Chapter 19—Managing Quality and Performance
TRUE/FALSE
1. The systematic process of regulating organizational activities to make them consistent with the
expectations in plans, targets, and standards of performance refers to organizational control.
2. Effectively controlling an organization requires information about product standards and actual
products, as well as actions to correct any deviations from the standards.
3. Although work processes can be controlled and regulated, it is impossible to control and regulate
employee behavior.
4. Customer service, external business processes, financial performances, and the organization’s capacity
for learning and growth are the four major perspectives of the balanced scorecard.
5. The feedback control model is a comprehensive management control system that balances traditional
financial measures with measures of customer service, internal business processes, and the
organization’s capacity for learning and growth.
6. Benchmark control focuses on the quantity of an end product or service.
7. A standard for performance is included in an organization’s overall strategic plan to compare
organizational activities against.
8. The final step of the feedback control model is to do nothing if performance is adequate or to take
corrective action if performance is inadequate.
9. In most companies, managers rely exclusively on qualitative measures to measure actual performance.
10. The fourth step in the control process is comparing actual activities to performance standards.
11. Effective management control involves subjective judgment and employee discussions, as well as
objective analysis of performance data.
12. An expense budget lists forecasted and actual revenues of the organization.
13. The level of funds flowing through the organization and the nature of cash disbursements is shown
through the capital budget.
14. A cash budget estimates receipts and expenditures of money on a daily or weekly basis..
15. Within the balanced scorecard, customer service indicators measure things such as employee retention
and satisfaction.
16. An expense budget lists forecasted and actual revenues of the organization.
17. The capital budget lists planned investments in major assets such as buildings, heavy machinery, or
complex information technology systems.
18. Zero-based budgeting requires a complete justification for every line item in a budget.
19. A balance sheet budget is a budget that plans and reports investments in major assets to be depreciated
over several years.
20. Bottom-up budgeting is a process in which lower level managers anticipate their department’s resource
needs and pass them up to top management for approval.
21. The balance sheet shows the firm’s financial position with respect to expenses and credits at a specific
point in time.
22. Liabilities are the firm’s debts, both current and long-term.
23. The income statement shows revenues coming into the organization from all sources and subtracts all
expenses.
24. A responsibility center involves the coordination of multiple managers from various departments to
carry out an activity.
25. The system of governing an organization so that the interests of corporate owners are protected refers
to corporate governance.
26. Frequently calculated ratios typically pertain to activity, passivity, and profitability.
27. The liquidity ratio shows the company’s ability to meet its current debt obligations and a measurement
of the firm’s margin of safety.
28. An activity ratio that measures how many times the inventory is turned over to meet the total sales
figure is called the inventory turnover.
29. The return on total assets (ROA) is an activity ratio that is the percentage returned to investors on total
assets.
30. Under hierarchical control, employees are actively engaged and committed to their work.
31. The use of cultural values, traditions, shared beliefs and trust to increase compliance with goals refers
to decentralized control.
32. Companies today are increasingly shifting from a hierarchical control process to one that is more
decentralized.
33. A process in which lower level managers anticipate their department’s resource needs and pass them to
top management for approval is called top-down budgeting.
34. Open-book management ties employee rewards to the company’s overall success.
35. The goal of open-book management is to get every employee thinking and acting like a business
owner.
36. Closed-book management helps employees appreciate why efficiency is important to the organization’s
success as well as their own.
37. The Six Sigma approach is a comprehensive management control system that balances traditional
financial measures with operational measures relating to a company’s critical success factors.
38. A Six Sigma process will typically result in one defective package of product for every three
truckloads shipped.
39. TQM tends to be most successful when it enriches jobs and improves employee motivation.
40. An organization-wide commitment to infusing quality into every activity through continuous
improvement defines Six Sigma.
41. A group of six to twelve volunteer employees who meet regularly to discuss and solve problems
affecting their common work activities refers to a quality team.
42. The implementation of total quality management involves the use of many techniques such as quality
circles, benchmarking, Six Sigma principles, reduced cycle time, and continuous improvement.
43. Benchmarking is the age-old practice of allowing the artisan to sign his name to the finished product.
44. Outsourcing is the continuous process of measuring products, services, and practices against the
toughest competitors or the industry leaders.
45. Continuous improvement is the implementation of a large number of small, incremental improvements
in all areas of the organization on an ongoing basis.
46. Six Sigma is most beneficial when employees have challenging jobs.
47. Very high expectations from senior management and a desire to share authority by middle managers
are two of the positive factors leading to success of TQM.
48. The certification based on a set of international standards for quality management, setting uniform
guidelines for processes to ensure that products conform to customer requirements is the ISO
certification.
MULTIPLE CHOICE
1. Which of the following is the systematic process through which managers regulate organizational
activities?
a.
Strategic planning
b.
Organizational control
c.
Organizational goal setting
d.
Strategic regulation
e.
Organizational leading
2. Ophelia, the new CEO at Odyssey Inc., plans to implement a highly effective systematic process of
regulating organizational activities to make them consistent with the expectations that are established
by managers within the company. This is referred to as _____ control.
a.
organizational
b.
feedback
c.
budgetary
d.
systems
e.
quality
3. For control, this type of measure is an important part of achieving higher performance.
a.
Statistical measurement
b.
Theoritical measurement
c.
Emotional measurement
d.
Employee conflict control
e.
Market control
4. Zachary, a manager at ExecuComp, receives quarterly reports, which track his department’s production
statistics. However, these reports lack key information regarding reject rates. Which of the following
components of the control model need improvement?
a.
Measuring actual performance
b.
The planning and setting of performance standards
c.
SWOT analysis
d.
The ability to take corrective action when necessary
e.
All of these
5. All of the following are key steps of setting up feedback control systems EXCEPT:
a.
comparing performance to standards.
b.
establishing standards.
c.
getting employee opinions.
d.
measuring performance.
e.
making necessary corrections.
6. Which of the following is a comprehensive management control system that balances traditional
financial measures with operational measures relating to a company’s critical success factors?
a.
Economic value-added system
b.
Activity-based costing system
c.
Market value-added system
d.
Balanced scorecard
e.
Open-book management system
7. _____ indicators focus on production and operating statistics.
a.
Financial performance
b.
Business process
c.
Critical success
d.
Potential for learning and growth
e.
Performance measurement
8. All of the following are major perspectives of the Balanced Scorecard EXCEPT _____.
a.
competitors
b.
customers
c.
learning and growth
d.
financial
e.
internal business processes
9. Your department has absenteeism standards, a way to measure absenteeism, and, based on your
investigation, you have concluded that your department has an excessive absenteeism rate. What
should your next step be?
a.
Set new absenteeism standards.
b.
Develop new measures of absenteeism.
c.
Terminate three employees for excessive absenteeism.
d.
All of these would be good examples of taking corrective action.
e.
None of these
10. Kyle’s work group consistently exceeds the goals the members set for themselves some months ago. In
an attempt to better motivate the group, Kyle thought it would be a good idea to set new goals. This is
an example of Kyle exercising control by:
a.
comparing performance to standards.
b.
developing adequate measures of performance.
c.
taking corrective action.
d.
all of these.
e.
comparing performance to standards and developing adequate measures of performance
only.
11. In the process of implementing the balanced scorecard approach at his company, operations manager
Seth Howard wonders whether internal activities and processes add value for customers and
shareholders. This involves which dimension of the balanced scorecard?
a.
Customers
b.
Learning and growth
c.
Financials
d.
External business processes
e.
Internal business processes
12. Focusing on how well resources and human capital are being managed for the company’s future refers
to which component of the balanced scorecard?
a.
Customers
b.
Learning and growth
c.
Financials
d.
Internal business processes
e.
External business processes
13. Use of the balanced scorecard can hinder or decrease organizational performance if it is implemented
using which type of orientation?
a.
Performance management orientation
b.
Performance measurement orientation
c.
Customer orientation
d.
Learning and growth orientation
e.
Internal business process orientation
14. All well-designed control systems involve the use of _____ to determine whether performance meets
established standards.
a.
opinions
b.
advice
c.
consultants
d.
benchmarks
e.
feedback
15. What is the first step in the feedback control system?
a.
Establishing strategic objectives
b.
Establishing standards of performance
c.
Taking corrective action
d.
Comparing performance to standard
e.
Measuring previous performance
16. CyberChasers Corporation sends a post-purchase questionnaire to all consumers who buy their
products. They are interested in gathering data on product quality, customer service orientation, and
customer satisfaction. This is an example of a:
a.
concurrent control.
b.
feedback control.
c.
feedforward control.
d.
preliminary control.
e.
preventive control.
17. Kendra is a manager at George’s Goodies. On a regular basis Kendra and her subordinates set
individual and organizational goals. This process is similar to which component of the control model?
a.
Taking corrective action when necessary
b.
An information system
c.
Establishing performance standards
d.
Engaging strategic analysis
e.
None of these
18. According to the control model, after establishing standards of performance the manager should:
a.
compare performance to standards.
b.
get the standards approved by the supervisors and subordinates.
c.
measure actual performance.
d.
take corrective action.
e.
provide feedback.
19. Tiffany recently discovered that the reject rate for her department has exceeded the standard for
performance in this area. What should Tiffany do to exercise effective control?
a.
She should order more training for her workforce.
b.
She should contact the maintenance department and have them come fix her machinery.
c.
She should suspend the poorer workers in her department.
d.
She should investigate and discover the cause of the problem.
e.
None of these
20. _____ is any organizational department or unit under the supervision of a single person who is
responsible for its activity.
a.
Independent center
b.
Responsibility center
c.
Analysis center
d.
Control center
e.
Budgeting center
21. _____ control is the process of setting targets for an organizations expenditures.
a.
Quality
b.
Income
c.
Budgetary
d.
Systems
e.
Supply chain
22. Which of the following includes anticipated and actual expenses for a responsibility center?
a.
Revenue budget
b.
Cash budget
c.
Capital budget
d.
Expense budget
e.
Operating budget
23. Which of these is a financial budget that estimates cash flows on a daily basis or weekly basis to
ensure that the company can meet its obligations?
a.
Capital expenditure budget
b.
Balance sheet budget
c.
Cash budget
d.
Revenue budget
e.
Profit budget
24. Madison has been assigned to work on the development of a budget that plans future investments in
major assets such as buildings and heavy machinery. Madison is working on a(n) _____ budget.
a.
cash
b.
capital
c.
revenue
d.
operating
e.
expense
25. The _____ plans future investments in major assets to be depreciated over several years.
a.
capital budget
b.
balance sheet budget
c.
cash budget
d.
revenue budget
e.
profit budget
26. Ron meets with his company’s accountant to discuss the budget of anticipated and actual expenses for
each segment of the organization. This involves review of which type of budget?
a.
Expense budget
b.
Revenue budget
c.
Cash budget
d.
Capital budget
e.
Nonfinancial budget
27. Stella, a systems manager for a large technology company, would like to get an understanding of her
company’s financial position with respect to assets and liabilities at the end of the fiscal year. Which
financial statement should she refer to?
a.
Income statement
b.
Activity ratio
c.
TQM report
d.
Balance sheet
e.
Balance scorecard
28. Brad is a department manager at Home Theater, Inc. His sole role in the budget process is to
implement the budget that is developed for him. This is an example of:
a.
strategic budgeting.
b.
operational budgeting.
c.
top-down budgeting.
d.
management by objectives.
e.
bottom-up budgeting.
29. Pauline is an area manager at Ironman Gym. She anticipates her area’s needs and formulates a
proposed budget every quarter. She then sends this proposal to her manager. This is an example of:
a.
top-down budgeting.
b.
strategic budgeting.
c.
revenue budgeting.
d.
bottom-up budgeting.
e.
none of these.
30. An advantage of the bottom-up budgeting process is:
a.
its emphasis on bureaucratic control.
b.
lower managers are more involved.
c.
top managers control the information flow.
d.
top managers are often not committed to achieving budget targets.
e.
all of these.
31. The firm’s financial position with respect to assets and liabilities at a specific point in time is shown by
its:
a.
activity ratio.
b.
profitability ratio.
c.
income statement.
d.
liquidity ratio.
e.
balance sheet.
32. _____ provide the basic information used for financial control of an organization.
a.
Owners equity
b.
Income statements
c.
Financial position
d.
Mission Statements
e.
100-K’s
33. _____ refer(s) to the difference between assets and liabilities and is the company’s net worth in stock
and retained earnings.
a.
Assets
b.
Current debt
c.
Net profit
d.
Owners’ equity
e.
Liabilities
34. The _____ ratio refers to the ability of the organization to meet its current debt obligation.
a.
activity
b.
liquidity
c.
profitability
d.
conversion
e.
growth
35. The conversion ratio is considered to be a(n) _____ ratio.
a.
activity
b.
liquidity
c.
profitability
d.
leverage
e.
cash
36. Which of the following is a ratio that measures the firm’s internal performance with respect to key
activities defined by management?
a.
A liquidity ratio
b.
An activity ratio
c.
Return on total assets
d.
A current ratio
e.
Profit margin on sales
37. The _____ is purchase orders divided by customer inquiries.
a.
current ratio
b.
inventory turnover ratio
c.
conversion ratio
d.
profit margin on sales
e.
none of these
38. Tammy is a production manager at Eagle’s Nest, Inc.. She is concerned that too much money is being
wasted on inventory that is sitting in the warehouse too long. She should calculate a(n):
a.
current ratio.
b.
inventory turnover ratio.
c.
conversion ratio.
d.
profitability ratio.
e.
leverage ratio.
39. Net income divided by sales is the correct formula for calculating:
a.
return on total assets.
b.
a current ratio.
c.
a liquidity ratio.
d.
profit margin on sales.
e.
a corporate evaluation.
40. Which of the following refers to funding activities with borrowed money?
a.
ROA
b.
Leverage
c.
Liquidity
d.
Profitability
e.
Activity
41. _____ is a control system that identifies the various activities needed to produce a product and
determines the cost of those activities.
a.
Open-book management
b.
An economic value-added system
c.
Activity-based costing
d.
An inappropriate control system
e.
None of these