Chapter 16

Question 1

4 Steps of Typical Control System (Cycle)

Answer 1

1: Set performance standards.
2: Measure Performance
3: Compare performance with standards.
4: Reward successes, correct problems.

Question 2

Standard

Answer 2

expected performance for a given goal: a target that establishes a desired performance level, motivates performance, and serves as a benchmark against which actual performance is assessed

Question 3

Performance standards can be set with respect to:

Answer 3

1: Quantity
2: Quality
3: Time Used
4: Cost

Question 4

Principle of Exception

Answer 4

a managerial principle stating that control is enhanced by concentrating on the exceptions to or significant deviations from the expected result or standard

Question 5

After-action review

Answer 5

a frank and open-minded discussion of four basic questions aimed at continuous improvement

Question 6

4 Basic question for AAR

Answer 6

1: What were our intended results?
2: What were our actual results?
3: What caused our results?
4: What will we sustain? Improve?

Question 7

Feedforward Control

Answer 7

the control process used before operations begin, including policies, procedures, and rules designed to ensure that planned activities are carried out properly
(“preliminary control”)

Question 8

Concurrent Control

Answer 8

the control process used while plans are being carried out, including directing, monitoring, and fine-tuning activities as they are performed

Question 9

Feedback Control

Answer 9

control that focuses on the use of information about previous results to correct deviations from the acceptable standard

Question 10

DPMO

Answer 10

defects per million opportunities

Question 11

Six Sigma

Answer 11

aims for defect free performance (DPMO is 3.4)

Question 12

Management Audit

Answer 12

an evaluation of the effectiveness and efficiency of various systems within an organization

Question 13

External Audit

Answer 13

an evaluation conducted by one organization, such as a CPA firm, on another

Question 14

Internal Audit

Answer 14

a periodic assessment of a company’s own planning, organizing, leading, and controlling processes

Question 15

Sustainability Audits

Answer 15

an evaluation of how effectively they are serving all stakeholders and protecting the environment

Question 16

Triple Bottom Line

Answer 16

profit, planet, people (for Sustainability)

Question 17

Budgeting

Answer 17

the process of investigating what is being done and comparing the results with the corresponding budget data to verify accomplishments or remedy differences; also called budgetary controlling

Question 18

Sales Budget

Answer 18

usually data for the sales budget include forecasts of sales by month, sales area, and product

Question 19

Production Budget

Answer 19

commonly expressed in physical units; requires types and capacities of machines, economic quantities to produce, and availability of materials

Question 20

Cost Budget

Answer 20

used for areas of the organization that incur expenses but no revenue (HR for ex)

Question 21

Cash Budget

Answer 21

shows anticipated receipts and expenditures, the amount of working capital available, the extent to which outside financing may be required, and the periods and amounts of cash available

Question 22

Capital Budget

Answer 22

used for the cost of fixed assets such as plants and equipment; not expenses but investments

Question 23

Master Budget

Answer 23

includes all the major activities of the business; brings together and coordinates all the activities of the other budgets and can be though of as a budget of budgets

Question 24

Accounting Audits

Answer 24

procedures used to verify accounting reports and statements

Question 25

Activity-Based Costing (ABC)

Answer 25

a method of cost accounting designed to identify streams of activity and then to allocate costs across particular business processes according to the amount of time employees devote to particular activities

Question 26

Balance Sheet

Answer 26

a report that shows the financial picture of a company at a given time and itemizes assets, liabilities, and stockholders' equity

Question 27

Assets

Answer 27

the values of the various items the corporation owns

Question 28

Liabilities

Answer 28

the amounts a corporation owes to carious creditors

Question 29

Stockholders' Equity

Answer 29

the amount accruing to the corporation's owners

Question 30

Profit and Loss Statement

Answer 30

an itemized financial statement of the income and expenses of a company's operations

Question 31

Current Ratio

Answer 31

a liquidity ratio that indicates the extent to which short-term assets can decline and still be adequate to pay short-term liabilities

Question 32

Debt-Equity Ratio

Answer 32

a leverage ratio that indicates the company's ability to meet its long-term financial obligations

Question 33

Return on Investment (ROI)

Answer 33

a ratio of profit to capital used, or a rate of return from capital

Question 34

Management Myopia

Answer 34

focusing on short-term earnings and profits at the expense of longer-term strategic obligations

Question 35

5 Steps to Designing Effective Control Systems

Answer 35

1: Establish valid performance standards 2: Provide adequate information to employees 3: Ensure acceptability to employees 4: Maintain open communication 5: Use multiple approaches

Question 36

7 Deadly Sins of Performance Measurement

Answer 36

Vanity, Provincialism, Narcissism, Laziness, Pettiness, Inanity, Frivolity

Question 37

Progressive Discipline

Answer 37

clear standards are established but failure to meet them is dealt with in a progressive or step-by-step process

Question 38

Balanced Scorecard

Answer 38

combination of four sets of performance measures: financial, customer satisfaction, business processes (quality and efficiency), and learning and growth

Question 39

Transfer Price

Answer 39

price charged by one unit for a good or service provided to another unit within the organization

Question 40

Empowerment

Answer 40

creating a strong culture of high standards and integrity so that employees will exercise effective control on their own