IMANET IMANET Certifications IMANET-CMA Questions & Answers

• Question 71:

  Goal congruence is the

  A. Desire and the commitment to achieve a specific goal

  B. Sharing of goals by supervisors and subordinates.

  C. Extent to which individuals have the authority to make decisions.

  D. Extent of the attempt to accomplish a specific goal

  Correct Answer: B

  Goal congruence is agreement on the goals of the organization and/or the segment by both supervisors and subordinates. Performance is assumed to be optimized when the parties understand that personal and segmental goals should be consistent with those of the organization.

• Question 72:

  The most fundamental responsibility center affected by the use of market-based transfer prices is a(n)

  A. Production center

  B. Investment center

  C. Cost center

  D. Profit center.

  Correct Answer: D

  Transfer prices are often used by profit centers and investment centers. Profit centers are the more fundamental of these two centers because investment centers are responsible not only for revenues and costs but also for invested capital.

• Question 73:

  Transfer pricing should encourage goal congruence and managerial effort In a decentralized organization,

  it should also encourage autonomous decision making.

  Managerial effort is the

  A. Desire and the commitment to achieve a specific goal

  B. Sharing of goals by supervisors and subordinates

  C. Extent to which individuals have the authority to make decisions.

  D. Extent of the attempt to accomplish a specific goal

  Correct Answer: D

  Managerial effort is the extent to which a manager attempts to accomplish a goal. Managerial effort may include psychological as well as physical commitment to a goal.

• Question 74:

  The price that one division of a company charges another division for goods or services provided is called the

  A. Market price

  B. Transfer price

  C. Outlayprice

  D. Distress price

  Correct Answer: B

  A transfer price is the price charged by one segment of an organization for a product or service supplied to another segment of the same organization.

• Question 75:

  Which one of the following will not occur in an organization that gives managers throughout the organization maximum freedom to make decisions?

  A. Individual managers regarding the managers of other segments as they do external parties

  B. Two divisions of the organization having competing models that aim for the same market segments.

  C. Delays in securing approval for the introduction of new products

  D. Greater knowledge of the marketplace and improved service to customers.

  Correct Answer: C

  Decentralization is beneficial because it creates greater responsiveness to the needs of local customers, suppliers, and employees Managers at lower levels are more knowledgeable about local markets and the needs of customers, etc. A decentralized organization is also more likely to respond flexibly and quickly to changing conditions, for example, by expediting the introduction of new products. Furthermore, greater authority enhances managerial morale and development. Disadvantages of decentralization include duplication of effort and lack of goal congruence.

• Question 76:

  The CEO of a rapidly growing high-technology firm has exercised centralized authority over all corporate functions. Because the company now operates in four states, the CEO is considering the advisability of decentralizing operational control over production and sales. Which of the following conditions probably will result from and be a valid reason for decentralizing"

  A. Greater local control over compliance with federal regulations.

  B. More efficient use of headquarters staff officials and specialists.

  C. Quicker and better operating decisions

  D. Greater economies in purchasing

  Correct Answer: C

  Decentralization results in greater speed in making operating decisions because they are made by lower-level managers instead of being referred to top management. The quality of operating decisions should also be enhanced, assuming proper training of managers, because those closest to the problems should be the most knowledgeable about them.

• Question 77:

  Which of the following is not a cost of decentralization?

  A. Dysfunctional decision making owing to disagreements of managers regarding overall goals and subgoals of the individual decision makers

  B. A decreased understanding of the overall goals of the organization.

  C. Increased costs for developing the information system.

  D. Decreased costs of corporate-level staff services and management talent

  Correct Answer: D

  The costs of centralized staff may actually decrease under decentralization. On the other hand, the corporate staff and the various services they provide may have to be duplicated in venous divisions, thereby increasing overall costs. Suboptimal decisions may result from disharmony among organizational goals, subgoals of the division, and the individual goals of managers. The overall goals of the firm may more easily be misunderstood because individual managers may not see the larger picture. Moreover, the information system necessary for adequate reporting in a decentralized mode will tend toward redundancy, which increases costs.

• Question 78:

  Which of the following is most likely to be a disadvantage of decentralization?

  A. Lower-level employees will develop less rapidly than in a centralized organization.

  B. Lower-level employees will complain of not having enough to do.

  C. Top management will have less time available to devote to unique problems.

  D. Lower-level managers may make conflicting decisions.

  Correct Answer: D

  The disadvantages of decentralization include a tendency to focus on short-run results to me detriment of the long-term health of the entity, an increased risk of loss of control by top management, the increased difficulty of coordinating interdependent units, and less cooperation and communication among competing decentralized unit managers

• Question 79:

  The primary difference between centralization and decentralization is

  A. Separate offices for all managers.

  B. Geographical separation of divisional headquarters and central headquarters.

  C. The extent of freedom of decision making by many levels of management

  D. The relative size of the firm.

  Correct Answer: C

  The primary distinction is in the degree of freedom of decision making by managers at many levels. In decentralization, decision making is at as low a level as possible. The premise is that the local manager can make more informed decisions than a centralized manager Centralization assumes decision making must be consolidated so that activities throughout the organization may be more effectively coordinated. In most organizations, a mixture of these approaches is best.

• Question 80:

  Butteco has the following cost components for 100,000 units of product for the year Raw materials $200 .000 Direct labor 100,000 Manufacturing overhead 200.000 Selling/administrative expense 150.000 All costs are variable except for $100,000 of manufacturing overhead and $100,000 of selling and administrative expenses. The total costs to produce and sell 110.000 units are

  A. $650,000.

  B. $715,000.

  C. $695,000.

  D. $495,000.

  Correct Answer: C

  Raw materials unit costs are strictly variable at $2($200,000 ?100,000 units). Similarly, direct labor has a variable unit cost of $1 ($100,000 - 100,000 units) The $200,000 manufacturing overhead for 100,000 units is 50%. The variable unit cost is $1. Selling costs are $100,000 fixed and $50,000 variable for production of 100,000 units, and the variable unit selling expenses is $50 ($50,000 ?100,000 units). The total unit variable cost is therefore $4 .50 ($2 + $1 + $1 +$.50). Fixed costs are $200,000. At a production level of 110,000 units, variable costs are $495,000 ($4.50 x 110,000 units). Hence, total costs are $695,000 ($495,000 + $200,000)