Chapter 22 Management Control Systems, Transfer Pricing, and Multinational Considerations

Chapter 22 Management Control Systems, Transfer Pricing, and Multinational Considerations

Objective 22.1

1) Which of the following is NOT a characteristic of a management control system?
A) It aids and coordinates the process of making decisions.
B) It encourages short-term profitability.
C) It motivates individuals throughout the organization to act in concert.
D) It coordinates forecasting sales and cost-driver activities, budgeting, and measuring and evaluating
performance.
Answer: B
Diff: 2
Terms: management control system
Objective: 1
AACSB: Reflective thinking

2) The formal management control system includes:
A) performance measures
B) mutual commitments
C) incentive plans
D) Both A and C are correct.
Answer: D
Diff: 1
Terms: management control system
Objective: 1
AACSB: Reflective thinking

3) Exertion towards a goal is:
A) motivation
B) effort
C) goal congruence
D) incentive
Answer: B
Diff: 1
Terms: effort
Objective: 1
AACSB: Reflective thinking

4) The degree of freedom to make decisions is:
A) decentralization
B) autonomy
C) centralization
D) motivation
Answer: B
Diff: 1
Terms: autonomy
Objective: 1
AACSB: Reflective thinking
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,5) If an oil refinery used refinery down-time as a Balanced Scorecard control measure, it would
represent the ________ perspective.
A) financial
B) customer
C) internal business process
D) learning and growth
Answer: C
Diff: 2
Terms: management control system
Objective: 1
AACSB: Reflective thinking

6) If a computer manufacturer used its common stock price as a Balanced Scorecard control measure, it
would represent the ________ perspective.
A) financial
B) customer
C) internal business process
D) learning and growth
Answer: A
Diff: 2
Terms: management control system
Objective: 1
AACSB: Reflective thinking

7) The goal of a management control system is to improve the collective decisions in an organization in
an economically feasible way.
Answer: TRUE
Diff: 1
Terms: management control system
Objective: 1
AACSB: Communication

8) Management control systems reflect only financial data.
Answer: FALSE
Explanation: Management control systems also reflect nonfinancial data.
Diff: 1
Terms: management control system
Objective: 1
AACSB: Reflective thinking




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,9) Of the four perspectives of the balanced scorecard the customer perspective refers to employee
satisfaction, absenteeism, information systems capabilities, and number of processes with real-time
feedback.
Answer: FALSE
Explanation: Of the four perspectives of the balanced scorecard the learning and growth perspective
refers to employee satisfaction, absenteeism, information systems capabilities, and number of processes
with real-time feedback.
Diff: 1
Terms: Balanced Scorecard
Objective: 1
AACSB: Reflective thinking

10) Motivation is the desire to attain a selected goal combined with the resulting drive or pursuit toward
that goal.
Answer: TRUE
Diff: 1
Terms: motivation
Objective: 1
AACSB: Reflective thinking

11) The essence of decentralization is the freedom for managers at lower levels of the organization to
make decisions.
Answer: TRUE
Diff: 1
Terms: decentralization
Objective: 1
AACSB: Analytical skills

12) The formal management control system includes shared values, loyalties, and mutual commitments
among members of the company, company culture, and norms about acceptable behavior for managers
and other employees.
Answer: FALSE
Explanation: The informal management control system includes shared values, loyalties, and mutual
commitments among members of the company, company culture, and norms about acceptable behavior
for managers and other employees.
Diff: 2
Terms: management control system
Objective: 1
AACSB: Analytical skills

13) A well-designed management control system obtains all of its information from within the company.
Answer: FALSE
Explanation: Well-designed management control systems use information both from within the
company and from outside the company, such as stock price and customer satisfaction measures.
Diff: 2
Terms: management control system
Objective: 1
AACSB: Communication



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, 14) Number of processes with real time feedback would be an example of a Balanced Scorecard control
measure from a customer perspective.
Answer: FALSE
Explanation: Number of processes with real time feedback would be an example of a Balanced
Scorecard control measure from a learning and growth perspective.
Diff: 2
Terms: management control system
Objective: 1
AACSB: Reflective thinking

15) Goal congruence exists when individuals work toward achieving one goal, and groups work toward
achieving a different goal.
Answer: FALSE
Explanation: Goal congruence exists when individuals and groups work toward achieving the same
goal.
Diff: 2
Terms: goal congruence
Objective: 1
AACSB: Reflective thinking

16) Effort is defined as achievement of a goal.
Answer: FALSE
Explanation: Effort is the extent to which managers strive or endeavor in order to achieve a goal.
Diff: 2
Terms: effort
Objective: 1
AACSB: Reflective thinking

17) Effort in terms of management control systems is defined in terms of physical exertion such as a
worker producing at a faster rate.
Answer: FALSE
Explanation: Effort goes beyond physical exertion and includes both physical and mental actions.
Diff: 2
Terms: effort
Objective: 1
AACSB: Reflective thinking

18) Management control systems motivate managers and other employees to exert effort through a
variety of rewards tied to the achievement of goals.
Answer: TRUE
Diff: 2
Terms: effort
Objective: 1
AACSB: Communication




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