MGMT 505 || QUESTIONS WITH COMPLETE
SOLUTIONS!!
1. Which of the following statement is true?
A. Managers naturally seek to maximize shareholders' wealth.
B. Managers act in their own interests, and so there is no way to align their interests with
those of the owners.
C. To motivate managers in non-profit firms, no employee incentives are needed.
D. To align the interests of managers and owners, owners must design systems to monitor
and reward management behavior that increases the firm's profits. correct answers D.
4. An internal accounting system should:
A. Provide information to enable costs to be minimized.
B. Provide financial accounting data for external reporting.
C. Provide data for tax purpose.
D. All of the above. correct answers D
6. Opportunity costs
A. Can be found directly in financial statements
B. Are monetary in nature
C. Reflect the benefit of the next best alternative
D. Are backward looking correct answers C
7. Which statement about costs is correct?
A. Sunk costs should be considered when making decisions.
B. Opportunity costs should not be considered when making decisions.
C. Average costs are the most important factor managers should consider in decision-making.
D. Fixed costs can be reduced. correct answers D
8. Speeds Inc. makes fiberglass ski-boards in Colorado. Which of the following is correct?
A. Fiberglass is factory overhead.
B. Plant real estate taxes are a product cost.
C. Pension benefits for factory workers are direct labor.
D. Overtime premium paid to the factory workers is direct labor. correct answers C
12. Which of the following statement is true?
A. Internal and external reports are independent and have no connections.
B. The current internal accounting systems may not be optimal.
C. External reports are generated more frequently.
D. Firms must use the same accounting system for both decision making and control. correct
answers B
13. Performance measures
A. always motivate employees to make the right decision for the firm.
B. are always worded vaguely.
C. are not necessary because employees always want to do the right things.
D. can influence employees' behavior. correct answers D
, 15. Managers may use a firm's internal accounting system to
A. Prepare financial statements for shareholders
B. Make decisions on firm's product mix
C. Plan the firm's budget
D. All of the above correct answers D
17. Which statement about operating leverage is true?
A. The higher the operating leverage, the better.
B. Firms with high operating leverage usually have low fixed costs.
C. Firms with high operating leverage may have competition advantage in short-term price-
cut competition.
D. Firms with low operating leverage face more risk when sales change. correct answers C
20. Which of the following can be found directly in financial statements?
A. Opportunity cost
B. Sunk cost
C. Cost of goods sold
D. Fixed cost correct answers C
2. Which of the following is true?
A. Decision right and knowledge cannot be linked
B. For empowerment to work, managers should let go of control
C. Large companies must centralize most decision rights to top management
D. None of the above is true correct answers D
6. Which statement about organizational architecture is true?
A. For efficiency, a manager should have both the decision right and the decision control.
B. The best performance measurement system uses only financial measures because they are
objective.
C. Bureaucratic rules always damage firm values.
D. A hierarchical structure that separates decision management from decision control can
help reduce agency costs. correct answers D
8. Ronald Coase's theory about firms states that
A. Firms function like an invisible hand.
B. Firms discipline those who have resources to the highest-value use.
C. Firms that survive are able to cut the transaction costs below what it would cost to acquire
equivalent goods or services in a series of market transactions.
D. None of the above. correct answers C
11. The "three legs" of organizational architecture do not include
A. Measure performance
B. Partition of decision rights
C. Decision control
D. Reward/punish performance correct answers C
17. Which advantage accrues when teams, or firms, are formed?
SOLUTIONS!!
1. Which of the following statement is true?
A. Managers naturally seek to maximize shareholders' wealth.
B. Managers act in their own interests, and so there is no way to align their interests with
those of the owners.
C. To motivate managers in non-profit firms, no employee incentives are needed.
D. To align the interests of managers and owners, owners must design systems to monitor
and reward management behavior that increases the firm's profits. correct answers D.
4. An internal accounting system should:
A. Provide information to enable costs to be minimized.
B. Provide financial accounting data for external reporting.
C. Provide data for tax purpose.
D. All of the above. correct answers D
6. Opportunity costs
A. Can be found directly in financial statements
B. Are monetary in nature
C. Reflect the benefit of the next best alternative
D. Are backward looking correct answers C
7. Which statement about costs is correct?
A. Sunk costs should be considered when making decisions.
B. Opportunity costs should not be considered when making decisions.
C. Average costs are the most important factor managers should consider in decision-making.
D. Fixed costs can be reduced. correct answers D
8. Speeds Inc. makes fiberglass ski-boards in Colorado. Which of the following is correct?
A. Fiberglass is factory overhead.
B. Plant real estate taxes are a product cost.
C. Pension benefits for factory workers are direct labor.
D. Overtime premium paid to the factory workers is direct labor. correct answers C
12. Which of the following statement is true?
A. Internal and external reports are independent and have no connections.
B. The current internal accounting systems may not be optimal.
C. External reports are generated more frequently.
D. Firms must use the same accounting system for both decision making and control. correct
answers B
13. Performance measures
A. always motivate employees to make the right decision for the firm.
B. are always worded vaguely.
C. are not necessary because employees always want to do the right things.
D. can influence employees' behavior. correct answers D
, 15. Managers may use a firm's internal accounting system to
A. Prepare financial statements for shareholders
B. Make decisions on firm's product mix
C. Plan the firm's budget
D. All of the above correct answers D
17. Which statement about operating leverage is true?
A. The higher the operating leverage, the better.
B. Firms with high operating leverage usually have low fixed costs.
C. Firms with high operating leverage may have competition advantage in short-term price-
cut competition.
D. Firms with low operating leverage face more risk when sales change. correct answers C
20. Which of the following can be found directly in financial statements?
A. Opportunity cost
B. Sunk cost
C. Cost of goods sold
D. Fixed cost correct answers C
2. Which of the following is true?
A. Decision right and knowledge cannot be linked
B. For empowerment to work, managers should let go of control
C. Large companies must centralize most decision rights to top management
D. None of the above is true correct answers D
6. Which statement about organizational architecture is true?
A. For efficiency, a manager should have both the decision right and the decision control.
B. The best performance measurement system uses only financial measures because they are
objective.
C. Bureaucratic rules always damage firm values.
D. A hierarchical structure that separates decision management from decision control can
help reduce agency costs. correct answers D
8. Ronald Coase's theory about firms states that
A. Firms function like an invisible hand.
B. Firms discipline those who have resources to the highest-value use.
C. Firms that survive are able to cut the transaction costs below what it would cost to acquire
equivalent goods or services in a series of market transactions.
D. None of the above. correct answers C
11. The "three legs" of organizational architecture do not include
A. Measure performance
B. Partition of decision rights
C. Decision control
D. Reward/punish performance correct answers C
17. Which advantage accrues when teams, or firms, are formed?
