60) The ratio of return on investment (ROI) measures the profitability of a business unit by
comparing ________ to ________.
A) activity; sales
B) liquidity; liability
C) inventory cost; inventory turnover
D) net profit before taxes; total assets invested
61) Which of the following defines a liquidity ratio?
A) revenue in relation to investment
B) current assets in relation to current liabilities
C) total debt in relation to total assets
D) amount of sales in relation to cost to produce
62) ________ represents a firm’s ability to meet long-term financial obligations.
A) Leverage (total debt/total assets)
B) Liquidity (current assets/current liabilities)
C) Inventory turnover (annual sales/inventory)
D) Return on equity (net profit before taxes/total assets invested
63) ________ is a measure of how well a firm can meet its short-term cash requirements.
A) Leverage (total debt/total assets)
B) Liquidity (current assets/current liabilities)
C) Inventory turnover (annual sales/inventory)
D) Return on equity (net profit before taxes/total assets invested)
64) The ________ is where the selling price of a unit of a product minus its variable costs
exceeds the fixed costs for that unit.
A) current ratio
B) return on investment
C) inventory turnover ratio
D) break-even point
65) Which of the following statements is true of break-even point?
A) It cannot be used for control purposes in business organizations.
B) It can be reached by selling very few units if the fixed costs are high.
C) It is the point where the selling price minus variable cost exceeds the fixed costs of a unit.
D) It helps managers exercise control after the product has been created and is ready for
marketing.
66) The ________ analysis allows managers to gauge the amount of a product that must be sold
to cover a firm’s fixed and variable costs. This analysis is difficult because ________.
A) return on equity; it is difficult to determine the total cost of inventory
B) break-even point; it is difficult to project variable costs accurately
C) efficiency; it is difficult to project variable costs accurately
D) activity; it is difficult to determine the total cost of inventory
67) Which of the following is a drawback of the BEP analysis?
A) It can discourage future profitable activities if they initially don’t seem profitable.
B) It can provide wrong indices of profit and loss and confuse managers.
C) It can only be conducted after production has been completed and inventory costs have been
made.
D) It detracts from cost reduction and profit maximization.
68) Which of the following is true of rolling budgets?
A) They are used in conjunction with normal budgets.
B) They do not have to be revised frequently.
C) They take very little managerial time and effort.
D) They are more accurate because of their recency.
69) In an automobile sales unit, the manager had given 6 out of 7 car salesmen a bonus for good
performance. Despite this, the unit kept underperforming in comparison to its counterparts.
Which of the following is the most probable cause for this?
A) The goals set by the manager for his salesmen were not high enough.
B) The salesmen in this particular unit were very bright and persuasive.
C) The automobile company had launched a regional ad campaign with positive feedback.
D) The car sales figures had dipped nationwide in the past year.
70) The ________ of an organization is probably the most widespread tactical control system
that the typical employee encounters.
A) operating budget
B) supervisory structure
C) human resource system
D) quantitative forecasting system
71) The degree of stretch in a budget refers to the ________.
A) resilience of the budget
B) tightness of the budget
C) acceptability of the budget
D) standardization of the budget
72) At Meridian Inc., employees are given general goals and basic budgets rather than policy
manuals. Furthermore, it is expected that they will be strongly dedicated to the goals of the
organization. Which control approach does Meridian Inc. use?
A) bureaucratic
B) commitment
C) operational
D) self-reliant
73) Which of the following is a type of control approach used under clan control?
A) strict adherence to rules and regulations
B) formal and impersonal approach to control
C) stress on group consensus on goals
D) emphasis on detecting deviance
74) Which of the following is a type of control approach used under bureaucracy control?
A) emphasis on detecting deviance
B) stress on group consensus on goals
C) mutual assistance in meeting standards
D) control comes from individuals or groups
75) Which of the following is a drawback of the clan approach of organizational control?
A) Control is imposed on the members of the organization.
B) Emphasis on detecting deviance is troubling for employees.
C) Considerable time and managerial effort goes behind the control.
D) Individual responsibility becomes a source of stress.
76) South West Trading controls the raw materials used to make its products at the point of
origin. In addition, it uses the services of United Parcel Service (UPS) to combine orders from
various factories into one container for shipment. What type of control system is being used by
South West Trading?
A) precontrol of operations
B) strategic control of operations
C) financial control of operations
D) concurrent control of operations
77) ________ is a type of operational control that evaluates the conversion of inputs to outputs
while it is happening.
A) Precontrol
B) Postcontrol
C) Concurrent control
D) Strategic control
78) Which of the following controls the quality, quantity, and characteristics of the inputs into
the production process?
A) precontrol
B) postcontrol
C) reactive control
D) concurrent control
79) What is the benefit of having precontrol of operations?
A) It controls the quality of the transformation process.
B) It provides immediate feedback for the production process.
C) It reduces the need for control at the later stages.
D) It ensures that the product is ready for the consumers.
80) Some employers use software to track the key strokes of their employees involved in data
entry. The software reflects the overall productivity of the employees by recording their pace of
work. This software is an example of ________.
A) precontrol of operations
B) postcontrol of operations
C) concurrent control of operations
D) proactive control of operations
81) Traditionally, manufacturers used quality control personnel to check the rate of defective
products and decide what to do if those rates were too high. This system is a part of ________.
A) precontrol of operations
B) postcontrol of operations
C) intermittent control of operations
D) concurrent control of operations
82) ________ was the traditional form of control in manufacturing.
A) Postcontrol
B) Concurrent control
C) Precontrol
D) Production control
83) Control responsibility that is too broad can lead to ________.
A) bottlenecks
B) decision delays
C) work overload
D) omissions
84) Which of the following is an approach to determine the focus of control?
A) balanced scorecard
B) break-even point
C) leverage
D) return on equity
85) Proponents of the balanced scorecard approach to control assert that it ________.
A) focuses on financial ratios and budgetary controls in order to improve profits
B) simplifies the design and implementation of control measures
C) takes a retroactive approach to designing organizational controls
D) links measures of organizational success more closely to strategic objectives
86) Which of the following is a common error committed by less-experienced managers?
A) They tend to defer control to top management.
B) They tend to avoid formal methods and control by “gut” instinct.
C) They tend to apply more control than is necessary to show they are “in charge.”
D) They tend to forgo control in order to foster good relations with their employees.
87) In the context of the characteristics determining the quality of information indispensible for
effective control, identify the correct statement.
A) All data collected for control purposes are equally useful in managerial operations and
decisions.
B) Control actions can be based on inaccurate information when valid information is difficult to
collect.
C) For effective control, information must arrive on time to those who can take action and make
any required changes.
D) Effective control systems find accurate data useful even if they arrive very late.
88) A manager of a hotel chain looks at the advertised claims of his competitors over the last 10
years. He becomes concerned that his hotels may not offer the same level of customer service as
his competitors do. What should the manager remind himself of before taking action?
A) the usefulness of quality information
B) the accuracy of quality information
C) the objectivity of quality information
D) the timeliness of quality information
89) Which of the following situations would be least likely to justify high control costs?
A) nuclear power plants
B) military weapons units
C) customer service call centers
D) federal air traffic control agencies
90) In which of the following cases is subjectivity more important than objectivity?
A) the amount of profits made by a firm in a given year
B) the volume of clients served by a customer care cell
C) the quantity of finished products produced by a factory unit
D) the reasons for consumer preferences for a given product
91) The ________ of control often affects the willingness of organization members to work
cooperatively with the system.
A) source
B) objectivity
C) flexibility
D) timelines
92) What is control within the context of organizations?
93) What are the basic elements in the control process?
94) What should a manager do if differences between performance and standards are major but
positive? Explain with an example.
95) Identify a challenge of formulating strategic controls.
96) Distinguish between return on investment and break-even point.
97) Explain how human resources work as a tactical control system.
98) Differentiate between precontrol and postcontrol of operations.
99) What determines the focus of control in an organization?
100) Explain the determinants of the amount of control to be applied.
101) How is control related to flexibility in an organization?