28.
The managers of Foodex, a fast food restaurant, record outputs on a daily basis by
counting how many customers their employees serve, the time each transaction takes, and
how much money each customer spends every day. With reference to the control process,
the managers of Foodex are ________.
A.
establishing the standards of performance
B.
measuring the actual level of performance of employees
C.
comparing the actual performance against chosen standards
D.
evaluating the result of the set standards
Once managers have decided which standards or targets they will use to evaluate
performance, the next step in the control process is to measure actual performance. In
practice, managers can measure or evaluate two things: (1) the actual outputs that result
from the behavior of their members and (2) the behaviors themselves.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 08-02 Describe the four steps in the control process and the way it operates over time.
Topic: Control Process Steps
29.
The standard of performance that measures efficiency at the corporate level of the
organization is known as ________.
A.
cost of goods sold
B.
capital costs
C.
net sales
D.
operating costs
At the corporate level, a standard of performance that measures efficiency is operating
costs, the actual costs associated with producing goods and services, including all
employee-related costs.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 08-02 Describe the four steps in the control process and the way it operates over time.
Topic: Control Process Steps
30.
The step of the control process utilized by managers to evaluate whether the actual
performance of the organization differs significantly from the standards of performance
that assess the organization is ________.
A.
measuring actual performance
B.
comparing actual performance to the standards
C.
initiating corrective action
D.
measuring standards of performance
Step 3 of the control process compares actual performance against chosen standards of
performance. Managers evaluate whether, and to what extent, the performance of the
organization deviates from the set standards of performance.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-02 Describe the four steps in the control process and the way it operates over time.
Topic: Control Process Steps
31.
Brandon, the manager of Flipflop Footwear, checked the weekly records and discovered
that the number of shoes produced in one week by 20 employees was 250 against the set
target of 220 shoes. With reference to the control process, Brandon is ________.
A.
establishing the standards of performance
B.
measuring the actual level of performance of employees
C.
comparing the actual performance against chosen standards of performance
D.
evaluating the result of the set standards
After measuring the actual level of performance of employees, the next step of the control
process is to compare the actual performance against chosen standards of performance.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 08-02 Describe the four steps in the control process and the way it operates over time.
Topic: Control Process Steps
32.
The final step in the control process is to ________.
A.
evaluate results and initiate corrective action
B.
measure actual performance
C.
compare actual performance to the standards
D.
measure the standards of performance
The final step in the control process is to evaluate the results and bring about change as
appropriate.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Learning Objective: 08-02 Describe the four steps in the control process and the way it operates over time.
Topic: Control Process Steps
33.
Danny, the manager of Wader Shoes, installed new machinery to speed up the production
process after the assigned targets were not achieved for the third week of the month. With
regard to the control process, Danny is ________.
A.
establishing the standards of performance
B.
measuring the actual level of performance of employees
C.
evaluating the result of the set standards
D.
initiating corrective actions
If managers find out that the level of performance is unacceptable, they must try to
change how work activities are performed to solve the problem.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 08-02 Describe the four steps in the control process and the way it operates over time.
Topic: Control Process Steps
34.
A mechanism of control utilized in organizational culture is ________.
A.
direct supervision
B.
management by objectives
C.
socialization
D.
organizational goals
Mechanisms of control for organizational culture include values, norms, and socialization.
Refer: Figure 8.3
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 08-02 Describe the four steps in the control process and the way it operates over time.
Topic: Organizational Culture
35.
Management by objectives is a mechanism of control with ________ organizational control
systems.
A.
input
B.
clan
C.
output
D.
behavior
Management by objectives is a mechanism of control for behavior control.
Refer: Figure 8.3
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Difficulty: 1 Easy
Learning Objective: 08-02 Describe the four steps in the control process and the way it operates over time.
Topic: Management by Objectives (MBO)
36.
The manager of Triks Burgers keeps track of the number of customers served at different
periods of the day in an attempt to plan a schedule for workers that matches the demand
for the restaurant’s products. By using this tracking system, the manager of Triks Burgers
is utilizing ________ control.
A.
output
B.
bureaucratic
C.
input
D.
MBO
Triks Burgers is tracking an output (number of customers served) and will adjust its
production process to try to match demand. This is a form of output control. All managers
develop a system of output control for their organizations. First they choose the goals that
they think will best measure efficiency, quality, innovation, and responsiveness to
customers. Then they measure to see whether the performance goals and standards are
being achieved at the corporate, divisional, functional, and individual employee levels of
the organization.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 08-03 Identify the main output controls, and discuss their advantages and disadvantages as means of
coordinating and motivating employees.
Topic: Control Systems
37.
The manager of Inkman, a convenience store, keeps track of the average sale amount for
each customer as a way of deciding on the product mix to be carried in the store. This is
an example of ________ control.
A.
feedforward
B.
output
C.
input
D.
MBO
Inkman is tracking an output (sales per customer) and will alter its product mix
accordingly. This is a form of output control.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 08-03 Identify the main output controls, and discuss their advantages and disadvantages as means of
coordinating and motivating employees.
Topic: Control Systems
38.
The performance ratio that measures the efficiency of the organization in terms of how
well the resources of the organization have been used to generate profit is a(n) _______
ratio.
A.
activity
B.
leverage
C.
profit
D.
liquidity
Profit ratios measure how efficiently managers are using the organization’s resources to
generate profits.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 08-03 Identify the main output controls, and discuss their advantages and disadvantages as means of
coordinating and motivating employees.
Topic: Control Process Steps
39.
The most commonly used financial performance measure that allows managers of one
organization to compare performance with that of other organizations is ________.
A.
gross profit margin
B.
the debt-to-assets ratio
C.
the inventory turnover ratio
D.
return on investment
Return on investment (ROI) is the most commonly used financial performance measure
because it allows managers of one organization to compare performance with that of other
organizations. ROI lets managers assess an organization’s competitive advantage.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 08-03 Identify the main output controls, and discuss their advantages and disadvantages as means of
coordinating and motivating employees.
Topic: Control Process Steps
40.
An organization’s net income before taxes divided by the total assets of the organization is
known as ________.
A.
gross profit margin
B.
return on investment
C.
the debt-to-assets ratio
D.
days sales outstanding
Return on investment = net income before taxes/total assets.
Refer: Table 8.1
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 08-03 Identify the main output controls, and discuss their advantages and disadvantages as means of
coordinating and motivating employees.
Topic: Control Process Steps
41.
The financial ratio that measures the ability of the organization to pay its short-term debts
is the ________ ratio.
A.
leverage
B.
liquidity
C.
activity
D.
profit
Liquidity ratios measure how well managers have protected organizational resources to be
able to meet short-term obligations. The current ratio (current assets divided by current
liabilities) tells managers whether they have the resources available to meet the claims of
short-term creditors.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-03 Identify the main output controls, and discuss their advantages and disadvantages as means of
coordinating and motivating employees.
Topic: Current Ratio
42.
The ratio that is computed by dividing the difference between current assets and inventory
by current liabilities is the ________ ratio.
A.
inventory turnover
B.
quick
C.
current
D.
debt-to-assets
Quick ratio = (current assets – inventory)/current liabilities.
Refer: Table 8.1
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 08-03 Identify the main output controls, and discuss their advantages and disadvantages as means of
coordinating and motivating employees.
Topic: Control Process Steps
43.
The current assets of Global Acorn are valued at 25 million dollars and its current liabilities
are at 6 million dollars. If its inventory is worth 1 million dollars, what is its quick ratio?
A.
4
B.
0.25
C.
0.14
D.
3.6
Quick ratio = (current assets – inventory)/current liabilities; refer: Table 8.1.
Therefore, quick ratio = (25 – 1)/6 = 24/6 = 4.
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 08-03 Identify the main output controls, and discuss their advantages and disadvantages as means of
coordinating and motivating employees.
Topic: Control Process Steps
44.
The CEO of a company would like to know whether his managers can pay off claims of
short-term creditors without selling inventory. What ratio will help him understand the
company’s liquidity?
A.
Inventory turnover ratio
B.
Quick ratio
C.
Current ratio
D.
Debt-to-assets ratio
The quick ratio shows whether managers can pay these claims without selling inventory.
Refer: Table 8.1
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 08-03 Identify the main output controls, and discuss their advantages and disadvantages as means of
coordinating and motivating employees.
Topic: Control Process Steps
45.
The financial ratio that indicates whether or not the organization is capable of paying off
its short-term debts without having to sell its inventory is the ________ ratio.
A.
quick
B.
current
C.
days sales outstanding
D.
profit
The quick ratio tells whether managers have the resources available to meet the claims of
short-term creditors without selling inventory.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 08-03 Identify the main output controls, and discuss their advantages and disadvantages as means of
coordinating and motivating employees.
Topic: Control Process Steps
46.
From the information given below, calculate the organization’s return on investment.
Total Liabilities = $300,000; Total Assets = $600,000; Gross Margin = $200,000; Net
Income Before Taxes = $30,000; Total Expenses = $240,000
A.
50 percent
B.
5 percent
C.
10 percent
D.
12.5 percent
ROI = net profit before taxes/total assets = $30,000/$600,000 = .05 = 5 percent.
Refer: Table 8.1
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 08-03 Identify the main output controls, and discuss their advantages and disadvantages as means of
coordinating and motivating employees.
Topic: Control Systems
47.
Calculate the return on investment from the information given below.
Net Income = $18,000; Advertising Expenses = $220,000; Total Liabilities = $120,000;
Total Assets = $160,000; Gross Margin = $80,000; Taxes Paid = $2,000
A.
16.67 percent
B.
15 percent
C.
11.25 percent
D.
12.5 percent
ROI = net profit before taxes + taxes paid/total assets = ($18,000 + $2,000)/$160,000 =
.125 = 12.5 percent.
Refer: Table 8.1
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 08-03 Identify the main output controls, and discuss their advantages and disadvantages as means of
coordinating and motivating employees.
Topic: Control Systems
48.
Calculate the current ratio of the organization from the information given below.
Sales = $200,000; Gross Profit = $40,000; Total Assets = $450,000; Current Assets =
$250,000; Current Liabilities = $300,000
A.
0.44
B.
0.56
C.
0.67
D.
0.83
Current ratio = current assets/current liabilities = $250,000/$300,000 = .83.
Refer: Table 8.1
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 08-03 Identify the main output controls, and discuss their advantages and disadvantages as means of
coordinating and motivating employees.
Topic: Current Ratio
49.
From the information given below, calculate the organization’s current ratio.
Total Liabilities = $750,000; Current Liabilities = $220,000; Total Assets = $700,000;
Current Assets = $176,000
A.
0.25
B.
0.93
C.
0.29
D.
0.80
Current ratio = current assets/current liabilities = $176,000/$220,000 = .80.
Refer: Table 8.1
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 08-03 Identify the main output controls, and discuss their advantages and disadvantages as means of
coordinating and motivating employees.
Topic: Current Ratio
50.
The financial ratio that indicates the degree to which the organization uses debt or equity
to finance its ongoing operations is the ________ ratio.
A.
leverage
B.
liquidity
C.
activity
D.
profit
Leverage ratios, such as the debt-to-assets ratio and the times-covered ratio, measure the
degree to which managers use debt (borrow money) or equity (issue new shares) to
finance ongoing operations.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 08-03 Identify the main output controls, and discuss their advantages and disadvantages as means of
coordinating and motivating employees.
Topic: Control Process Steps
51.
The financial ratio that measures how well the managers of the organization are creating
value from the organization’s assets is the ________ ratio.
A.
leverage
B.
liquidity
C.
current
D.
activity
Activity ratios provide measures of how well managers are creating value from
organizational assets.
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 08-03 Identify the main output controls, and discuss their advantages and disadvantages as means of
coordinating and motivating employees.
Topic: Control Process Steps
52.
The financial ratio that indicates how efficiently the managers of the organization are
collecting the revenue due to the organization from the sale of its products or services is
the ________ ratio.
A.
debt-to-assets
B.
quick
C.
current
D.
days sales outstanding
Days sales outstanding provides information on how efficiently managers are collecting
revenue from customers to pay expenses.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 08-03 Identify the main output controls, and discuss their advantages and disadvantages as means of
coordinating and motivating employees.
Topic: Control Process Steps
53.
The managers of a division are given a fixed budget and are then evaluated on the basis of
their ability to produce goods or services. This is an example of a(n) ________ budget
approach.
A.
expense
B.
profit
C.
cash flow
D.
revenue
Managers of a division may be given a fixed budget for resources and be evaluated on the
amount of goods or services they can produce using those resources. This is a cost or
expense budget approach.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-03 Identify the main output controls, and discuss their advantages and disadvantages as means of
coordinating and motivating employees.
Topic: Control Systems