Chapter 14 Budgets Are Preliminary Control And Actual Statements

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Lussier, Management Fundamentals, 7e

Answers to Questions in the Text

Chapter 14: Managing Control Systems,

Finances, and People

WORK APPLICATION SAMPLE ANSWERS

Most of the answers are actual student answers or based on student answers. You may give these

answers as part of your lecture before, after, or in place of getting student answers.

14–1. Using Exhibit 14–1, identify the primary organizational inputs, transformation process,

outputs, and customers of a firm you work for or have worked for. Also, identify the level of

customer satisfaction.

Last summer, I worked for a company that made corrugated cardboard boxes. The input was the

14–2. Building on Work Application 14–1, give examples of preliminary, concurrent, rework, and

damage controls for an organization you work for or have worked for.

As a preliminary control, we would have to clean our work area regularly and follow safety

14–3. Building on Work Applications 14–1 and 14–2 and using Exhibit 14–2, illustrate the systems

process for a department you work for or have worked for within an organization. Be sure to give

examples of preliminary, concurrent, rework, and damage controls for your department.

14–4. Building on Work Applications 14–1 through 14–3, illustrate the systems process you

personally use within your department. Be sure to give examples of preliminary, concurrent,

rework, and damage controls you personally use.

My actual job was to catch the boxes as they came out of the cutter and to stack them. My input was

the boxes coming out of the cutter. My preliminary control was the standing plan procedures for

Lussier, Management Fundamentals, 7e

14–5. Give an example of a standard from an organization you work for or have worked for that

has the five characteristics of a complete standard.

As a waiter, my standard is to wait on no less than five tables (quantity) per hour (time) without

14–6. Give an example of the critical success factors for a job you have or had. Be sure to place

them in priority order (most important first) and to explain why they are critical.

The knife on the corrugater is the critical success factor. If it is not set up right, all the boxes will be

14–7. Identify a situation in which corrective action was needed to meet an objective/standard.

Describe the corrective action taken to meet the objective/standard.

Our objective was to finish an order by 5:00 p.m. The belt on the conveyor broke, and no one could

14–8. Give an example of a constant, a periodic, and an occasional control method used by an

organization you work for or have worked for. Identify each by name and explain why it is

classified as such.

A constant control where I work is a standing plan that states that all purchases over $500 must be

14–9. Identify the major source(s) of revenue and expenses where you work or have worked.

14–10. Identify the major capital asset expenditures invested in by your present or a past

organization.

14–11. Does the company you work for or have worked for make its financial statements available

to the public? If it does, get copies and review them. Also, does the organization develop

operating, capital expenditures, and financial budgets? If it does, try to get copies for review. If

you are not sure, call or talk to your present or past boss to find out.

I worked for McDonald’s, which makes its financial statements available because it has shareholders.

14–12. How would you rate your present or past boss’s coaching ability? Explain your answer

using critical incidents.

Lussier, Management Fundamentals, 7e

On a scale of 1–10, my summer boss’s coaching ability was an 8. He took time to tell us what we

14–13. Identify a problem employee you observed on the job. Describe how the person affected

the department’s performance.

Joel works in my department. He has been having marital problems the last few months, and it has

14–14. Review the discipline guidelines in Exhibit 14–11. Identify any guidelines your present or

past boss did not follow.

My supervisor did not always discipline in private when rules were broken. I do not think he

14–15. Identify a complaint you brought to a manager. State the complaint and identify which

steps in the complaint-handling model the manager did or did not follow. If you have never

complained, interview someone who has.

When I worked part time at the local supermarket, I was always scheduled for both weekend nights.

14–16. Identify a complaint you brought to a business. State the complaint and identify which

steps in the customer-handling model the person did or did not follow. If you have never

complained, interview someone who has.

I pay my bills using online banking. Macy’s said I didn’t pay my bill, but I did. I had to call and they

REVIEW QUESTION ANSWERS

14–1. Why is damage control important?

Damage control is action taken to minimize negative impacts on customers/stakeholders due to

14–2. Why should you focus on preliminary and concurrent types of control rather than rework

and damage control?

Preventing problems and catching them before they have negative effects on customers create a

Lussier, Management Fundamentals, 7e

14–3. Who are the primary customers/stakeholders for the outputs of the operations, marketing,

human resources, finance, and information functional areas/departments?

The marketing department is the primary stakeholder for the operations department outputs. The

14–4. What are the five areas of performance that standards measure?

14–5. Why is measuring performance important to an organization?

By measuring its performance, an organization determines to what extent it is successful and how to

14–6. What is shown in a performance report?

14–7. What is the role of reinforcement in the control systems process?

Reinforcement lets employees know that they are meeting or have met objectives/standards and

14–8. What are the three constant control methods, the three periodic control methods, and the

four occasional control methods?

Constant controls include self-control, clan control, and standing plans. Periodic controls include

14–9. What are the three steps in the master budgeting process?

The three steps in the master budgeting process are to develop the (1) revenue and expenditure

14–10. Why is the capital expenditures budget the most important budget?

The capital expenditures budget is the most important budget because it is based on developing

14–11. What is the difference between financial statements and financial budgets?

Lussier, Management Fundamentals, 7e

The difference between financial budgets and financial statements is that financial statements

14–12. What is the objective of coaching?

14–13. How do managers commonly demotivate employees?

Managers commonly demotivate employees by giving more negative criticism than praise.

14–14. What is the performance formula, and how is it used with coaching?

14–15. What are the three activities of management by walking around, and what is the role of

facilitating?

Management by walking around (MBWA) has three major activities: listening, teaching, and

14–16. What are the differences among coaching, counseling, and disciplining?

14—17. Identify a complaint you brought to a manager. State the complaint and identify which

steps in the complaint-handling model the manager did or did not follow. If you have never

complained, interview someone who has.

When I worked part time at the local supermarket, I was always scheduled for both weekend

COMMUNICATION SKILLS ANSWERS

14–1. Recall a personal event that you had to help conduct, such as a party, shower, or wedding.

Identify preliminary, concurrent, rework, and damage controls, as well as feedback. What did you

learn from the experience and the textbook discussion that can help you to plan and control

better in the future?

14–2. Apply the control systems process to your college education. What are your major

objectives and standards? How do you measure and compare performance to your objectives and

standards? What current and future corrective action have you taken? Do you reinforce your

performance when meeting goals? If yes, how?

Lussier, Management Fundamentals, 7e

Answers will vary.

14–3. Employees tend to resist control and sometimes break the rules. Give examples of things

you or others have done to resist controls.

14–4. How does your professor in this course use controls to reduce and/or eliminate cheating on

tests and other assignments?

14–5. How confident are you in your ability to develop budgets and read financial statements?

What experience have you had in developing budgets and reading financial statements?

Answers will vary.

14–6. Do you feel that managers should spend more time on coaching and MBWA techniques?

Explain.

14–7. Which of the eight discipline guidelines is most relevant to you personally? Explain.

14–8. Can the need for discipline be reduced? If so, how?

APPLYING THE CONCEPT ANSWERS

Applying the Concept 14–1: Types of Control

Identify the type of control used or required as

A. preliminary

B. concurrent

C. rework

D. damage

1. As quality inspector Amita tried to start the lawn mower, it would not start.

C. Rework. The mower needs to be fixed before shipping.

2. The manager, Sayeed, just got a new laptop computer, and one of the keys on the keyboard

doesn’t work.

3. In two weeks, the Christmas shopping season begins, and Richard is scheduling employees’

hours.

Lussier, Management Fundamentals, 7e

4. Coach Lee’s basketball team is behind at halftime, so he is sending in some new players.

Applying the Concept 14–2: Frequency and Methods of Control

Identify the one primary method of control.

Constant

A. self

B. clan

C. standing plans

Periodic

D. regular meetings and reports

E. budgets

F. audits

Occasional

G. observation

H. the exception principle

I. special reports

J. project

5. “June, have you completed the monthly inventory check yet?”

6. “Kenny, I know I’m not manager of our team, but we really need you to pick up the pace if we

are going to ship this order out on time.”

7. “I don’t know what happened, Helen. All of a sudden, the thing just jammed, and I can’t fix it.”

8. “Jamal, with this amount of money for the year, it is going to be difficult to operate my

department at full capacity.”

E. Budget. The amount of money for the year is a budget.

9. “Brianna, I’m putting you in charge of hiring and overseeing the general contractor to renovate

the office.”

10. The manager Deondre placed his desk facing the employees.

G. Observation. The manager’s desk is facing the employees to provide occasional observation.

11. The lawyer Tinna is in court, and her assistant is working alone in the office.

12. The manager Bonita got her monthly operations performance statement.

Lussier, Management Fundamentals, 7e

13. The manager Tyson is talking to an employee to find out why the shipment is behind schedule.

14. Signs are posted stating that goggles must be worn in the department.

C. Standing plans. The signs stating that helmets must be worn are giving a “rule.”

Applying the Concept 14–3: Guidelines for Effective Discipline

Identify which guideline is being followed—or not being followed—in the following statements. Use

the guidelines in Exhibit 14–8 as the answers.

15. “Katrina, as a new employee, you need to learn the rules and regulations. The computer

program will teach them to you and give you a test to make sure you understand them.”

16. “Now that I’ve been disciplined, Sam will give me the silent treatment for about a week.”

H. When discipline is over, resume normal relations. Giving the silent treatment is not getting back

to normal.

17. “That punishment isn’t fair, Joe; you shouldn’t dock my pay for coming in late once.”

18. “Chris, come into my office so that we can discuss your behavior.”

F. Discipline in private. In the manager’s office, others will not hear the discipline.

19. “Tony must have been really mad to yell that loudly at Hank for making that mistake.”

20. “Our manager Nancy comes back from break late all the time; why can’t I?”

21. “When I leave the place a mess, Henry reprimands me. But when attractive Erica does it,

nothing is ever said to her.”

22. “Sandy gave me a verbal warning for being late for work, and she made me sign a form. The

form is now in my permanent record file.”

G. Document discipline. The note is documentation of the discipline.

JOIN THE DISCUSSION

Join the Discussion 14–1: Academic Grades

Recall Join the Discussion 11–1 about academic standards in Chapter 11. Successful managers

establish and maintain high expectations for all their employees. As Lou Holtz said, we need to set a

higher standard. While students are doing less work than in prior years, grades continue to go up, a

trend called grade inflation. At one time, most colleges used a set grade point average (GPA) to

Lussier, Management Fundamentals, 7e

determine honors. But today, because of grade inflation, most colleges use a system of ranking

GPAs.

1. Why are professors giving higher grades today than were given 5, 10, or 20 years ago?

Answers vary

2. Are students who are putting in less time and getting higher grades being well prepared for a

career with high standards after graduation?

3. Is it ethical and socially responsible for professors to drop standards and for colleges to award

higher grades today than they did 5, 10, or 20 years ago?

4. Should colleges take action to raise standards? If so, what should they do?

5. An important part of a professor’s job is to evaluate student learning through grading. Do you

believe your learning is evaluated effectively? How could it improve?

6. Do you find consistency among your professors’ standards in terms of the work required in their

courses and the grades given, or do some professors require a lot more work and some give lots of

As and others lots of lower grades? Should colleges take action to improve consistency among

professors’ standards? If so, what should they do?

Join the Discussion 14–2: Expenses

PricewaterhouseCoopers (PwC) is a large global accounting firm. When its employees traveled to

and from clients’ facilities and for clients, PwC paid the cost and then charged travel expenses to the

client. PwC’s practice was to charge the regular rate, when in fact it was getting discounts. Clients

accused PwC of overcharging them for travel. PwC said there was nothing wrong with this practice,

but it agreed to a several-million-dollar settlement to resolve an Arkansas lawsuit over travel

rebates.

1. Is it ethical and socially responsible for PwC to charge the full rate for travel expenses when it

gets discounts?

2. If you worked for a company and knew it did this, would you say anything to anyone about it? If

yes, to whom would you speak, and what would you say?

Join the Discussion 14–3: Disciplining Ethical Behavior

Unfortunately, some employees are rewarded for being unethical, while others are disciplined for

being ethical. For example, some auto repair shops pay a commission for work done, so mechanics

are paid more if they get customers to buy parts and services they don’t need. Mechanics who have

a below-average number of repairs may be considered underachievers and may be pressured,

Lussier, Management Fundamentals, 7e

through discipline, to perform unneeded repair work. Similarly, those in the medical field may push

unnecessary tests or even treatments.

1. Have you ever been in or known of a situation in which people were rewarded for being

unethical and disciplined for being ethical? If so, describe the situation.

2. Is it ethical and socially responsible for firms to establish controls that reward unethical

behavior and discipline ethical behavior to make more money?