|
1) ________ means minimum constraints and maximum freedom for managers at the lowest levels of an organization to make decisions and to take actions. |
C) Total decentralization |
|
2) An advantage of decentralization is that it ________. |
A) Creates greater responsiveness to local needs |
|
3) Which of the following is an advantage of decentralization? |
A) It creates greater responsiveness to local needs. |
|
4) Which of the following is a benefit of decentralization? |
D) It eliminates the need for enforcing goal congruence among the departments. |
|
5) ________ occurs when a decision’s benefits for one subunit is more than offset by the costs to the organization as a whole. |
A) Suboptimal decision making |
|
6) Which of the following statements is true of decentralization? |
B) A decentralized structure forces top management to lose some control over the organization. |
|
7) Which of the following areas lends themselves to the concept of decentralization? |
C) product advertising |
|
8) Which of the following is a drawback of decentralizing a multinational company? |
B) It may result in lack of control and results in increasing risk. |
|
9) Which of the following is a responsibility center to measure the revenues and costs of subunits in centralized or decentralized companies? |
A) investment center |
|
10) Decentralization in multinational companies may lead to lack of control. |
Answer: TRUE |
|
11) An investment center is always a decentralized subunit. |
Answer: FALSE Explanation: This is not always true. Profit centers can be coupled with a highly centralized organization. |
|
… |
… |
|
12) In a profit center, the manager is accountable for investments, revenues, and costs. |
Answer: FALSE Explanation: In an investment center, the manager is accountable for investments, revenues, and costs. |
|
13) Decisions regarding sources of long-term financing are best made at subunit level as the subunit has local knowledge and can leverage it in negotiations. |
Answer: FALSE Explanation: Such decisions are best made at a centralized level as corporate managers have better information about financing terms in different markets and can obtain the best terms. |
|
14) Surveys indicate that decisions made most frequently at the corporate level are related to sources of supplies and products to manufacture. |
Answer: FALSE Explanation: These decisions are made at a decentralized level. |
|
15) The labels profit center and cost center are dependent on the degree of centralization or decentralization in a company. |
Answer: FALSE Explanation: The labels profit center and cost center are independent on the degree of centralization or decentralization in a company. |
|
… |
… |
|
16) Incongruent decision making occurs when individuals and groups work toward achieving the organization’s goals even if departmental performance is adversely affected. |
Answer: FALSE Explanation: Incongruent decision making occurs when a decision’s benefit to one subunit is more than offset by the costs to the organization as a whole. |
|
1) A product may be passed from one subunit to another subunit in the same organization. The product is known as a (n) ________. |
B) Intermediate product |
|
2) Which of the following best describes a transfer price? |
D) It is the price one subunit charges for a product or service supplied to another subunit of the same organization. |
|
3) A transfer-pricing method leads to goal congruence when ________. |
C) Managers act in their own best interest and the decision is in the long-term best interest of the company |
|
4) Which of the following is true of transfer pricing? |
C) It helps top managers evaluate the performance of individual subunits. |
|
5) Transfer-pricing systems enable managers to focus on maximizing the performance of their subunits. |
… |
|
6) The product or service transferred between subunits of an organization is called an intermediate product. |
Answer: TRUE |
|
7) The transfer price creates revenues for the selling subunit and costs for the buying subunit affecting each subunit’s operating income. |
Answer: TRUE |
|
1) Negotiated transfer prices are often employed when ________. |
B) Market prices are volatile |
|
2) The costs used in cost-based transfer prices ________. |
C) Can either be actual or budgeted costs |
|
3) Which of the following is true of hybrid transfer prices? |
C) They take into account both cost and market information. |
|
4) To reduce the excessive focus of subunit managers on their own subunits, many companies compensate subunit managers on the basis of ________. |
A) Both the operating income earned by their respective subunits and the company as a whole |
|
24) The choice of a transfer-pricing method has minimal effect on the allocation of company-wide operating income among divisions. |
Answer: FALSE Explanation: The choice of a transfer-pricing method has a large effect. |
|
25) Transfer prices do not affect managers whose compensation is directly dependent on an organization’s operating income because transfer prices affect only divisional profits and not the organization’s profit. |
Answer: FALSE Explanation: Transfer prices affect both divisional and organizational profits. |
|
26) Hybrid transfer prices take into account both cost and market information. |
Answer: TRUE |
|
27) Hybrid transfer prices can be arrived at through negotiations. |
Answer: TRUE |
|
28) Negotiated transfer prices are often employed when market prices are stable. |
Answer: FALSE Explanation: Negotiated transfer prices are often employed when market prices are volatile. |
|
29) The cost used in cost-based transfer prices can be actual cost or budgeted cost. |
Answer: TRUE |
Share This
Flashcard
