Chapter 11 (Theory

Question 1

Decentralized organization

Answer 1

An organization in which decision-making authority is not confined to a few top executives but rather is spread throughout the entire organization

Question 2

Advantages of a decentralized organization #1

Answer 2

By delegating day-to-day problem solving to lower-level managers, top management can concentrate on bigger issues, such as overall strategy.

Question 3

Advantages of a decentralized organization #2

Answer 3

Empowering lower-level managers to make decisions puts the decision-making authority in the hands of those who tend to have the most detailed and up-to-date information about day-to-day operations.

Question 4

Advantages of a decentralized organization #3

Answer 4

By eliminating layers of decision making and approvals, organizations can respond more quickly to customers and to changes in the operating environment.

Question 5

Advantages of a decentralized organization #4

Answer 5

Granting decision-making authority helps train lower-level managers for higher-level positions.

Question 6

Advantages of a decentralized organization #5

Answer 6

Empowering lower-level managers to make decisions can increase their motivation and job satisfaction.

Question 7

Disadvantage of a decentralized organization #1

Answer 7

Lower-level managers may make decisions without fully understanding the company’s overall strategy.

Question 8

Disadvantage of a decentralized organization #2

Answer 8

If lower-level managers make their own decisions independently of each other, coordination may be lacking.

Question 9

Disadvantage of a decentralized organization #3

Answer 9

Lower-level managers may have objectives that clash with the objectives of the entire organization.1 For example, a manager may be more interested in increasing the size of his or her department, leading to more power and prestige, than in increasing the department’s effectiveness.

Question 10

Disadvantage of a decentralized organization #4

Answer 10

Spreading innovative ideas may be difficult in a decentralized organization. Someone in one part of the organization may have a terrific idea that would benefit other parts of the organization, but without strong central direction the idea may not be shared with, and adopted by, other parts of the organization.

Question 11

Responsibility Center

Answer 11

Any business segment whose manager has control over costs, revenues, or investments in operating assets.

Question 12

Cost Center

Answer 12

A business segment whose manager has control over cost but has no control over revenue or investments in operating assets.

Question 13

Examples of Cost Centers

Answer 13

Service departments such as accounting, finance, general administration, legal, and personnel are usually classified as cost centers. In addition, manufacturing facilities are often considered to be cost centers

Question 14

Examples of a Profit Center

Answer 14

A business segment whose manager has control over cost and revenue but has no control over investments in operating assets.

Question 15

Investment Center

Answer 15

A business segment whose manager has control over cost, revenue, and investments in operating assets.

Question 16

What is included in Operating Assets?

Answer 16

cash, accounts receivable, inventory, plant and equipment, and all other assets held for operating purposes.

Question 17

How is Margin improved?

Answer 17

improved by increasing selling prices, reducing operating expenses, or increasing unit sales

Question 18

Criticisms of ROI

Answer 18

1) Managers may increase ROI in a way that hurts the overall goal of the company
2) It isn’t great for judging a manager’s ability
3) Managers being evaluated by ROI may reject business investments that would help the whole company but hurt his segment

Question 19

Criticisms of Residual Income

Answer 19

It can’t be used to compare the performance of divisions of different sizes. Larger divisions often have more residual income than smaller divisions, not necessarily because they are better managed but simply because they are bigger.

Question 20

Balanced Scorecard

Answer 20

An integrated set of performance measures that are derived from and support the organization’s strategy.

Question 21

Four Groups of a balanced scorecard`

Answer 21

financial, customer, internal business processes, and learning and growth.

Question 22

Financial Scorecard

Answer 22

ROI, Residual Income, Gross Margin

Question 23

Learning & Growth

Answer 23

Suggestions by EMP, Biggest Resource, Certificatons, Continued Training/Conferences

Question 24

Internal Business Process

Answer 24

Number of Accidents by facility #Students enrolled

Question 25

Customer

Answer 25

Market Shares, Return Sales, Customer Feedback