LO3/4

Question 1

Organisational structure

Answer 1

A formal way of outlining the way that authority, responsibility and information will flow in a business.

Question 2

Division of work

Answer 2

The process of dividing a job or project into smaller tasks and assigning responsibility for their completion to a specific group or individual.

Question 3

Hierarchy

Answer 3

The number of levels in the organisational structure.

Question 4

Chain of command

Answer 4

The route through which authority is passed down through an organisation.

Question 5

Delegation

Answer 5

I’m Passing authority (but not responsibility or accountability) down through the organisational hierarchy to a subordinate.
Pros
- it can motivate and empower workers that have been given more responsibility
- time to focus on more complex tasks of more importance
- it can develop the workforce’s skills and flexibility
- the quality of the work may improve due to more highly skilled subordinates
Cons
- subordinates may not have the skills or experience to do a “good” job
- loss of control may result in decisions being made that do not reflect the overall objectives of the business

Question 6

Span of control

Answer 6

The number of subordinate reporting to each manager/supervisor.

Question 7

Functional approach

Answer 7

This approach separates a business into departments.

Question 8

Product approach

Answer 8

This approach separates a business according to the types of products it manufacturers.

Question 9

Geographic approach

Answer 9

The type of approach separates a business according to the geographic areas it operates in.

Question 10

Advantages of a narrow span of control

Answer 10

• more opportunities for promotion for employees
• easier to control workers
• more likely to know when employees have a problem
• more managers reduce promotion opportunities
• better control over subordinates work
• easier to communicate

Question 11

Disadvantages of a narrow span of control

Answer 11

• slower decision making
• workers can be demotivated
• expensive
• more supervision reduced worker motivation

Question 12

Break-even

Answer 12

The level of output where TOTAL REVENUE = TOTAL COST

Question 13

Break-even level of output

Answer 13

Total fixed cost / contribution per unit

Question 14

Contribution per unit

Answer 14

Price - variable cost per unit

Question 15

Margin of safety

Answer 15

ACTUSL SALES - BREAK-EVEN LEVEL OF OUTPUT
- the amount by which sales can fall before a loss is made

Question 16

Cash inflows

Answer 16

The flow of money into a business.

Question 17

Cash outflows

Answer 17

The flow of money out of a business.

Question 18

Net cash flow

Answer 18

The difference between cash inflows and cash flows in a given time period.

Question 19

Income statement

Answer 19

A financial statement that records the revenue, costs and profits of a business for a given period of time.

Question 20

Subordinate

Answer 20

An employee who is below another employee in an organisational hierarchy

Question 21

Wide span of control

Answer 21

Advantages
- less expensive as fewer managers/supervisors are needed
- less supervision improves worker motivation
- faster communication and decision making
Disadvantages
- fewer managers/supervisors reduces promotion opportunities
- less control over subordinate work
- effective communication may be difficult

Question 22

Narrow span of control

Answer 22

Advantages
- more managers/supervisors increases promotion opportunities
- better control over subordinate work
- effective communication may be easier
Disadvantages
- more expensive as more managers/supervisors are needed
- slower communication and decision making

Question 23

Tall organisational structure

Answer 23

• many layers of hierarchy
• long chains if command
• narrow spans of control
• centralised decision making (minimal delegation)

Question 24

Flat organisational structure

Answer 24

• few layers of hierarchy
• short chains of command
• wide spans of control
• decentralised decision making (more delegation)