been very unsuccessful because it lays too much emphasis on quality management.
D) has been very unsuccessful because those who undertake it are those who are being evaluated.

27) If costs rise more quickly than quality, then firm value will

A) be maximized before total quality is achieved.
B) be minimized before total quality is achieved.
C) be maximized after total quality is achieved.
D) always decline.

28) Changes in an organizational architecture must be

A) coordinated and done randomly, starting with the solvable problems.
B) coordinated and done sequentially, starting with the minor problems.
C) coordinated and done all at once.
D) coordinated and done sequentially, starting with the major problems.

29) Use the figure. The additional training costs of moving from Level I to Level II are

A) $260.
B) $440.
C) $180.
D) zero.

30) Use the figure. The total costs of achieving total quality are

A) $1,300.
B) $1,040.
C) $250.
D) $1,065.

31) Use the figure. If the rule is to keep increasing quality until the incremental costs are greater than the new sales, then this firm should stop at

A) Level I.
B) Level II.
C) Level III.
D) Total Quality.

32) Use the figure. If the company moves from Level II to Level III, then the additional costs are

A) $250.
B) $135.
C) $115.
D) $845.

33) Use the figure. If the company moves from Level II to Level III, the additional scrap/warranty costs are

A) $155.
B) −$135.
C) $135.
D) $290.

ESSAY. Write your answer in the space provided or on a separate sheet of paper.
34) The text expends considerable effort detailing the reengineering of a hospital. At the end of the case study, the text notes that the changes in process and structure inside the hospital were complementary. In the context of organizational architecture, what does this mean?

35) Provide some examples of management innovations that have lost their popularity.

36) Evidence suggests that many businesses may waste millions of dollars a year on quality-improvement strategies that don't improve their performance and may even hamper it. Based on this, evaluate the practice of management innovation in architecture critically.

37) What changes in the marketplace and in technology have spurred the movement toward TQM-like architecture changes in modern corporations?

38) "Market forces determine the success of any management innovation". Do you agree?

39) Why do innovations in management techniques fail so often?

40) Phillip Crosby asserts that quality is free. Is he right?

41) The case study on Software Development, Inc. (SDI) reviews the introduction of thirty-eight new or revised software packages for the costs of defects. Do an analysis of Table 23.2. If you look at the software introductions with more than fifty defects and those with fewer than twenty-five defects, what general conclusions can you come to concerning the product costs, training costs, prevention costs, and maintenance/service costs of SDI?