55) A manager at a local bookstore is about to allocate extra floor space to an espresso counter
when a new coffee shop opens next door. He stops implementation of his plan and instead looks
into opening a juice bar. This an example of which of the following?
A) successful budgeting
B) real-time adjustment
C) sequence and timing
D) management by objectives
56) The final element in the planning process involves ________.
A) monitoring outcomes
B) implementing plans
C) assessing the firm’s external environment
D) measuring objectives and assigning priorities
57) It is easier to gauge the outcome of a plan if it was expected to ________.
A) achieve greater employee commitment levels
B) improve the firm’s financial performance
C) reduce the firm’s susceptibility to environmental uncertainty
D) enhance the company’s public image
58) ________ is a term that refers to the tool used to quantify and allocate resources to specific
activities.
A) Budget
B) Contingency plan
C) Benchmarking
D) Accounting
59) A(n) ________ specifies the amount of money a company plans to spend on specific items
that have long-term use and require significant financial investments.
A) capital expense budget
B) mission statement
C) operating budget
D) white paper
60) Sespi is a manufacturer of aerated drinks such as colas and other beverages. The finance
department is planning to table a capital expenditure budget for the upcoming year. Which of the
following items might be accounted for under this budget?
A) stationery items for offices
B) a new bottling plant
C) employee payroll
D) dividend payments for shareholders
61) A(n) ________ typically includes all primary activities on which the unit or organization
plans to spend money and the amount allocated for each item during the year.
A) mission statement
B) expense budget
C) vision statement
D) profit and loss statement
62) The ________ requires a manager to start with the previous year’s budget and then present
arguments for why the upcoming year’s budget should be increased or decreased.
A) performance-based budgeting approach
B) zero-based budgeting approach
C) income-based budgeting approach
D) incremental budgeting approach
63) A(n) ________ budget outlines how much money an organization needs, and it is submitted
to a superior or a budget review committee.
A) approved
B) pro forma
C) proposed
D) linked
64) A catering company manager is proposing the purchase of a new van to enable the company
to handle more deliveries. She is working on ________.
A) a sales pitch
B) a capital expenditure budget
C) an operating budget
D) a contingency plan
65) A(n) ________ specifies the amount of money the manager is authorized to spend and what
items can be purchased or what expenses are allowed.
A) proposed budget
B) approved budget
C) operational budget
D) capital budget
66) What is “budget momentum”?
A) allocation of money to a unit in the future because that unit is expected to grow in the future
B) allocation of money to a unit in the future to mirror the current performance of that unit
C) allocation of money to a unit in the future because the unit had been allocated money in the
past
D) allocation of money to a unit in the future based on the forecasted performance of that unit
67) Which one of the following is a benefit of zero-based budgeting?
A) Items that cannot be justified on their current merits will not be allocated money.
B) It requires less time to create than an incremental budgeting approach.
C) Managers can rely on last year’s budget to identify patterns.
D) Expensive items can be justified based on their historical merits.
68) Which of the following statements is true of budgeting?
A) Research suggests that the incremental budgeting approach is most suitable for small to
medium-sized enterprises.
B) Managers typically use budgeting as a planning tool to measure objectives and monitor
outcomes.
C) As a planning tool, budgeting invariably helps managers make good decisions about the
integration of organizational levels.
D) Budgeting processes do not guarantee that managers will make good decisions about
organizational priorities.
69) What is the major problem with the goal, “We will become the best in the business”?
A) It is not specific enough.
B) It is too constricting.
C) It is not relevant.
D) It is not achievable.
70) Which of the following is NOT one of the five characteristics of effective goals?
A) specificity
B) abstractness
C) commitment
D) measurability
71) A manager tells his sales staff that he wants sales to increase by 18 percent during this year.
Even though they are skeptical about whether this goal can be reached, most of them agree to it.
However, they were unable to meet the target at the end of the year. Which of the following
would best explain the failure to meet this goal?
A) If employees are only superficially committed to the goal, it will probably not be achieved.
B) If employees do not believe it is possible to achieve a goal, it is probably because the goal is
too vague.
C) If employees are skeptical that a goal can be reached, it is because they do not know how their
performance will be measured.
D) If a goal is too specific, employees will be demotivated by the impersonal nature of the goal.
72) Which of the following is NOT necessarily true about the goal, “We will achieve a 12
percent return on assets in the next six months”?
A) It is specific.
B) It is time-bound.
C) It is measurable.
D) It is realistic.
73) Which of the following is a reason why goals that are too easy to achieve are usually
ineffective?
A) Employees are too financially motivated to achieve the goals.
B) The goals do not deliver substantial results.
C) Employees are daunted by having to perform at a level much higher than their capabilities.
D) The goals are not specific enough.
74) Altering the time frame for a goal is most likely to affect ________.
A) the specificity of the goal
B) the scope of the goal
C) the realism of the goal
D) the measurability of the goal
75) A company’s vice president says, “I think we should do away with the practice of using
forecasts as a basis for our plans. The results are not fully accurate.” Which of the following
would be the best rebuttal to this statement?
A) The fact that forecasting has not yielded exact results in the past does not mean that it will not
do so in the future.
B) Companies in some other industries have effectively used forecasting for analyzing the
potential of the external business environment.
C) Forecasts are meant to provide a general idea of the direction of future business and cannot be
expected to be fully accurate.
D) Supply and demand conditions in the marketplace this year are expected to deviate
significantly from historical averages.
76) Based on the available forecasts, a business’ sales are expected to drop 20 percent in the
current year as compared to the previous year. Which of the following will be a cascading effect
of this forecast?
A) The company will have to raise prices to maintain profit margins.
B) Hiring will be lower during the year.
C) Competition is likely to reduce during the year.
D) The company will stock more inventory compared to the previous year.
77) The sales forecasts for the summer season for LocoPoco, a beverage company, indicated
increased demand for its colas. However, the actual sales were 30 percent lower than expected.
Which of the following could explain the apparent discrepancy above?
A) Research reports revealed that there are harmful additives in colas.
B) Competitors launched a new brand of bottled water in the market.
C) Forecasts were based on information derived from external sources.
D) The firm’s advertising budget was slashed by 2 percent.
78) The executive of a certain company states that the firm should adopt the benchmark practices
only of other firms in the same industry, as business conditions in other industries are
significantly different. Which of the following is the underlying assumption in his argument?
A) The argument assumes that business practices are nontransferable across industries.
B) The argument assumes that firms cannot find unique and significantly better ways of doing
things by looking outside their competitor set.
C) The argument suggests that noncompetitors face different business conditions that make
appropriate comparisons difficult.
D) The argument is based on the assumption that benchmarking is an ineffective tool for
investigating best practices of other firms.
79) Write a short note on strategic plans.
80) Describe operational plans and their importance for an organization.
81) What are the key planning issues that managers at the corporate level focus on?
82) What is the focus of executives at the business level?
83) Describe the process of benchmarking.
Corporate managers at Metal Craft Ltd. announced that they intended to enlarge their product
lines by the beginning of 2013. “We see a lot of opportunity in the market,” CEO Ernie Colfax
explained, “but it will take everyone’s effort.” Metal Craft’s goal is to maintain its current market
share while increasing profitability by five percent over the next two years.
Cal Able, VP of Sales, immediately met with his five district sales managers to formulate a plan.
“It’ll be tough at first,” Cal stated in the meeting. “The competitive environment is nasty. Mr.
Colfax wants to enhance product lines to offset that. But, in the meantime, we have to maintain
market share while increasing profitability.” After two days of discussions, Mr. Able met with
Mr. Colfax to present the new plan for the sales force. As per the plan, each salesperson would
be required to increase his/her sales calls to fifteen prospects and eighteen customers each
month, while keeping costs at a minimum.
84) What strategic plans are evident in this scenario?
85) What tactical plans are evident in this scenario?
86) What operational plans are evident in the scenario?
87) Explain the organizational objectives in this scenario.
88) How might a Gantt chart be useful to Metal Craft?
89) What critical factors will Mr. Colfax need to monitor during the implementation of his plan?
90) Why might real-time adjustments in Metal Craft’s plans be necessary?
91) Are Metal Craft’s goals effective?
92) Did Mr. Able encourage the sales staff to develop a feeling of ownership toward the goals?