Control System – PART – I

  1. In the management context, the traditional concept of control refers to _______.

i.establishing standards of performance

ii.evaluating actual performance against the standards of performance laid out

iii.implementing corrective actions to accomplish organizational objectives

a.Only i

b.Only i and iii

c.Only ii and iii

d.i, ii and iii

2.Management control systems help in _____.

i.monitoring the developments in the external marketplace and adapting to them

ii.assuring better quality

iii.coping with unanticipated change

iv.creating faster cycles to market

a.Only i, ii and iii

b.Only i, iii, and iv

c.Only ii, iii and iv

d.i, ii, iii and iv

  1. A management control system may be viewed as a collection of controls which may be used to address business situations _____.

i.when managers and employees do not have a clear idea of what is expected of them

ii.when managers have a fair idea of what is expected but do not feel motivated

iii.when managers and/or employees are not able to perform well in spite of knowing about the expectations and having sufficient motivation for performance

a.Only i and ii

  1. Only i and iii

c.Only ii and iii

d.i, ii and iii

4.The term ‘cybernetics’, coined by Norbert Weiner in the 1940s, has its origin in the Greek word ‘Kybernetes’. Which of the given statements regarding cybernetics is true?

i.It is the study of the entire field of control and communication theory.

ii.When exercising the control function using this approach, a manager measures the performance of an individual, a plan, or a program against certain predetermined standards

iii.According to this approach, no corrective actions are taken if there are any deviations from the predetermined standards.

a.Only i and ii

b.Only ii and iii

c.Only i and iii

d.i, ii and iii

5.The basic control process involves certain steps. Identify The step that succeeds the step of measuring performance.

a.Establishing standards

b.Comparing actual performance against standards

c.Rewarding good performance and/or taking corrective action

d.Adjusting standards and measures

6._______ constitute the foundation of the cybernetic process of management control. They state the criteria on the basis of which employee performance and related behaviour can be evaluated.




d.Action plans

7.A/An _____ management control system facilities organizational learning and the adoption of new strategies with the external environment in focus.





8.All the following statements regarding financial reporting are true, except the one which says that ___.

a.Financial reporting is a representation of financial transactions which take place in the organisation.

b.Financial statements bring out a ‘true and fair’ view of the transactions that have taken place in the organization.

c.Financial reports are used only by internal stakeholders

d.Financial reporting involves preparation and publication of financial statements which may be done on a interim or an annual basis.

9.Management controls may be classified into ______, based on the object of control.

a.formal controls and informal controls

b.feedforward control and feedback control loop control and closed loop control

d.action controls, results controls and personnel/cultural controls

10.Which of the following types of controls act as a motivating factor for individuals to perform well, in the hope of earning rewards?

a.Action controls

b.Results controls

c.Personnel controls

d.informal controls

11._____ is a form of action control which entails making employees responsible for their actions and in essence, it is applicable after an action has been carried out.

a.Closed loop control

b.Behavioral restriction

c.Pre-action appraisal

d.Action accountability

  1. Which of the following controls, also referred to as bureaucratic controls, involve establishing standard rules and procedure for control of activities and their outcomes?

a.Formal controls

b.Results controls

c.Closed loop controls

d.Personnel/cultural controls

13.Based on the extent of formalization, management controls can be classified into formal controls and informal controls. Formal controls _____.

i.are further classified into feedback control and feedforward control

ii.involve establishing standard rules and procedures for control of activities and their outcomes

iii.are also called bureaucratic controls

iv.are exerted by establishing a corporate culture and value system in which there is an interactive exchange of information

a.Only i

b.Only i and ii

c.Only ii and iii

d.Only iii and iv

14.Standard operating procedures, budgetary control, financial reporting, audit and incentive system are example of ______ controls.

  1. feedback




  1. Management controls may be classified into open loop controls and closed loop controls based on the _____.

a.object of control

b.extent of formalization of control

c.time of implementation of controls

d.level of bureaucracy

16.Match the following ‘schemes for classification of management controls’ with the respective ‘classifications within each scheme’.

Schemes for classification

i.Object of control

ii.Extent of formalization of control

iii.Time of implementation of controls


p.Behavioral restrictions, pre-action appraisal and action accountability

q.Bureaucratic and informal controls

r.Action, results and personnel/cultural controls

s.Open loop and closed loop controls

a.i/p, ii/q, iii/s

b.i/r, ii/q, iii/s

c.i/q, ii/r, iii/p

d.i/s, ii/p, iii/r

17.Feedforward and feedback control are types of _______ control.

  1. formal loop


d.closed loop

18.________ control entails continuously scrutinizing and monitoring the various process in use along with the environment within which the organization is operating, in order to make proactive modifications.

  1. Open loop



d.Pre-action appraisal

19.National culture, competitive strategy and organizational slack are some of the _____ factors which influence the effectiveness and operation of management control system.

  1. structural




20.Which of the given statements about for profit and non-profit organizations is incorrect?

a.In for profit organizations, the profits accrued are passed on to the employees, shareholders and to the government, while in the case of non-profit organization they are utilized for the benefit of society.

b.In non-profit organizations, the reward received are mostly intangible in nature while in the case of for profit organizations, the rewards are primarily tangible.

c.The profitability of non-profit organizations is calculated depending on how much the service has helped in improving the quality of life in society, while the profitability of for-profit organizations is calculated in the form of financial profits.

d.Both of profit and non-profit organizations participate in the equity markets and so, shareholder expectations on ‘return-on-equity’ are relevant for both types of organizations.

21.Organizational _______ defines the formal configuration of job roles and responsibilities that employees, as individuals and groups, have to undertake so that activities within the organization are carried out effectively and efficiently.





22.As a dimension of culture according to Hofstede, uncertainly avoidance refers to ______.

a.risk-taking ability and extent of avoidance of ambiguity

b.inequality in the distribution of power

c.tendency of employees to accept higher targets

d.defined top-down approach of management

23.Identify the statements(s) that is/are true pertaining to Geert Hofstede’s individualism/ collectivism dimension of national culture.

i.It examines the tendency of people to prefer working either as individuals or as teams.

ii.In a culture scoring high on collectivism, people work as a team and believe in group rewards.

iii.In a culture scoring high on individualism, people prefer incentives based on individual performance rather than those based on group performance.

a.Only i

b.Only iii

c.Only ii and iii

d.i, ii and iii

24.All the statements given here pertaining to the features of a culture that is high on the femininity dimension are true, except _____.

a.high interdependence

b.acceptance of higher targets

c.inclination toward service

d.nurturing nature

25.Identify the feature(s) which is/are unique to ‘related diversified’ firms.

i.These firms have different business which are related in some way and share common core competencies.

ii.These firms are financed and managed by a single parent firm.

iii.In these firms, resourced are shared between the different businesses.

iv.There is open communication between the corporate managers and the individual business unit managers, in these firms.

a.Only i

b.Only ii

c.Only ii and iii

d.Only i, iii and iv

26._______ depend more on strategic controls than ___. These controls help in controlling the performance of individual business by evaluating all the operations in which the business is involved.

a.Related diversified firms; unrelated diversified firms

b.Unrelated diversified firms; related diversified firms

c.Single business firms; strategic business units

d.Strategic business units; single business firms

27..Identify the statement(s) that is/are true with regard to the generic strategies suggested by Michael Porter and the role of management control systems in achieving these strategies.

i.If the organization follows the overall cost leadership strategy, it will cut costs in every activity of its performance and management control systems will be designed to achieve this efficiency objective.

ii.If the organization follows the differentiation strategy, it will incur extra costs to build in the differentiation and management control systems will work toward building value into the product that is less than the cost of value added.

iii.If the organization follows the focus strategy, it will target a small set of customers with its exclusive set of product offerings at premium prices; the management control systems are used to ensure the right pricing policy for the product offerings.

a.Only i and ii

b.Only i and iii

c.Only ii and iii

d.i, ii and iii

28.Identify the statement(s) describing autocratic managers and democratic managers, which is/are incorrect.

i.A democratic permissive manager will allow subordinate participation in decision making and allow them the freedom to decide their work pattern.

ii.An autocratic permissive manager will allow subordinate participation in decision making but closely monitor the way in which the work is done.

iii.A democratic directive manager will take the decisions himself/herself, but allow the subordinates to choose their own style of working.

iv.An autocratic directive manager will not only take the decisions but also decide on how the work should be carried out by the subordinates.

a.Only i

b.Only i and iv

c.Only ii and iii

d.Only ii, iii and iv

29.Organizational slack refers to the capacity in an organization which is in surplus of what is required for normal operations. Identify the circumstances under which slack may be said to exist.

i.Over-utilization of resources

ii.Setting targets lower than expected performance

iii.Giving a higher remuneration to employees than is required for retaining them

iv.Pricing products lower than is necessary for retaining customers

a.Only i

b.Only ii and iii

c.Only ii, iii and iv

d.i, ii, iii and iv

30.All the statements regarding stakeholders given below are true, except that _____.

a.stakeholders are individuals or groups of people of people who are affected by the activities and operations of the organization

b.investors, employees and suppliers are all internal stakeholders of an organization

c.customers, creditors, community, government, etc, are the external stakeholders of an organization

d.stakeholders are or groups of people who impact the activities and operations of the organization

31.The dimensions which are entirely internal to the organization and which are used for performance measurement and benchmarking the organization with the rest of the industry, are called structural dimensions. Which of the following are among the different structural dimensions as identified by Richard L. Daft?





a.Only i and ii

b.Only ii and iii

c.Only i, ii and iii

d.i, ii, iii and iv

32.The structural dimensions of organization design ___.

i.are the dimensions entirely internal to the organization which are used as a basis for formally describing the organization structure

ii.are the basis on which the contextual dimensions are shaped

iii.include both internal and external factors like the organization’s size, technology, environment in which it operates, and culture

a.Only i

b.Only i and ii

c.Only i and iii

d.i, ii and iii

33.In organization design, _____ refers to the number of subordinates who report to a particular supervisor.


b.personnel ratios

c.span of control


34.Among the structural dimensions of organization design, _______ describes the reporting relationships prevalent in the organization and span of control.


b.hierarchy of authority



35.Which of the following organization structures is characterized by employees being grouped based on their expertise and skills?

a.Divisional structure

b.Functional structure

c.Matrix structure

d.Hybrid structure

36.Identify the statement that may be considered to be true with respect to the functional organization structure.

a.In a functional structure, the horizontal hierarchy is stronger than the vertical hierarchy.

b.An organization that has a functional structure can make quick decisions and adapt easily to environmental changes.

c.In a functional organization, employees are able to specialize in the jobs assigned to their respective departments.

d.The functional structure enables coordination and encourages innovation and creativity among the employees as they have a clear idea about the organizational objectives.

37.The _____ organization structure is formed based on the product range of the organization, the markets catered to by the organization, or the geographical locations in which it operates.





38.Sanman works in a project-based company that aims at integrating technical specialization, market responsiveness and product innovation. He was selected by the company as he was assessed as having strong interpersonal skills and respect for colleagues besides being good at his job. These qualities were important as Sanmam would have to report to two different supervisors (which often gives rise to conflicts). It may be concluded from the given information that Sanman works in an organization with a _____ structure.





39.As proposed by Frank Ostroff, the ‘horizontal structure’ is devoid of the rigidity and departmentalization that exist in a vertical system. Organizations shift toward the horizontal structure through _____.



c.integration process reengineering

40._______ stands for ‘an organized group of related tasks and activities that work together to transform inputs into outputs that create value for customers’.




d.Horizontal structure

41.Which of the following are features of the horizontal organization structure?



iii.Customer-centric approach

iv.Employee empowerment

a.Only ii and iii

b.Only iii and iv

c.Only ii, iii and iv

d.i, ii, iii and iv

42.Which of the following organization structures is also called the flexible or adaptive organization?

a.Horizontal structure

b.Hybrid structure

c.Matrix structure

d.Divisional structure

43.The control system of the organization should be able to measure the impact that the activities of each manager has on the performance of the organization. _______ is a principle in the design of responsibility structures, according to which each manager should be assessed and rewarded only for those factors that are under his/her control.

a.Goal congruence


c.Transfer pricing

d.Responsibility accounting

44.According of the nature of monetary inputs and outputs, responsibility centres can be classified into four types. Which of the following is not one of those four types?

a.Cost center

b.Revenue center

c.Profit center

d.Quality center

45.Which of the following statements is an incorrect description of transfer pricing as a technique to measure the contribution of individual centers to the overall organizational goals?

a.It is the internal price charged by a selling department, division or subsidiary of the same organization.

b.It is a value which is treated as the cost of the selling center and the revenue of the buying center.

c.It is the monitory value assigned in responsibility accounting for exchanges that take place between the responsibility centers of an enterprise.

d.Both (a) and (c)

46.______ the department is an organization would normally not be considered as a cost center.

a.public relations

b.research and development



47.Identify the statement that is true with regard to responsibility centers in an organization.

a.Cost centers are held responsible for the costs incurred but not for generating revenue.

b.Revenue centers are those responsibility centers which are responsible for profits and the manager of a revenue center has control over both the input (cost of resources) as well as the output (revenue earned).

c.Profit center are held responsible for the overall economic performance in terms of the cost incurred, the revenue generated, as well as the associated investment.

48.Of the following statements describing cost center, identify the one which is false.

a.From the perspective of the cost center’s manager, both the costs and the level of outputs can be independently controlled.

b.In attempting to minimize costs, managers of cost centers may ignore important non-financial indicators of performance.

c.The public relations department and the research and development department in an organization are examples of cost centers.

d.Cost centers are classified into two different types – standard cost centers and discretionary expense centers.

49.The managers of ______ centers, as a part of responsibility structure, have to focus on both cost reduction and maximization of revenue in order to achieve the profit targets.



c.discretionary expense


50.The decision on the definite set of control alternatives to be used involves an analysis of the structural and contextual factors which influence control systems and also making a cost-benefit analysis. In situations in which accepted norms for actions cannot be formed, ______ are useful but only if the outcome from actions can be assessed.

a.personnel/cultural controls controls

c.results controls

d.judgemental controls

51._______ find it easier to use tight personnel/cultural controls compared to ______ as in the former, there is often a commonality between the desires of individual employees and those of the organization as a whole.

a.Large multi-business establishments; related diversified firms

b.Multinational corporations; single-country companies

c.Small and single business; large multi-business establishment

d.Diversified firms; single business firms

52.Which of the following are the requisites for tight action accountability controls?

i.Definition of the desired actions specifically telling the performer what needs to be done instead of providing a general line of conduct

iii.Effective tracking of the action

iv.Provision for significant rewards or punishments for taken

a.Only i and ii

b.Only i, ii and iii

c.i, ii iii and iv

53.According to Christopher Bartlett and Sumantra Ghosal, organizations can choose from one of four strategies for doing international business. Among these strategies, the international strategy involves _______.

a.adapting to local requirements by customizing both product and marketing strategy

b.transferring know-how and/or products developed in the home country to foreign markets where they are scarce or unavailable

c.focusing on cost reduction by selecting locations for value addition based on the objective to minimizing costs and achieving economies of scale along with the beneficial effects of learning and experience

d.achieving both cost reduction and local adaptability while encouraging a two-way flow of know-how between the parent company and subsidiary

54.The _______ strategy in international business involves adapting to local requirements by customizing both product and marketing strategy, and usually involves a poor flow of know-how between the parent company and the subsidiary.



53.Which of the following strategies that may be adopted by organizations doing international business aims at achieving both cost reduction and local adaptability ؍encouraging a two-wat flow of know-how between the parent company and the subsidiary?

a.Global strategy

b.Multi-domestic strategy

c.Transnational strategy

d.International strategy

54.Which of the following statements is incorrect regarding the centralization decision in which of the four strategies in international business?

a.International strategy – the parent organization in the home country might retain with itself the process of product development;

b.Multi-domestic strategy – subsidiaries adapt a local requirement by deciding independently on issues related to production and marketing, while R&D, marketing, etc, are to great extent centralized.

c.Global strategy – decisions regarding location of production facilities, R&D, marketing etc., are to a great extent centralized.

d.Transnational strategy – simultaneously, decentralize decisions that help in cost competitiveness and centralize decisions to ensure local responsiveness.

55.The limitation of global structures based on area or product resulted in multinational corporations (MNCs) adopting the transnational strategy which uses a global matrix structure. Identify the statements that are true with regard to the global matrix structure.

ii.It has limitations such as disagreements and differences between the two hierarchies (product and area) and rigidities in decision-making procedures which lead to slow responsiveness to market needs.

iii.A particular manager becomes a part of both the divisional and product hierarchies and reports to two superiors.

a.Only i and ii

b.Only i and iii

c.Only ii and iii

d.i, ii and iii

56.In international business, results control is more appropriate for organizations adopting the ____ and _______ strategies.

a.multi-domestic; international; global; multi-domestic

d.transnational; multi-domestic

57.Identify the controls that are more appropriate to use in organizations that have adopted the global strategy or the in international business.

a.Action controls and results controls

b.Results controls and personnel controls

c.Cultural controls and results control

d.Action controls and personnel/cultural controls



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