3.

The direct costs of a MCS include:

a. Out of pocket
b. Monetary cost required to design and implement the MCS
c. Cost of paying cash bonuses (arising from incentive compensation for results
control)
d. The costs of maintaining an internal audit staff (needed to ensure compliance
with action control prescriptions)
e. All of the answers above are correct

4. Indirect cost of control caused by:

A. Behavioral placement, gamesmanship, operating delays, and netral attitudes
B. Behavioral displacement, gamesmanship, operating delays, and negative
attitudes
C. Behavioral displacement, gamesmanship, operating cycles, and negative attitudes
D. Behavioral displacement, gamesmanship, operating delays, and positif attitudes

5. In results control system, behavioral displacement occurs when an organization

defines sets of results measures that are incongruent with the organization’s
“true”objectives. For example
A. When companies give their sales people monthly sales quotas, the salespeople
tend to work on the easiest sales, which are not necessarily the most profitable
sales or sales with the highest priority
B. When brokerage firms reward their brokers through commissions on client
trades, some brokers respond by churning accounts, engaging in more
transactions than are in the customers’ best interests and that run the risk of
client dissatisfaction and turnover
C. When companies reward their research scientist for the number of patents filed,
they are likely to see an increase in the number of patents filed. However, this
incentive may lead to patent proliferation only and may not enhance, and may
even erode, researcher’s concerns for the eventual commercial success of their
discoveries
D. When software testers are evaluated in terms of the number of “bugs” they find,
the bug count goes up. But more of the bugs found will be minor. Bug counts also
create incentive for superficial testing, penalizing testers to take the time either to
look for the harder to find but more important bugs or to document their findings
thoroughly. Bug counts also penalize tester who support other testers through
coaching, helping, and auditing.
E. All the answers above are correct

6. Behavioral displacement can also occur with action controls. One forms of action
control-related displacement is often referred to as means-ends inversion, meaning
that
A. Employees pay attention to what they do while losing sight of what they are to
accomplish (the ends)
B. Managers who are given an approval limit for capital expenditures have been
known to invest in a series of small projects, each of which fall just within their
authorization limits.
C. PC maker implemented a policy to put a time limit on customer service calls.
Specifically, customer service reps who spent more than 13 minutes talking to a
customer would not earn their commission. Not surprisingly, service reps began
doing just about anything possible to get customers off the phone, such as
pretending that the line was not working or just hanging up.
D. Some actions controls rigid, non-adaptive behaviours, bureaucratic organizations
E. All of the answers above are correct

7. Gamesmanship
A. Actions that employees take to reduce their performance indicators without
producing any positive effects for the organization
B. Actions that employees take to improve their performance indicators with
producing any positive effects for the organization
C. Actions that employees take to improve their performance indicators without
producing any positive effects for the organization
D. Actions that employees take to decline their performance indicators with
producing any positive effects for the organization

8. Two major forms of gamesmanship:

A. Behavioural constraints and action accountability
B. Slack creation and data manipulation
C. Selection and placement
D. Provision of necessary resources and group-based rewards

9. Budget slack
A. Negotiating more easily achievable targets; that is, targets that are deliberately
lower than their best-guess forecast of the future.
B. Protects the managers against unforeseen contingencies and improves the
probability that the budget target will be met, thus increasing the likelihood of
receiving a favourable evaluation and associated rewards (such as a raise, a
bonus, recognition, or a promotion)
C. The two answers above are correct
D. Reporting erroneous data, meaning that the data are changed

10. Any action undertaken to change the reported results (sales numbers of profit)
while providing no real economic advantage to the organization and, sometimes,
even causing harm. Results controls can produce negative attitudes
A. Full of employee commitment to the performance targets defined in the results-
control system.
B. Most employees are committed to targets they consider too difficult, not
meaningful, not controllable, or imprudent (and, of course, illegal or unethical).
C. Managers complain that their performance evaluation are not fair because they
are being held accountable for things over which they have little or no control.
D. Rewards that are perceived as equitable, and perhaps most forms of punishment,
tend to produce negative attitudes
E. All the answers above are correct
11.Multinational Organizations face a multidimensional organizational problems:
A. Geography and national cultures
B. Differences in local business environments
C. Two answers above are correct
D. They are organized only by functions and /or product line
E. All the answers above are correct

12. The most widely cited taxonomy consists of the four cultural dimensions
identified in a study by Geert Hofstede:
A. Individualism vs collectivism, power distance, uncertainty avoidance, masculinity
vs femininity
B. Individualism vs egocentrism, power distance, uncertainty avoidance,
masculinity vs femininity
C. Individualism vs collectivism, lower distance, uncertainty avoidance, masculinity
vs femininity
D. Individualism vs collectivism, power distance, certainty avoidance, masculinity vs
femininity

13. Differences in local business environments consists of:

A. Foreign currency translation
B. Uncertainty, inflation, talent
C. National culture
D. All the answers above are correct

14. If corporate managers decide that the managers of their foreign entities should
not bear the foreign exchange risk, they can instead use any of four essentially
identical methods
A. Evaluate the manager in terms of local currency profits as compared to a local
currency plan or budget
B. Treat the foreign gain or loss as “below” the income statement line for which he
manager is held accountable
C. Evaluate the manager in terms of profits measured in home currency, but
calculate a “foreign exchange variance” and treat it as uncontrollable
D. Re-express the home currency budget for the entity in local currency using the
end-of-year, not beginning -of-year, exchange rate of some average for the
period. This procedure creates a budget that “flexes” with exchange rates
E. All of the answers above are correct

15. Control types that can addressed all control problems are:
A. Results accountability, behavioural constraints, training
B. Preaction reviews, Action accountability, selection and placement
C. Creation of strong organizational culture, group based rewards, provision of
necessary resources
D. Training, redundancy, group based reward

16. Creation of a strong organizational culture can addressed control problem:

A. Lack of direction, motivational problems, personal limitations
B. Lack of direction and motivational problems
C. Motivational problems and personal limitations
D. Lack of direction, personal limitations

17. Advantages of action controls:

A. Lead to documentation of the accumulation of knowledge as to what works best
B. Policies and procedures are an efficient way to aid organizational coordination.
C. Two answers above are correct
D. Excellent knowledge of what actions are desirable exists only for highly
routinized jobs
E. Potentially causing behavioural displacement

18. Disadvantages of action controls:

A. Lead to documentation of the accumulation of knowledge as to what works best
B. Policies and procedures are an efficient way to aid organizational coordination.
C. Two answers above are correct
D. Excellent knowledge of what actions are desirable exists only for highly
routinized jobs
E. Potentially causing behavioural displacement

19. The decision as to whether controls should be applied more or less tightly in any
particular organization, or in an area within the organization, depends on the answer
to three questions:
A. What are the unpotential benefits of tight controls, what are the costs, are any
harmful side-effects likely
B. What are the potential benefits of tight controls, what are the revenues, are any
harmful side-effects likely
C. What are the potential benefits of tight controls, what are the costs, are any
positive side-effects likely
D. What are the potential benefits of tight controls, what are the costs, are any
harmful side-effects likely

20. Simultaneous tight-loose controls means

A. Tight on subjectives and core values, but loose on procedures
B. Loose on objectives and core values, but tight on procedures
C. Tight on objectives and core values, but loose on procedures
D. Loose on subjectives and core values, but tight on procedures

21. Managers must be aware of such differences because

A. the effectiveness of the management controls used will vary depending on the
reactions of the employees involved.
B. Implementation of MCSs particularly challenging and it is crucial to emphasize
that no one form of control is optimal in all circumstances.
C. What works best in one organizations, or area within an organization, may not
work in another.
D. It is still important to keep the focus on the people involved., because their
responses will determine the success or failure of the MCS.
E. All the answers above are correct
22. Cost center focuses on
A. Advertising and promotions, research and development
B. Cost of goods sold, research and development
C. Cost of goods sold, advertising and promotions, research and development
D. Cost of goods sold, advertising and promotions

23. Profit center focuses on:

A. Revenue, Advertising and promotion, Research and development, Proft Before
Tax, Income Tax, Profit After Tax
B. Revenue, COGS, Research and development, Proft Before Tax, Income Tax, Profit
After Tax
C. Revenue, COGS, Gross Margin, Proft Before Tax, Income Tax, Profit After Tax
D. Revenue, COGS, Gross Margin, Advertising and promotion, Research and
development, Proft Before Tax, Income Tax, Profit After Tax

24. Investment center focuses on:

A. Revenue, COGS, Proft Before Tax, Income Tax, Profit After Tax, Accounts
Receivables, Inventory, Fixed Assets, Accounts Payable, Debt
B. Revenue, COGS, Gross Margin, Advertising and promotion, Research and
development, Proft Before Tax, Income Tax, Profit After Tax, Accounts
Receivables, Inventory, Fixed Assets, Accounts Payable, Debt
C. Revenue, COGS, Gross Margin, Advertising and promotion, Research and
development, Proft Before Tax, Income Tax, Profit After Tax, Inventory, Fixed
Assets,
D. Revenue, COGS, Proft Before Tax, Income Tax, Profit After Tax, Accounts
Receivables, Inventory, Fixed Assets.

25. Gross Margin Center focuses on:

A. Revenue, Cost of Goods, Sold Research and Development, Profit Before Tax,
Income Tax, Profit After Tax
B. Cost of Goods Sold, Gross Margin, Advertising and Promotion, Profit Before Tax,
Income Tax, Profit After Tax
C. Revenue, Cost of Goods Sold, Gross Margin
D. Cost of Goods Sold, Gross Margin, Advertising and Promotion, Research and
Development, Profit Before Tax, Income Tax, Profit After Tax

26. Incomplete profit center focuses on:

A. Revenue, Cost of Goods Sold, Gross Margin, Advertising and Promotion,
Research and Development, Profit Before Tax
B. Revenue, Cost of Goods Sold, Gross Margin
C. Revenue, Cost of Goods Sold, Gross Margin, Advertising and Promotion,
Research and Development, Profit Before Tax, Income Tax, Profit After Tax
D. Revenue, Cost of Goods Sold, Gross Margin, Advertising and Promotion

27. Before Tax Profit Center focuses on:

A. Revenue, Cost of Goods Sold, Gross Margin, Advertising and Promotion,
Research and Development, Profit Before Tax
B. Revenue, Cost of Goods Sold, Gross Margin, Advertising and Promotion,
Research and Development, Profit Before Tax, Income Tax, Profit After Tax
C. Revenue, Cost of Goods Sold, Gross Margin, Advertising and Promotion,
Research and Development
D. Revenue, Cost of Goods Sold, Gross Margin, Advertising and Promotion,
Research and Development, Profit Before Tax, Income Tax, Profit After Tax

28. Complete Profit Center focuses on:

A. Revenue, Cost of Goods Sold, Gross Margin, Advertising and Promotion,
Research and Development, Profit Before Tax, Income Tax, Profit After Tax
B. Revenue, Cost of Goods Sold, Gross Margin, Profit Before Tax, Income Tax, Profit
After Tax
C. Revenue, Cost of Goods Sold, Gross Margin, Advertising and Promotion,
Research and Development, Profit Before Tax
D. Revenue, Cost of Goods Sold, Gross Margin, Profit Before Tax
 29. Typical financial responsibility centers in a functional organization
IC = Investment center
RC = Revenue center
CC = Cost center
A. Top: President (IC), Lower: Manufacturing Vice President (RC), Sales and
Marketing Vice President (RC), Finance Vice President (CC), Administrative Vice
President (CC)
B. Top: President (IC), Lower: Manufacturing Vice President (CC), Sales and
Marketing Vice President (RC), Finance Vice President (RC), Administrative Vice
President (CC)
C. Top: President (IC), Lower: Manufacturing Vice President (CC), Sales and
Marketing Vice President (RC), Finance Vice President (CC), Administrative Vice
President (RC)
D. Top: President (IC), Lower: Manufacturing Vice President (CC), Sales and
Marketing Vice President (RC), Finance Vice President (CC), Administrative Vice
President (CC)

30. Typical financial responsibility centers in a divisionalized organization

IC = Investment center
PC = Profit center
RC = Revenue center
CC = Cost center
A. Top: President (IC), Middle: Group Vice President (IC) lower: Division manager
(PC) and bottom: Marketing manager (PC) & Other Functional Managers (CC),
Group Vice President (IC) and lower: Division manager (PC), Administrative and
Financial Vice Presidents (CC)
B. Top: President (IC), Middle: Group Vice President (IC) lower: Division manager
(PC) and bottom: Marketing manager (RC) & Other Functional Managers (CC),
Group Vice President (IC) and lower: Division manager (PC), Administrative and
Financial Vice Presidents (CC)
C. Top: President (IC), Middle: Group Vice President (IC) lower: Division manager
(PC) and bottom: Marketing manager (RC) & Other Functional Managers (RC),
Group Vice President (IC) and lower: Division manager (PC), Administrative and
Financial Vice Presidents (CC)
D. Top: President (IC), Middle: Group Vice President (IC) lower: Division manager
(PC) and bottom: Marketing manager (RC) & Other Functional Managers (CC),
Group Vice President (IC) and lower: Division manager (CC), Administrative and
Financial Vice Presidents (RC)

31. Transfer prices have multiple organizational purposes:

A. To provide the proper economic signals so that the managers affected will make
good decision
B. To provide information that is useful for evaluating the performances of both the
profit centers and their managers.
C. Move profits between firm locations
D. All the answers above are correct

32. Transfer pricing alternatives

A. Market-based transfer prices, marginal-cost transfer prices *
B. full cost transfer prices, negotiated transfer prices,
C. dual rate transfer prices
D. All the answers above are correct

33. Division ‘A’ produces a component and wants to sell it to Division ‘B’. The
transfer price is
A. revenue to Division ‘A’ and a cost to Division ‘B’
B. revenue to Division ‘B’ and a cost to Division ‘A’
C. revenue to Division ‘A’ and no effect on Division ‘B’
D. a cost to Division ‘B’ and no effect on Division ‘A’

34. Transfer prices are the prices charged

A. for distributing goods from one warehouse to another.
 B. for the goods produced by one division to another division that needs these
goods.
C. when delivering goods to the customer.
D. when transferring goods to international divisions.

35. The transfer price that would leave the selling division no worse off if the good is
sold to an internal division is(are) called:
A. The maximum transfer price
B. The negotiated transfer price
C. The minimum transfer price
D. Both a and c

36. The transfer price that would leave the buying division no worse off if an input is
purchased from an internal division is(are) called:
A. The maximum transfer price
B. The minimum transfer price
C. The negotiated transfer price
D. Both a and c

37. In the PT ABC, Division A has a product that can be sold either to outside
customers or to Division B. Information about these divisions is given below:

Case 1 Case 2
Division A:
Capacity in units 100,000 100,000
Number of units sold externally 100,000 60,000
Market selling price $90 $75
Variable costs per unit 73 58
Fixed costs per unit based on capacity 10 10

Division B:
Number of units needed for production 40,000 40,000
 Purchase price per unit from external supplier $86 $74

The company uses the opportunity cost approach to transfer pricing. What is the
minimum transfer price in Case 1?
A. $90
B. $73
C. $83
D. $86

38. In the PT ABC, Division A has a product that can be sold either to outside
customers or to Division B. Information about these divisions is given below:

Case 1 Case 2
Division A:
Capacity in units 100,000 100,000
Number of units sold externally 100,000 60,000
Market selling price $90 $75
Variable costs per unit 73 58
Fixed costs per unit based on capacity 10 10

Division B:
Number of units needed for production 40,000 40,000
Purchase price per unit from external supplier $91 $74

The company uses the opportunity cost approach to transfer pricing. What is the
maximum transfer price in Case 1?
A. $90
B. $91
C. $83
D. $73
 39. In the PT ABC, Division A has a product that can be sold either to outside
customers or to Division B. Information about these divisions is given below:

Case 1 Case 2
Division A:
Capacity in units 100,000 100,000
Number of units sold externally 100,000 60,000
Market selling price $90 $75
Variable costs per unit 73 58
Fixed costs per unit based on capacity 10 10

Division B:
Number of units needed for production 40,000 40,000
Purchase price per unit from external supplier $86 $74

The company uses the opportunity cost approach to transfer pricing. What is the
minimum transfer price in Case 2?
A. $58
B. $74
C. $68
D. $75

40. In the PT ABC, Division A has a product that can be sold either to outside
customers or to Division B. Information about these divisions is given below:

Case 1 Case 2
Division A:
Capacity in units 100,000 100,000
Number of units sold externally 100,000 60,000
Market selling price $90 $75
Variable costs per unit 73 58
Fixed costs per unit based on capacity 10 10
Division B:
Number of units needed for production 40,000 40,000
Purchase price per unit from external supplier $86 $74

The company uses the opportunity cost approach to transfer pricing. What is the
maximum transfer price in Case 2?
A. $75
B. $68
C. $74
D. $58

41. In the PT ABC, Division A has a product that can be sold either to outside
customers or to Division B. Information about these divisions is given below:

Case 1 Case 2
Division A:
Capacity in units 100,000 100,000
Number of units sold externally 100,000 60,000
Market selling price $90 $75
Variable costs per unit 73 58
Fixed costs per unit based on capacity 10 10

Division B:
Number of units needed for production 40,000 40,000
Purchase price per unit from external supplier $86 $74

The company uses the opportunity cost approach to transfer pricing. Which case
should not be transferred internally?
A. Both should be transferred internally.
B. Neither should be transferred internally.
C. Case 1
D. Case 2

42. When there is an outside market for an intermediate product that is perfectly
competitive, the most equitable method of transfer pricing is
A. market price.
B. production cost pricing.
C. variable cost pricing.
D. cost plus markup pricing.

43. Negotiated prices are transfer prices

A. determined between a division and corporate headquarters.
B. negotiated with external customers.
C. used when supplying and buying divisions independently agree on a price.
D. agreed to by division management and employees

44. When there is an outside market for an intermediate product that is perfectly
competitive, the most equitable method of transfer pricing is
A. market price.
B. production cost pricing.
C. variable cost pricing.
D. cost plus markup pricing

45. The “floor” in transfer pricing is

A. the transfer price that would leave the buying division no worse off if an input is
purchased from an internal division.
B. the transfer price that would leave the selling division no worse off if the good is
sold to an internal division.
C. the transfer price that would leave the buying division worse off if an input is
purchased from an internal division.
D. none of these.
 46. The Jet Engine Division provides engines for the Jet Plane Division of a company.
The standard unit costs for the Jet Engine Division are as follows:

Direct materials $ 600

Direct labor 1,200
Variable overhead 300
Fixed overhead 150
Market price per unit 2,730

The engine department has excess capacity. What is the best transfer price to avoid
transfer price problems?
A. $1,350
B. $900
C. $2,100
D. $300

47. Question
A. Option 1
B. Option 2

48. PT Elang Jaya Nusantara (EJN) has two divisions, the Blending Division and
Canning Division. The Blending Division sells chemicals to the Canning Division.

Standard costs for the Blending Division are as follows:

Direct materials $3.00 per gallon

Direct labor 2.40 per gallon

The Canning Division uses the following predetermined overhead rate:

Variable overhead $3.60 per gallon

Fixed overhead 2.40 per gallon
Total $6.00 per gallon
What is the transfer price for the chemicals per gallon based on standard variable
cost?
A. $3.00
B. $9.00
C. $5.40
D. $11.40

49. The Engine Division provides engines for the Truck Division of a company. The
standard unit costs for the Engine Division are as follows:

Direct materials $ 600

Direct labor 1,200
Variable overhead 300
Fixed overhead 150
Market price per unit 2,730

What is the transfer price based on full cost plus a markup of 30 percent?
A. $585
B. $2,925
C. $2,760
D. $2,730

50. The XXX Division provides frames for the Tractor Division of a company. The
standard unit costs for the XXX Division are as follows:

Direct materials $ 800

Direct labor 1,500
Variable overhead 400
Fixed overhead 350
Market price per unit 4,575
 What is the transfer price based on full cost plus a markup of 20 percent?
A. $5,490
B. $4,575
C. $3,240
D. $3,660

51. The XXX Division provides engines for the Final Assembly Division of a company.
The standard unit costs for the Engine Division are as follows:

Direct materials $ 600

Direct labor 1,200
Variable overhead 300
Fixed overhead 150
Market price per unit 2,730

What is the transfer price based on variable product costs plus a fixed fee of $210?
A. $210
B. $1,80
C. $2,100
D. $2,310

52. Garuda Furniture had the following historical accounting data, per hundred
board feet, concerning one of its products:

Finished shelving:
Direct materials $30
Direct labor 16
Variable overhead 10
Fixed overhead 12
Variable selling expenses 8
Fixed selling expenses 4
The shelving is normally transferred internally from the Cutting Division to the
Finishing Division. It also may be sold externally for $110 per hundred board feet. The
minimum profit level accepted by the company is a markup of 20 percent.

If the negotiated price is used, Garuda Furniture's transfer price should be a

A. maximum of $100.80.
B. minimum of $84.00.
C. minimum of $80.00.
D. maximum of $110.00.

53. Garuda Furniture had the following historical accounting data, per hundred
board feet, concerning one of its products:

Finished shelving:
Direct materials $30
Direct labor 16
Variable overhead 10
Fixed overhead 12
Variable selling expenses 8
Fixed selling expenses 4

The shelving is normally transferred internally from the Cutting Division to the
Finishing Division. It also may be
sold externally for $110 per hundred board feet. The minimum profit level accepted by
the company is a markup of 20 percent.
If the variable manufacturing cost transfer price method is used without a fixed fee,
Garuda Furniture's transfer price will be
A. $56
B. $84
C. $64
D. $68
 54. PT Cemerlang Indah Perkasa (CIP) has two divisions, X and Y. Division X sells its
product to Division Y. Standard costs for Division X are as follows:

Direct materials $ 4 per unit

Direct labor 2 per unit
Variable overhead 5 per unit
Fixed overhead 3 per unit
Total $14 per unit

What is the transfer price for Division X based on standard variable cost plus a
markup of 25 percent?
A. $11.00
B. $17.50
C. $13.75
D. $7.50

55. XXX Division provides engines for the Tractor Division of a company. The
standard unit costs for the Engine Division are as follows:

Direct materials $ 600

Direct labor 1,200
Variable overhead 300
Fixed overhead 150
Market price per unit 2,730

What is the transfer price based on variable product costs plus 20 percent?
A. $720
B. $2,160
C. $2,100
D. $2,520

56. PT XXX had the following historical accounting data per unit:
Direct materials $60
Direct labor 30
Variable overhead 15
Fixed overhead 24
Variable selling expenses 45
Fixed selling expenses 9

The units are normally transferred internally from Division A to Division B. The units
also may be sold externally for $210 per unit. The minimum profit level accepted by the
company is a markup of 30 percent. There were no beginning or ending inventories.

If the negotiated price is used, Division A's transfer price should be a

A. minimum of $120.00.
B. minimum of $153.00.
C. maximum of $198.90.
D. maximum of $210.00.

57. PT Anugerah had the following historical accounting data per unit:

Direct materials $60

Direct labor 30
Variable overhead 15
Fixed overhead 24
Variable selling expenses 45
Fixed selling expenses 9

The units are normally transferred internally from Division A to Division B. The units
also may be sold externally for $210 per unit. The minimum profit level accepted by the
company is a markup of 30 percent. There were no beginning or ending inventories.
 If variable manufacturing costs without a fixed fee are used as the transfer price,
Division A's transfer price would be
A. $60.
B. 105
C. $90.
D. $144.

58. PT Milenial is a multinational company with divisions around the world. Division
A in the United States purchases a part from Division G in China. The part can be
purchased externally for $7 each. Transportation costs amount to $1 and the
commission of $.50 will not need to be paid.

What is the transfer price using the comparable uncontrolled price method?
A. $8.50
B. $8
C. $7
D. $7.50

59. PT Milenial, is a multinational company with divisions around the world. Division
A in the United States purchases a part from Division G in China. There is no outside
market for the part. The part is sold for $12 and normally receives a 20% markup on
cost.

What is the transfer price using the resale price method?

A. $9.60
B. $10
C. $12
D. $14.40

60. PT Milenial., is a multinational company with divisions around the world.

Division A in the United States purchases a part from Division G in China. There is
no outside market for the part because it is used to manufacture another product. The
manufacturing cost for the part is $5. Transportation is $1 and commissions are $.5
but do not need to be paid.

What is the transfer price using the cost-plus method?

A. $5.50
B. $6.50
C. $6
D. $5

61. Question
A. Option 1
B. Option 2

62. The quantitative expression of a plan stated in either physical or financial terms
or both is called
A. Cost of goods sold statement
B. Financial statement
C. Budget
D. Cost of goods manufactured statement

63. Which of the following is NOT a component of the master budget?

A. Sales Budget
B. Capital Budget
C. Cost of Goods Sold Budget
D. Budget to Actual Variance Analysis

64. Control can be defined as

A. the process of setting standards, receiving feedback on actual performance, and
taking corrective action whenever actual performance deviates significantly from
plan.
B. a quantification of plans, stated in either physical or financial terms, or both.
C. identification of corporate objectives.
D. a comprehensive financial plan.

65. Which of the following statement is correct regarding a continuous budget?

A. budget is prepared for a one year period that corresponds to the company’s fiscal
year.
B. A continuous budget is a monthly budget.
C. As a month/period expires in the budget, an additional month/period in the
future is added so the company always has a 12-month budget on hand.
D. None of the section 1

66. Question

A. Option 1
B. Option 2

67. Which of the following is NOT an advantage of budgeting?

A. It forces managers to plan.
B. It provides resource information that can be used to improve decision making.
C. It aids in the use of resources and employees by setting a benchmark that can be
used for the subsequent evaluation of performance.
D. It provides organizational independence.

68. The process of setting standards, receiving feedback on actual performance, and
taking corrective action whenever actual performance deviates significantly from
planned performance.
A. Control
B. Monitoring
C. Eye balling
D. Comparing

69. Which of the following factors is NOT an advantage of preparing operating

budgets?
 A. It provides resource information that can be used to improve decision making.
B. It improves communication and coordination.
C. It aids in the use of resources and employees by setting a benchmark that can be
used for the subsequent evaluation of performance.
D. It saves time and resources

70. The budgets that are concerned with the inflows and outflows of cash and with
financial position are called the:
A. Operating budgets
B. Master budgets
C. Financial budgets
D. Continuous budgets

71. Operating budgets are

A. a forecast of expected operating expenses.
B. a forecast of operating expenses and related revenues.
C. a forecast of units of production.
D. concerned with the income-generating activities of a firm.

72. Participative budgeting has which of the following potential problems?

A. building slack into a budget
B. encourages individual behavior that is in basic conflict with the goals of the
organization
C. using budgets as a part of performance evaluations could lead to unethical
behavior
D. managers take action that will improve performance in the short run but has
long-term consequences

73. The condition that exists when managers deliberately underestimate revenues or
overestimate costs to provide flexibility is called:
A. Realistic standards
B. Monetary incentives
C. Budgetary slack
D. Management by exception

74. Controllable costs are those that a manager

A. has no authority over.
B. cannot avoid.
C. does not participate in authorizing.
D. can influence through decision making.

75. Financial Results Controls has three core elements:

A. Financial responsibility centers, non-formal management processes, motivational
contracts
B. Financial responsibility centers, formal management processes, unmotivational
factors
C. Financial responsibility centers, formal management processes, motivational
contracts
D. All the answers above are correct

76. Rewards:
A. Monetary: salary increases, bonuses, benefits, perquisites, promotion; non
monetary: Autonomy. Recognition. Participation in decisions, office assignments,
preferred parking places, titles
B. Monetary: salary increases, bonuses, perquisites; non monetary: promotion.
Benefits, Autonomy. Recognition. Participation in decisions, office assignments,
preferred parking places, titles
C. Monetary: salary increases, bonuses, benefits, perquisites; non monetary:
promotion. Autonomy. Recognition. Participation in decisions, office
assignments, preferred parking places, titles
D. All the answers above are correct

77. Punishments
A. Monetary: No raise, no bonus, no perquisites; Non-monetary: interference in job
from superiors, loss of job, sssignment to important tasks, no promotion,
humiliation
B. Monetary: No raise, no bonus, no perquisites; Non-monetary: interference in job
from superiors, loss of job, sssignment to unimportant tasks, no promotion, no
humiliation
C. Monetary: No raise, little bonus, no perquisites; Non-monetary: interference in
job from superiors, loss of job, sssignment to unimportant tasks, no promotion,
no humiliation
D. Monetary: No raise, no bonus, no perquisites; Non-monetary: interference in job
from superiors, loss of job, sssignment to unimportant tasks, no promotion,
humiliation

78. The compensation package

A. Salary, Benefits (Pension and health benefits, Perquisites of various types),
Incentive compensation (Short-term incentive plans: based on the capital in the
current year or less, middle-term incentive plans: based on the performance
measured over periods greater than 1 year and often related to the company’s
stock price
B. Salary, Benefits (Pension and health benefits, Perquisites of various types),
Incentive compensation (Short-term incentive plans: based on the performance
in the current year or less, Long-term incentive plans: based on the performance
measured over periods greater than 1 year and often related to the company’s
stock price
C. Salary, Benefits (Pension and health benefits, Perquisites of various types),
Incentive compensation (Short-term incentive plans: based on the total assets in
the current year or less, Long-term incentive plans: based on the performance
measured over periods greater than 1 year and often related to the company’s
stock price
D. Salary, Benefits (Pension and health benefits, Perquisites of various types),
Incentive compensation (Short-term incentive plans: based on the working
capital in the current year or less, Long-term incentive plans: based on the
 performance measured over periods greater than 1 year and often related to the
company’s stock price

79. Accounting performance

A. EPS
B. ROE
C. ROA
D. All the answers above are correct

80. Market-based performance

A. Stock options
B. Restricted stock
C. Stock appreciation rights
D. All the answers above are correct
E. ROA, EPS, ROE

81. Purpose of incentives

A. Attraction/retention (Paying employees only guaranteed salaries tends to attract
risk-averse employees, Paying performance-dependent compensation tends to
attract employees who are more risk tolerant, more aggressive, more confident in
their abilities, unrestricted stock, for example, often are geared toward employee
retention, Golden handcuffs) and control purposes (Provide a competitive
compensation package, make compensation variable with firm performance, Tax
considerations)
B. Attraction/retention (Paying employees only guaranteed salaries tends to attract
risk-averse employees, Paying performance-dependent compensation tends to
attract employees who are more risk tolerant, more aggressive, more confident in
their abilities, Restricted stock, for example, often are geared toward employee
retention, Golden handcuffs) and control purposes (Provide a competitive
compensation package, make compensation variable with firm performance, Tax
considerations)
C. Attraction/retention (Paying employees only guaranteed salaries tends to attract
risk-averse employees, Paying performance-dependent compensation tends to
attract employees who are more risk tolerant, more aggressive, more confident in
their abilities, Restricted stock, for example, often are geared toward employee
retention, Golden handcuffs) and Non-control purposes (Provide a competitive
compensation package, make compensation variable with firm performance, Tax
considerations)
D. Attraction/retention (Paying employees only guaranteed salaries tends to attract
risk-averse employees, Paying performance-dependent compensation tends to
attract employees who are more risk tolerant, more calm, more confident in their
abilities, Restricted stock, for example, often are geared toward employee
reaction, Golden handcuffs) and Non-control purposes (Provide a competitive
compensation package, make compensation variable with firm performance, Tax
considerations)

82. Upper cutoff

A. To maintain vertical compensation equity
B. To keep total compensation somewhat smooth over time
C. To avoid the fact that managers will be “unduly” motivated to take actions to
maximize bonus payouts
D. To avoid undeserved bonuses due to “windfall” gains
E. To alleviate the possibility of a faulty compensation plan design
F. All the answers above are correct

83. Lower cutoff

A. To avoid paying bonuses for performance, which is considered mediocre or worse
B. To maintain vertical compensation equity
C. To keep total compensation somewhat smooth over time
D. To avoid the fact that managers will be “unduly” motivated to take actions to
maximize bonus payouts

84. Bonus determination approach Formulaically:

A. The performance-reward link is explicit
B. Alleviates bias or favoritism in assessing and rewarding performance
C. But possibly less focus on performance dimensions that are more difficult to
quantify (e.g., R&D)
D. All the answers above are correct

85. Bonus determination approach Subjectively

A. Allows performance to be evaluated more “completely” considering any of a
number of hard-to-quantify, but important, performance areas
B. Lack of explicitness increases the employee's risk (due to possible bias)
C. All the answers above are correct
D. Alleviates bias or favoritism in assessing and rewarding performance

86. Criteria for evaluating reward systems

A. Rewards should be valued, Rewards should be large enough to have impact,
Rewards should be understandable
B. Rewards should be timely, Rewards should be durable, Rewards should be
reversible
C. All the answers above are correct
D. Rewards should be cost highly

87. Planning cycle

A. Strategic planning (relatively broad processes of thinking about the missions,
goals, and strategies; normally a top-management process)
B. Programming Capital Budgeting (specification of specific action programs to be
implemented over the next few years and specification of the resources each will
consume; it involves managers at different levels (top-down/ bottom-up)
C. Operational budgeting (short-term financial planning, budgets match the
organization’s responsibility structure, emphasis on quantitative data)
D. All the answers above are correct

88. Budgeting and management control

A. Budgeting involves setting targets that are commonly used as
standards against which to evaluate performance – results controls,
Planning and budgeting processes involve formal reviews of plans
and include the actions that are felt to be good for the organization to
take – action controls *
B. Planning and budgeting processes provide the needed information for decision-
making to the relevant managers – results controls
C. Planning and budgeting processes involve formal reviews of plans and include
the actions that are felt to be good for the organization to take – cultural controls
D. All the answers above are correct

89. Types of financial performance targets

A. Model-based (engineered)/historical/negotiated,
B. Internally/externally-derived (Target costing, Benchmarking),
C. Fixed/flexible (Should managers be held accountable for achieving their plans
regardless of the business conditions they face?, Relative performance targets)
D. All the answers above are correct

90. Budget Participative

A. The budgetee is both involved and has influence over setting the budget
B. Leads to better acceptance of budget targets, and hence, commitment to achieve
them
C. Is an effective way of information sharing bringing together corporate priorities
and constraints with lower-level insights about business potentials and risks
D. But, potential for slack, bias, conservatism,
E. All the answers above are correct

91. .…………………...is a prerequisite for the design of any MCS and , indeed, for any
purposeful activities
A. Knowledge of objectives *
B. Knowledge of strategy formulation
C. Knowledge of management control
D. All the answers above are correct

92. Management control focuses on execution, and it involves addressing the general
question: are our employees likely to behave appropriately? This questions
A. do our employees understand what we expect of them?
B. will the work consistently hard and try to do what is expected of them-- that is,
will they pursue the organization's objectives in line with the strategy?
C. are they capable of doing a good job?
D. all the answers above are correct *

93. Organizations can never avoid all their control problems, but they can often avoid
some of them by limiting exposure to certain types of problems and problem sources,
or by reducing the maximum potential loss if the problems occur. These prominent
avoidance strategy are:
A. activity elimination, automation, decentralization, risk sharing
B. activity elimination, automation, centralization, risk default
C. activity elimination, automation, centralization, risk sharing *
D. activity delimination, automation, centralization, risk sharing

94. Risk sharing can involve

A. bying insurance to protect against certain types of potentially large losses the
organization might not be able to afford *
B. purchase fidelity bonds on employees in sensitive positions (such as bank tellers)
to reduce the firm's exposure
C. joint venture agreement
D. all the answers above are correct

95. Behavioral constraints

A. intangible constraints and administrative constraint
B. physical constraints and administrative constraint *
C. Intangible constraints and general constraint
D. physical constraints and general constrant
96. Conditions determining the effectiveness of results controls
A. knowledge of desired results, ability to influence desired results, ability to
measure uncontrollable results effectively
B. knowledge of undesired results, ability to influence desired results, ability to
measure controllable results effectively
C. knowledge of desired results, ability to influence desired results, ability to
measure controllable results effectively *
D. knowledge of desired results, disability to influence desired results, ability to
measure controllable results effectively

97. Selection and placement can addressed

A. lack of budgeting, personal limitations
B. motivational problems, group limitations
C. lack of direction, personal limitations, motivational problems *
D. all of the answers above are correct

98. Causes of management control problems:

A. tightly direction, motivational problems, personnel limitations
B. lack of direction, motivational problems, personnel limitations *
C. loosly direction, motivational problems, personnel limitations
D. lack of direction, motivational problems, opportunity to conduct fraud

99. Results controls provide several preventive-type benefits

A. alleviate a potential lack of direction ==> well-defined results informs employees
as to what is expected of them and encourage them to do what they can to
produce the desired results
B. induce employee alleviate a potential lack of direction ==> well-defined results
inform employees as to what is expected of them and encourage them to do what
they can to produce the desired results to behave so as to maximize their chances
of producing the results the organization desires
C. can mitigate personal limitations and encourage employees to develop their
talents to position themselves to earn the results dependent rewards
D. All of the answers above are correct *

100. Preaction reviews involve:

A. the scrutiny of action plans
B. reviewers can approve or dissapprove the proposed actions, request
modifications, or ask for a more carefully considered plan before granting final
approval
C. a common form: planning and budgeting processes
D. all of the answers above are correct *

101. Cultural controls

A. code of conduct, group based rewards
B. intra-organizational transfers and physical arrangement
C. tone at the top and norms
D. all the answers above are correct *

102. The achievement of tight results control depends on characteristics

A. Definition of the desired results area, the performance measures, and the
forcement provided
B. definitions of the undesired results areas, the performance measures, and the
reinforcement or incentives provided
C. definitions of the desired results areas, the performance measures, and the
reinforcement or incentives provided *
D. definitions of the desired results areas, the performance achieved, and the
reinforcement or incentives provided