Question

A decentralized organization is one in which:

a. each stockholder is given decision-making authority.

b. only top-level management is given decision-making authority.

c. each employee in the organization is given permission to make decisions about their company.

d. managers at various levels throughout the organization are given decision-making authority.

A local chain department store grants each of its store managers the authority to make buying decisions for their stores. Granting managers this kind of authority is found in which type of organization?

a. Desegmented

b. Centralized

c. Segmented

d. Decentralized

A local chain electronics store does not allow its store or district managers to make important decisions about their stores. The main role of store managers is to supervise employees and make sure day-to-day transactions run smoothly while district managers supervise store managers and report profitability data back to top-level management. Not allowing store or district managers decision-making authority is most likely to be found in which type of organization?

a. Centralized

b. Desegmented

c. Segmented

d. Decentralized

When a few individuals at the top of an organization retain decision-making authority, the organization is referred to as a(n):

a. investment center.

b. centralized organization.

c. decentralized organization.

d. profit center.

Which of the following statements regarding the structure of organizations is false?

a. In a decentralized organization, decision-making authority is confined to top-level management.

b. Decentralization may make it difficult for managers to share unique and innovative ideas.

c. When decision-making authority is spread among too many managers, managers may become so concerned with their own area of responsibility that they lose sight of the company's overall focus.

d. In a decentralized organization, there may be a lack of coordination and communication between segments.

Which of the following is an advantage of decentralization?

a. It allows top-level management who normally work at corporate headquarters to get involved with the day-to-day decisions that need to be made at lower levels.

b. It allows managers to focus on their own area of responsibility rather than what is best for the company as a whole.

c. It requires very little as far as manager training costs.

d. It allows decisions to be made in a more timely manner.

Which of the following is not an advantage of decentralization?

a. It allows lower-level managers to focus on their own particular goals and objectives without having to consider the overall company's goals and objectives.

b. It allows top-level managers more time to devote to long-range strategic planning.

c. It permits lower-level managers to gain valuable on-the-job training in order to become better managers.

d. It often creates higher job satisfaction for managers.

Which of the following is often not a disadvantage of decentralization?

a. Lack of coordination and communication between segments.

b. Higher training costs for lower-level managers.

c. Lack of company focus as lower-level managers may make decisions that benefit their own particular segment.

d. Decreased job satisfaction for lower-level managers.

Which of the following is a disadvantage of decentralization?

a. Lower training costs for lower-level managers.

b. Less timely decisions are able to be made on a day-to-day basis.

c. Decreased job satisfaction for lower-level managers.

d. Lack of coordination and communication between segments.

"Responsibility accounting" is the concept that says:

a. managers should be responsible for both revenues and costs of their particular segment.

b. managers should be held entirely responsible for all investment decisions that impact the particular segment in which they are in charge.

c. managers should be held responsible for only those things under their control.

d. managers should never be held entirely responsible for things that happen within the particular segment in which they are in charge.

A budget for a single unit of a product or service is called as a:

a. real cost.

b. fixed cost.

c. total cost.

d. standard cost.

Which of the following statements is true regarding the budgeted cost for direct materials?

a. It must be determined after materials are purchased for the year.

b. It can not be determined if a company uses a just-in-time inventory system.

c. It would consist of two components - a standard quantity and a standard price.

d. It would be used on a static budget but not a flexible budget.

Variance analysis compares:

a. standard costs and actual costs.

b. static budgets and flexible budgets.

c. product costs and period costs.

d. practical standards and ideal standards.

Which of the following statements is false regarding task analysis?

a. It uses actual historical data in the determination of standard costs.

b. It emphasizes what it should cost to produce a product rather than historical costs.

c. It examines the production process in detail.

d. It may involve the use of engineers.

Task analysis:

a. is used to set standard costs.

b. is used to determine the tasks that production employees should complete on a daily basis.

c. is used to evaluate employee performance.

d. emphasizes the historical costs of a product.

A(n) ____ is attainable only when near-perfect conditions exist.

a. static budget

b. ideal standard

c. flexible budget

d. practical standard

In most companies, machines break down occasionally and employees are often less than perfect. Which type of standard acknowledges these characteristics when determining the standard cost of a product?

a. Practical standard

b. Ideal standard

c. Efficiency standard

d. Budgeted standard

Hathaway Inc. produces and sells golf umbrellas to local resorts. Hathaway anticipates April to be a busy month with the sale of 2,000 umbrellas. The company has prepared the following static budget for April:

Sales revenue (2,000 units)	$60,000
Variable costs:
Direct materials	6,000
Direct labor	8,000
Overhead	2,500
Fixed costs	6,000
Net operating income	$37,500

During April, Hathaway actually produced and sold 2,300 umbrellas. What should be Hathaway's net operating income in April based on a flexible budget?

a. $35,025

b. $43,125

c. $44,025

d. $37,500

Hoppe Inc. manufactures widgets. Management has determined that each widget has a standard materials cost of $3.50 when 2.5 ounces of raw material at a cost of $1.40 per ounce are used. The static budget for the month of December showed an estimated production of 4,000 widgets in December. During December, 4,300 widgets were actually produced. The actual cost for each widget was $3.60 when 2.25 ounces of raw material at a cost of $1.60 per ounce were purchased and used. What should be the total direct materials cost according to Hoppe's flexible budget for December?

a. $14,000

b. $15,480

c. $14,400

d. $15,050

Violetta Inc. manufactures plastic storage boxes. Management has determined that each medium-sized box has a standard materials cost of $1.20 when 4 pounds of raw material at a cost of $.30 per pound are used. The static budget for the month of March showed an estimated production of 15,000 boxes in March. During March, 17,000 boxes were actually produced. The actual cost for each box was $1.56 when 3.9 pounds of raw material at a cost of $.40 per pound were purchased and used. What should be the total direct materials cost according to Violetta's flexible budget for March?

a. $26,520

b. $23,400

c. $18,000

d. $20,400

Answer 1

1) Solution: managers at various levels throughout the organization are given decision-making authority

Explanation: In decentralized organization at all levels of management authority is delegated and throughout the organization.

2) Solution: Decentralized

Explanation: In decentralized organization at all levels of management authority is delegated and throughout the organization.

3) Solution: Centralized

Explanation: In centralized organizational structure the authority of decision-making is concentrated at the top, and only some people are responsible for making decisions and creating the policies of the organization.

4) Solution: Centralized organization

Explanation: In centralized organizational structure the authority of decision-making is concentrated at the top, and only some people are responsible for making decisions and creating the policies of the organization.

5) Solution: In a decentralized organization, decision-making authority is confined to top-level management

Explanation: In decentralized organization at all levels of management authority is delegated and throughout the organization.

6) Solution: It allows decisions to be made in a more timely manner

Explanation: In decentralized organization decisions can be made more quickly

7) Solution: It allows lower-level managers to focus on their own particular goals and objectives without having to consider the overall company's goals and objectives.

Explanation: In decentralized organization lower-level managers also participate in company's goal

8) Solution: Decreased job satisfaction for lower-level managers

Explanation: In decentralized organization lower-level managers also participate in company's goal thus increases the job satisfaction

9) Solution: Lack of coordination and communication between segments

Explanation: In decentralized organization there is lack of coordination and communication between segments

10) Solution: managers should be held responsible for only those things under their control

Explanation: Responsibility accounting held’s managers accountable for work under their control

11) Solution: standard cost

Explanation: The standard cost refers to a budget for a single unit of a product or service

12) Solution: It would consist of two components - a standard quantity and a standard price

Explanation: The budgeted cost for direct materials is inclusive of standard quantity and it's standard price

13) Solution: standard costs and actual costs.

Explanation: The variance analysis makes a comparison of standard costs and actual costs.

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