1. The design and use of management control systems affects how an individual makes and
implements decisions.
2. In general, there is a direct relationship between the quality of the information provided to
managers and the quality of decisions made using that information.
3. Rational managers will always make decisions that are in the best interest of the
organization employing them.
4.
Decentralization
is the delegation of the authority to make decisions in the organization’s
name to subordinates.
5. In general, organizations are more centralized in the early stages of their existence and
more decentralized as they grow.
6. One advantage of
decentralization
is faster response time to changes in the organization’s
environment by local managers.
7. One advantage of centralization is better use of top management’s time on strategic
decisions.
8. Properly developed and implemented management control systems influence
subordinates to act in the organization’s best interest.
9. Delegated decision authority is the specification of what decisions a subordinate can
make in the organization.
10. It is important to not consider an organization’s compensation and reward system when
designing its performance evaluation system.
11. Managers in a cost center are held responsible for both the costs and volumes of inputs
used to produce a product or provide a service.
12. In general, profit centers are found at higher levels in an organization than
investment
centers.
13. Properly designed management control systems can totally eliminate the inherent conflict
between individual behavior and organizational goals.
14. There is no single accounting measure that can fully measure the performance of a profit
or investment center.
15. Fixed compensation is generally not linked to measured performance; i.e., it is
independent of measured performance.
16. Properly designed management control systems have both fixed compensation and
contingent compensation.
17. Cost allocations based on dual rates assume that a common cost can be separated into a
fixed and variable component.
18. The primary reason to use a dual rate allocation system is to focus a manager’s
performance evaluation on factors under the manager’s direct control.
19. It is possible for performance evaluation systems and/or management control systems to
contribute to unethical or fraudulent behavior.
20. Properly designed management control systems will eliminate fraudulent behavior by
maximizing goal congruence within the organization.
21. Which of the following statements is (are) true regarding managerial decisions?
(A) The design and use of management control systems affects how an individual makes and
implements decisions.
(B) Rational managers will always make decisions that are in the best interest of the organization
employing them.
22.
Decentralization
refers to the delegation of decision-making authority to:
23. Which of the following is
not
a characteristic of a decentralized organization?
24. Which of the following statements is
false
?
25. Which of the following elements is
not
part of a management control system?
26. An operating unit of an organization is called a cost center if it is responsible:
27. An operating unit of an organization is called an investment center if it is responsible:
28. An operating unit of an organization is called a revenue center if it is responsible:
29. An operating unit of an organization is called a profit center if it is responsible:
30. An operating unit that is responsible for revenues and costs is commonly referred to as
a(n):
31. An operating unit that is responsible for revenues only is commonly referred to as a(n):
32. An operating unit that is responsible for only costs is commonly referred to as a(n):
33. When managers are held responsible for costs but the input-output relationship is not well
specified, a(n) ___________ is established.
34. When managers are held responsible for costs and the input-output relationship is well
specified, a(n) ___________ is established.
12–18
35. Decentralized organizations can delegate authority and still maintain control and monitor
managers’ performance by designing appropriate management control systems. Which of the
following responsibility centers would be evaluated similar to an independent business?
36. Controllable revenue is included in a performance report of a:
37. Controllable revenue is included in a performance report of a:
38. Controllable revenue is included in a performance report of a:
39. Assets invested in a responsibility center are included in a performance report of a: