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Question PaperManagement Control and Information Systems - I (MB2F3): January 2009

Answer all 88 questions.

Marks are indicated against each question.

Total Marks : 1001. Which of the following would be the Critical Success Factors (CSFs) for consumer electronic

industry such as Whirlpool?

I. Store location.

II. Sustainable customer relationships with distributors.

III. Sustainable supplier relationship.IV. Cutting edge research and development.

(a) Both (I) and (III) above

(b) Both (II) and (IV) above

(c) Both (III) and (IV) above

(d) (I), (II) and (III) above

(e) (II), (III) and (IV) above. (1 mark)

2. Structural dimensions are the dimensions that are entirely internal to the organizations. The structural

dimensions are shaped based on which of the following types of dimensions?

(a) Contextual dimensions

(b) Formal dimensions

(c) Informal dimensions

(d) Cultural dimensions(e) Functional dimensions. (1 mark)

3. Tata Group implemented the Tata Business Excellence Model (TBEM) to bring about a

transformation in the organization to enable it to face the dynamic and competitive business

environment. TBEM include(s) core value(s) like

I. Organizational agility.

II. Valuing employees and partners.

III. Company-driven excellence.

IV. Visionary leadership.

(a) Only (I) above

(b) Only (III) above

(c) Both (I) and (III) above(d) Both (II) and (IV) above

(e) (I), (II) and (IV) above. (1 mark)

4. Which of the following transactions results in decrease of working capital?

(a) Issue of shares for cash

(b) Take over of long-term investments by creditors

(c) Stock sold at 20% below cost for cash(d) Machinery purchased in exchange of debentures

(e) Preliminary expenses written-off. (2marks)

5. A budget for discretionary expenditure such as training, advertising, sales promotion and research and

development etc., is an example of which of the following types of budget?

(a) Master budget

(b) Flexible budget(c) Capital budget

(d) Appropriation budget

(e) Participative budget. (1 mark)

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6. Who among the following decides whether the financial statements audited are depicting the true and

fair picture of the organizations state of affairs?

(a) Director of the company

(b) Auditor of the company

(c) Chief executive officer of the company

(d) President of the company

(e) Government. (1 mark)

7. Mandira Ltd., has furnished the following budget for the next year:

Quarters 1st

2nd

3rd

4th

Budgeted direct labor hours 69,000 74,000 71,000 76,000

Variable overhead rate per labor hour Rs. 6.20 Rs. 6.20 Rs. 6.20 Rs. 6.20

Fixed manufacturing overhead costs Rs.82,000 Rs.82,000 Rs.82,000 Rs.82,000

The fixed manufacturing overhead costs include depreciation of Rs.42,000 per quarter. 75% of the

manufacturing overhead costs of each quarter are paid in cash during that quarter and the remaining

25% is paid in the following quarter. The amount of overhead costs to be paid during the 2nd

quarter is

(a) Rs.4,75,550

(b) Rs.4,91,050

(c) Rs.5,09,800(d) Rs.5,40,800

(e) Rs.5,33,050. (2marks)

8. Which of the following is more convenient for Reliance telecom, if it wants to compare its market share

with that of its competitors?

(a) Table

(b) Pie chart

(c) Bar chart

(d) Line chart

(e) Dot chart. (1 mark)

9. An individuals value system is an important factor that determines whether he/she will behave

ethically or unethically, when faced with an ethical dilemma. Which of the following is/are true aboutlocus of control, one of the individual factors that influence ethical behavior?

I. Is the ability of the individual to take decisions independently in the face of problems.

II. Relates to the reasons which a person cites for his/her success or failure.

III. People with high locus of control will not depend on others for decision-making whereas people

with low locus of control will look to other people for help in arriving at decisions.IV. Managers with an external locus of control feel they are in control of the situation and are ready to

be held accountable for their actions.

(a) Only (II) above

(b) Both (I) and (III) above

(c) Both (II) and (IV) above

(d) (I), (III) and (IV) above

(e) All (I), (II), (III) and (IV) above. (1 mark)

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10.Key performance indicators have an impact on all the key results areas of the organizations. Which of

the following is/are the characteristic(s) of the key performance indicators?

I. Key performance indicators are generally financial in nature and cannot be measured whenever

required.

II. They should be devised in such a way that employees at all levels in the organization understandand utilize them effectively.

III. Key performance indicators have a major effect on most of the critical success factors but theyhave a negative impact on most of the performance indicators.

IV. Both the teams and the individuals in an organization are held responsible for the key performance

indicators.

(a) Only (II) above


(c) Both (II) and (IV) above

(d) Both (III) and (IV) above

(e) (I), (II) and (III) above. (1 mark)

11.Which of the following organizational structure is also termed as Product structure?

(a) Functional structure

(b) Horizontal structure

(c) Matrix structure(d) Divisional structure

(e) Hybrid structure. (1 mark)

12.Which of the following constitute the foundation of the cybernetic process of management control?

(a) Principles

(b) Actuals

(c) Standards

(d) Controls

(e) Objectives. (1 mark)

13.The calculation of which of the following heads are included in the preparation of direct material

budget?

I. Quantity of material needed for production.

II. Quantity of material to be purchased.

III. Availability of raw material.

IV. Cost of material used.

(a) Both (I) and (II) above



(d) (I), (II) and (IV) above


14.Which of the following is/are true about Compliance management audit?

I. Auditors are asked to identify the gaps between the organizations existing policies and objectives

and its actual practices.II. Agribusiness firms engaged in food processing may regularly schedule audits of their quality

control function is an example of compliance management audit.

III. An organization conducts compliance management audit to find ways to optimize the usage of

energy in an organization.IV. This type of audit eliminates the fear of directives being imposed on the organization by an

outside party.

(a) Only (III) above

(b) Both (I) and (IV) above

(c) Both (II) and (III) above



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15.Which of the following lead to a cost variance for materials, if the cost of materials is recorded wrongly

or it is recorded higher or lower than the correct or budgeted value?

(a) Operational causes

(b) Controllable causes

(c) Uncontrollable causes

(d) Situational causes

(e) Non-operational causes. (1 mark)

16.In order to have a clear idea of an organizations financial health, some important information should

be disclosed in the annual report. Which of the following is considered to be Essential information

item in an annual report?

(a) Capitalized interest

(b) Major contractual relationships

(c) Information regarding assets

(d) Discussion on major factors influencing next year

(e) Capital expenditure. (1 mark)

17.Productivity and quality are the important aspects in operations management. Bad quality can lead to

managers budgeting for slack in their operations, in terms of

I. Efficient utilization of resources.II. Providing for greater lead times.

III. Accepting relatively poor quality.

(a) Only (I) above

(b) Only (II) above

(c) Only (III) above(d) Both (I) and (II) above

(e) Both (II) and (III) above. (1 mark)

18.Strategic decision-making may involve a lot of uncertain and fuzzy variables. Using which of the

following techniques, Decision support systems help in controlling the inherent risk in decision-making

in such scenario?

(a) Where-if analysis(b) How-if analysis

(c) What-if analysis

(d) Who-if analysis

(e) When-if analysis. (1 mark)

19.Which of the following is an example of the cost center in which a certain fixed budget is a llocated to

the cost center and it is expected to achieve the best possible results within the allocated budget?

(a) Maintenance department

(b) A company-owned sales outlet

(c) Information technology department

(d) Finance department

(e) Public relation department. (1 mark)

20.Management controls are classified based on different schemes. Which of the following is aclassification based on time of implementation of controls?

(a) Closed loop controls

(b) Personnel/cultural controls

(c) Formal controls

(d) Action accountability(e) Pre-action appraisals. (1 mark)

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21.Which of the following are the benefits of master budgets?

I. As the master budget is a compilation of the budgets from different departments, it helps in better

integration of all the organizational functions.

II. A master budget helps the employees track how each of their business unit objectives, when

achieved, contribute to the objectives of the organization.III. The planning activity in master budgets helps organizations to look for alternative ways in which

they can enhance value to customers and also minimize costs.IV. Master budgets serve only as planning tool and do not serve as control tool.


(b) Both (II) and (III) above(c) (I), (II) and (III) above



22.In certain organizations, the transfer pricing department only draws up the transfer pricing policies, the

implementation and day-to-day management are taken care of by the

(a) Human resource department

(b) Marketing department

(c) Operations department

(d) Finance and tax departments(e) Legal department. (1 mark)

23.There are many categories of audits that organizations undertake. The audit categories differ in terms of

I. Their emphasis on financial data and/or non-financial data.II. Secondary purpose.

III. Compliance, certification, communication and/or control.

IV. Scope.



(c) (I), (III) and (IV) above

(d) (II), (III) and (IV) above


24.Arogya Ltd., has furnished the following information pertaining to its product A for the month of

December 2008:

Particulars Actual Budget

Sales (units) 20,000 24,000

Sales revenue (Rs.) 2,20,800 2,52,000

The sales price variance for the month was

(a) Rs.10,800 (Adverse)

(b) Rs.10,800 (Favorable)

(c) Rs.12,400 (Favorable)

(d) Rs.12,960 (Adverse)(e) Rs.12,960 (Favorable). (1 mark)

25.Which of the following components of financial control, monitors the organizations financial activities

and maintains documentary evidence of all inflows and outflows?

(a) Financial policies

(b) Book-keeping

(c) Financial procedures

(d) Financial information system

(e) Controlling assets. (1 mark)

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26.Budgets are used to give an overview of the organization and its operations. Which of the following are

true about budgets?

I. Budgets help in integrating the tactical and operational strategies of different departments with the

corporate strategy of the organization.

II. The budgeting process starts with the dissemination of guidelines approved by the senior

management.

III. Budgets can be used to evaluate the performance of the operations of the organization as well asthe performance of the employees against set standards.

IV. Budgeting helps managers to enhance their learning skills.



(c) Both (III) and (IV) above(d) (I), (II) and (III) above


27.Which of the following is true about multi-domestic strategy, one of the strategies for doing

international business?

(a) In this strategy, there is a two-way flow of know-how between the parent organization and

subsidiary

(b) In this strategy, there is a one-way flow of know-how from the parent organization to thesubsidiary

(c) In this strategy, there is a transfer of know-how and/or products developed in the home country

to foreign markets where they are scarce or unavailable

(d) In this strategy, there is a poor flow of know-how between the parent organization and thesubsidiary

(e) In this strategy, there is no flow of know-how between the parent organization and the

subsidiary. (1 mark)

28.Geert Hofstede has defined culture and highlighted the dimensions on which culture varies across the

countries. Which of the following dimensions of culture implies competitive spirit, independent

thinking, assertiveness etc.?

(a) Individualism

(b) Masculinity(c) Collectivism

(d) Power distance

(e) Femininity. (1 mark)

29.In which of the following types of target in period-to-period reporting, the performance parameter isexpected to exhibit a linear pattern throughout the period during which the performance is analyzed?

(a) Step

(b) Seasonal

(c) Growth curve

(d) Flat line

(e) Vertical. (1 mark)

30.Dustin Ltd., in India sells wool to its subsidiary organization Diakiba Ltd., in China. If the rate chargedby Dustin Ltd., in India is same as the current market price as if the transaction is taking place

between two unrelated organizations, then the method of estimating transfer pricing is known as

(a) Comparable uncontrolled price method

(b) Profit sharing method(c) Two sets of prices method

(d) Two-step pricing method

(e) Cost plus method. (1 mark)

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31.Audit evidence is any kind of information that the auditor uses to determine whether the financial

statements being audited are in accordance with the established rules and regulations. Which of the

following is true about audit evidence?

(a) Audit evidence is not influenced by the legal and statutory requirements

(b) Audit evidence depends on the size of the item or error judged in the particular circumstances ofits omission or misstatement

(c) Judgment regarding audit evidence constitutes an evaluation of only quantity of misstatement inthe financial statements

(d) Audit evidence comprises of basic accounting data only

(e) For the audit evidence to be useful it has to fulfill criteria like sufficiency and appropriateness. (1 mark)

32.Damu Ltd., has furnished the following budgeted and actual sales for the month of December 2008:

Particulars Budget Actual

Units sold 4,900 units 4,500 units

Sales margin Rs.60 per unit Rs.55 per unit

The sales volume variance for the month was

(a) Rs.13,400 (Adverse)

(b) Rs.13,400 (Favorable)

(c) Rs.13,000 (Adverse)(d) Rs.24,000 (Adverse)

(e) Rs.24,000 (Favorable). (2marks)

33.An organization prepares a variety of financial statements to monitor business performance. Cash flow

statement is one of the financial statements which are extensively used for exercising financial control.

Which of the following is/are true about cash flow statement?

I. Cash flow statement is based on the accrual accounting principle.

II. An analysis of the cash flows from operating activities will indicate the quantum of cash being

generated from business operations.

III. Cash flow from investing activities helps to estimate future cash outflow requirements in terms of

payments to shareholders and lenders.

(a) Only (II) above(b) Only (III) above(c) Both (I) and (II) above

(d) Both (II) and (III) above

(e) All (I), (II) and (III) above. (1 mark)

34.Which of the following budgets help organizations to control inaccuracies regarding projections and in

turn minimize the discrepancies between the standards and the actuals?

(a) Rolling(b) Participative

(c) Master

(d) Financial

(e) Zero-based. (1 mark)

35.Which of the following controls is used when the objectives are clear and results are quantifiable, butthe interfaces are not predictable and activities not repetitive?

(a) Intuitive

(b) Political

(c) Judgmental

(d) Routine

(e) Expert. (1 mark)

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36.Mr. Alok Nath, manager of bearing division of Levi Ltd., takes decisions all alone about the various

operational aspects of the division and also decides the roles and responsibilities and the way work

should be carried out by the subordinates. Mr. Alok Nath can be categorized as

(a) Democratic manager

(b) Autocratic directive manager

(c) Autocratic permissive manager

(d) Democratic permissive manager(e) Democratic directive manager. (1 mark)

37.The success or failure of a business organization depends on number of factors. Which of the following

is not the factor which can be controlled by the organization?

(a) Service orientation

(b) Government rules and regulations

(c) Employees

(d) Leadership

(e) Administration. (1 mark)

38.Which of the following types of costs are used in the cost-based pricing methods?

(a) Actual

(b) Variable(c) Historical

(d) Fixed

(e) Standard. (1 mark)

39.Apex Ltd., is undergoing an audit, where the inherent risk is 50 percent, detection risk is

82 percent and the control risk is 48 percent and the maximum audit risk the auditor wishes to accept is18 percent. In above situation, if the audit risk is lower or higher than the maximum acceptable limit,

then the auditor should take necessary steps to

(a) Increase the probability of detecting the misstatement and decrease the detection risk

(b) Decrease the probability of detecting the misstatement and increase the detection risk

(c) Increase the probability of detecting the misstatement and decrease the inherent risk

(d) Decrease the probability of detecting the misstatement and decrease the detection risk

(e) Increase the probability of detecting the misstatement and decrease the control risk. (2marks)

40.Ambuli Ltd., manufactures plastic bags. The companys directors have projected the following sales for

the next three months:

February 2009 4,00,000 units

March 2009 4,20,000 units

April 2009 4,60,000 units

Opening stock of finished goods on February 01, 2009 is estimated as 50,000 units. The company has

some problems recently in supplying its customers promptly and the directors have decided to aim for a

10% increase in finished goods closing stock at the end of each of the three months.

Each bag uses 0.5 kg of plastic that costs Rs.12 per kg. The stock of plastic on February 01, 2009 isestimated as 60,000 kg. The raw material is readily available, but in order to ensure that the company

will not run out of stock, the directors would like to increase the closing stock of plastic by 10% eachmonth for the next three months. The cost of raw material to be purchased during the month of April

2009 will be

(a) Rs.27,09,180(b) Rs.28,83,420

(c) Rs.26,76,290

(d) Rs.28,12,200

(e) Rs.26,60,900. (2marks)

41.An interest coverage ratio of 6 indicates that

(a) Sales are 6 times of interest expense(b) Profit after tax is 6 times of interest expense

(c) Profit before tax is equal to 1/6th

of interest expense

(d) Profit before interest and taxes is 6 times of interest expense(e) Profit after tax is equal to 1/6

thof interest expense. (2marks)

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46.Entropia Ltd., introduced a fast food service with an assurance of delivering the order within the

prescribed time of 30 minutes to the customers door step. Identify the performance indicators, incase

there is a delay in delivering the order.

I. Performance driver.

II. Outcome indicator.

III. Time perspective.

(a) Only (I) above(b) Only (II) above

(c) Only (III) above

(d) Both (I) and (II) above


47.Specialization is one among the structural dimensions of organizational design. Which of the following

is/are true about degree of specialization?

I. One of the ways of achieving specialization is functional specialization.

II. In functional specialization the job is broken down into several parts which are useful in

overcoming restrictions of time and knowledge in performing complex jobs.

III. As the job performed by individual employees is of a routine nature in organizations with a low

degree of specialization, control systems usually consist of explicit rules and procedures which

help establish certain standard actions and results.

(a) Only (I) above

(b) Only (III) above

(c) Both (I) and (II) above

(d) Both (II) and (III) above(e) All (I), (II) and (III) above. (1 mark)

48.In the management context, the traditional concept of control does not refer to

I. The activities of establishing set performance, evaluating standard performance against these set

performance and implementing corrective actions to accomplish organizational objectives.

II. The activities of establishing standards for performance, evaluating actual performance against

these standards and implementing corrective actions to accomplish organizational objectives.

III. The activities of establishing actual performance, evaluating set performance against these actualand implementing corrective actions to accomplish organizational objectives.

(a) Only (I) above

(b) Only (II) above


(d) Both (I) and (III) above


49.Master budgets form the basis of the control systems in organizations. Financial budget is one of the

components of master budget. Which of the following are included in financial budget?

I. Capital budget.

II. Cash budget.

III. Production budget.

IV. Sales budget.




(d) (I), (II) and (III) above(e) All (I), (II), (III) and (IV) above. (1 mark)

50.According to Albrecht, the second component of the fraud involves

(a) Conversion

(b) Theft act

(c) Concealment

(d) Deterrence

(e) Detection. (1 mark)

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51.The total purchases of Paragon Ltd., is Rs.50,000. If the closing stock is more than the opening stock by

Rs.10,000, the cost of goods sold will be

(a) Rs.30,000

(b) Rs.50,000

(c) Rs.40,000(d) Rs.60,000

(e) Rs.70,000. (2marks)

52.A Corporate Annual Report (CAR) is a key public document prepared by organizations mainly to fulfill

the mandatory corporate reporting requirements. Quantitative information is one important aspect that

is considered in annual reports. Which of the following are generally included in quantitativeinformation?

I. The balance sheet.

II. The cash flow statement.

III. The income statement.

IV. The funds flow statement.



(c) (I), (II) and (III) above

(d) (II), (III) and (IV) above(e) All (I), (II), (III) and (IV) above. (1 mark)

53.The management control system of any organization can be divided into various parts. Which of the

following ethical control mechanism(s) is/are used by an organization to regulate activity of indicating

and communicating objectives?

I. Code of ethics.

II. Ethics training for employees.

III. System of whistleblowing.

IV. Corporate governance focused on ethics.

(a) Only (II) above


(c) Both (II) and (IV) above(d) (I), (II) and (IV) above


54.Key result indicators emerge from the organizations activities. Which of the following is an exampleof key result indicators that are relevant for many organizations?

(a) Return on capital employed

(b) Service coverage ratio

(c) Current ratio

(d) Assets turnover

(e) Inventory ratio. (1 mark)

55.Which of the following is/are not true about hybrid structure, one of the types of organizational

structure?I. In hybrid structure, there is a scope for different ways of thinking and a participative style of

management.

II. A combination of functional and divisional structures and matrix and horizontal structures are the

two types of hybrid structures.III. Hybrid organizations aim at functioning effectively by fitting the organization design to the

demands of the environment.

(a) Only (I) above

(b) Only (II) above




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56.Which of the following control principle suggests that managers should be informed about a

problematic situation only when the data shows a significant deviation from the established standards

and when a situation arises that is difficult for subordinates to handle?

(a) Management by control

(b) Management by walking around

(c) Management by objectives

(d) Management by exception(e) Bottom-up management. (1 mark)

57.The monetary value of ending inventory is required for calculating the

(a) Direct labor

(b) Cost of goods sold

(c) Sales

(d) Production

(e) Factory overhead. (1 mark)

58.The aim of conducting a social audit is to influence the policies, objectives and actions of the concerned

organization to improve its social performance. Which of the following is true about macro-micro

social indicator audit, one of the types of social audit?

(a) It aims to appraise a program which has already been initiated by the organization(b) It evaluates the contribution of the organization to the well being of the local community

(c) It can assume the form of a research based appraisal that is conducted to find out the social

impact of pollution caused by an organization

(d) It is conducted to assess social costs in terms of money

(e) This audit is limited to specific processes and programs of an organization that may have socialimplications. (1 mark)

59.The following data has been furnished by Winci Ltd., for the year 2007-08 pertaining to its products:

Estimated market size 7,25,000 units

Actual market size 5,00,000 units

Planned market share 29%

Standard margin per unit Rs. 3.28

The market size variance for Winci Ltd., for the year 2007-08 is

(a) Rs.4,34,281

(b) Rs.1,28,245

(c) Rs.3,12,222

(d) Rs.2,14,020(e) Rs.2,18,022. (1 mark)

60.One of the important approaches to performance analysis is the performance prism approach. This

approach comprises

I. Stakeholder satisfaction and contribution.

II. Strategies.

III. Processes.

IV. Capabilities.



(c) (I), (II) and (III) above

(d) (II), (III) and (IV) above


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61.In which of the following system of arbitration, to administer the transfer price mechanism and to

resolve conflicts in an organization both the parties submit a written case to the arbitrator, who reviews

it and decides on the price?

(a) Voluntary

(b) Informal(c) Formal

(d) Compulsory(e) Official. (1 mark)

62.Customer perspective of the Balanced Scorecard performance measurement framework is concerned

with attracting, satisfying and retaining profitable customers/consumers in chosen target segments.Which of the following is not the factor that influences the customers perception of the value delivered

by an organizations product or service?

(a) Quality

(b) Employee skills

(c) Performance and service

(d) Cost(e) Time. (1 mark)

63.Which of the following controls incurs lower monetary costs and usually does not result in harmful side

effects or negative attitudes?

(a) Action

(b) Result

(c) Personnel/cultural

(d) Tight

(e) Loose. (1 mark)

64.The brand manager for Arvinda Co., manufacturer of DVD players, need to take the approval of the

vice president of Marketing, before launching a new television commercial to replace an existing one.

The above situation elucidates which of the following types of controls?

(a) Behavioral restriction

(b) Formal controls

(c) Action accountability(d) Pre-action appraisals

(e) Informal controls. (1 mark)

65.Zero-based Budgeting (ZBB) is designed to evaluate the whole spectrum of functional activity, so thatareas that are inefficient and of little value are identified. The other advantage(s) of the ZBB is/are

I. In ZBB, the contributions which are intangible in nature are evaluated and ranked.

II. ZBB helps in integrating the planning and budgeting control processes.

III. ZBB helps in curbing redundant expenditure.

(a) Only (I) above

(b) Only (II) above(c) Only (III) above

(d) Both (II) and (III) above(e) All (I), (II) and (III) above. (1 mark)

66.Divisions in an organization are not allowed to buy the goods from outside sources because of the

internal constraints, even though outside capacity exists. In such situation, which of the following

methods of transfer pricing is implemented?

(a) Negotiated pricing

(b) Resale price

(c) Cost-based pricing

(d) Market-based pricing

(e) Profit split. (1 mark)

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67.Which of the following audit is an independent appraisal function established within an organization to

examine and evaluate its activities as a service to the organization and it need not be limited to books of

accounts and related records?

(a) Environmental

(b) Management

(c) Operational

(d) Internal(e) Financial statement. (1 mark)

68.Costing details of the Herbal and Health, detergent brands of India Limited, for 2008 are as follows:

Particulars Herbal Health

Planned sales units 30,00,000 45,00,000

Actual number of units sold 35,00,000 35,00,000

Standard selling price per unit Rs.18 Rs.15

Actual selling price per unit Rs.16 Rs.12

Standard margin per unit Rs. 8 Rs. 6

The total sales mix variance was

(a) Rs.15,40,000

(b) Rs.18,40,000(c) Rs.14,00,000

(d) Rs.13,20,000

(e) Rs.11,90,000. (2marks)

69.Which of the following is also known as statement of financial position?

(a) Cash flow statement

(b) Trial balance(c) Income statement

(d) Funds flow statement

(e) Balance sheet. (1 mark)

70.Who among the following is responsible for issuing the guidelines for budget preparation and for

making sure that this information is properly communicated throughout the organization?(a) Chief executive officer of the company(b) Company secretary

(c) Chief financial officer of the company

(d) Budget controller of the company

(e) Director of the company. (1 mark)

71.Multi-domestic strategy and international strategy are among the strategies suggested for doing

international business. Which of the following controls is/are more appropriate for these strategies?

I. Action controls.

II. Personnel/cultural controls.

III. Results controls.

(a) Only (I) above(b) Only (II) above




72.Management controls differ depending on the type of diversification. Related diversified firms depend

more on

(a) Dynamic controls(b) Financial controls

(c) Strategic controls

(d) Feedforward controls

(e) Feedback controls. (1 mark)

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73.In which of the following stages of product life cycle, the penetration, awareness, sales, market share,

etc., are very low?

(a) Introductory

(b) Growth

(c) Maturity(d) Decline

(e) Saturation. (1 mark)

74.Transfer pricing problem is encountered by vertically integrated organizations in industries where the

raw material is extracted and processed further to produce the final product. In order to overcome the

pricing problem, which of the following alternative way(s) of calculating transfer price is adopted?

I. Transfer price comprises a standard variable cost plus a share of actual profits on sales.

II. The selling unit is credited with the market sales price and the buying unit is charged for the total

standard costs.

III. The organizations transfer the goods and services between their profit centers at a price equal to

the prevailing open market price for those goods and services.

(a) Only (I) above

(b) Only (II) above


(d) Both (I) and (II) above(e) Both (II) and (III) above. (1 mark)

75.Detection risk is one of the components of audit risk. Which of the following is true regarding

detection risk?

(a) The auditors can control the level of detection risk by properly planning, directing etc.

(b) These risks arise due to various factors that affect the entitys operations

(c) Assessment of detection risk will involve considering the reliability of both the management and

the application controls

(d) Detection risk is not influenced by the audit procedures used by the auditors

(e) Detection risk is the risk that a material misstatement could occur in an assertion for an accountbalance or class of transactions, and would not be prevented or detected on a timely basis by the

internal control policies and procedures. (1 mark)

76.Max Ltd., has provided the following information pertaining to its sales for the month of December

2008:

Estimated market size 80,000 units

Actual market size 84,000 units

Planned sales 16,000 units

Actual sales 14,700 units

Standard margin per unit Rs.25

The variance due to market share for the period was

(a) Rs. 52,500 (Favorable)(b) Rs. 52,500 (Adverse)

(c) Rs. 32,500 (Adverse)(d) Rs. 32,500 (Favorable)

(e) Rs.1,00,000 (Favorable). (2marks)

77.Which of the following is classified as an efficiency ratio?

(a) Total assets turnover ratio

(b) Fixed charges coverage ratio

(c) Debt-equity ratio

(d) Price-earnings ratio

(e) Debt service coverage ratio. (1 mark)

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78.Which of the following is defined as resources and effort toward activities that cannot be justified

easily in terms of their immediate contribution to organizational objectives?

(a) Kickback

(b) Whistleblowing

(c) Slack

(d) Corporate counsel

(e) Moral judgment. (1 mark)

79.The concept of levers of control proposed by Robert Simons help managers not only in motivating

people to be creative but also in enforcing the control systems of the organization effectively. Which of

the following are false regarding boundary systems, one of the levers of control used in management?

I. These systems use quantitative data, statistical analyses and variance analyses to scan for anything

unusual that might indicate a potential problem.

II. These systems are used to communicate the doctrines of the corporate culture to every employee

of the organization.

III. Performance management, budgeting, brand management etc., are a few boundary systems.

IV. These systems are based on the principle that in an age of empowered employees, it is easier and

more effective to set the rules regarding what is inappropriate rather than what is appropriate.


(b) Both (II) and (IV) above(c) Both (III) and (IV) above

(d) (I), (II) and (III) above


80.Feedforward control is a(an)

(a) Follow-up control

(b) Follow-back control

(c) Assumed control

(d) Reverse control

(e) Anticipatory control. (1 mark)

81.Which of the following strategic business profile will be best suited, if the industry is stable and the

main challenge is to maintain or improve operational efficiencies, which the top management canmonitor due to its focus on cost efficiencies?

(a) Rigid/cost conscious

(b) Flexible/inefficient

(c) Flexible/cost conscious

(d) Rigid/inefficient

(e) Rigid/efficient. (1 mark)

82.Limra Ltd., is a company with two main business units - an equipment division and a furnishing

division. The following data is available for furnishing division for the year 2007-08:

Particulars Rs. in lakhs

Sales 1,000

Variable costs 800Traceable fixed costs 40

Segment margin of furnishing division of Limra Ltd., for the year 2007-08 is

(a) Rs.400 lakhs

(b) Rs.300 lakhs

(c) Rs.160 lakhs

(d) Rs.100 lakhs

(e) Rs.200 lakhs. (1 mark)

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83.Which of the following is an estimate of the amount by which the earnings of the company exceed or

fall short of the return that shareholders and lenders could have got, had they invested their money

elsewhere?

(a) Cost of capital

(b) Opportunity cost(c) Economic value added

(d) Market value added(e) Brand value added. (1 mark)

84.Which of the following is not a current liability?

(a) Acceptances or Bills payable(b) Sundry creditors

(c) Interest accrued and due on secured loans

(d) Amounts due to subsidiary companies

(e) Declared dividends. (1 mark)

85.For Snable Ltd., Profit before Interest and Taxes (PBIT) is Rs.90 lakhs, Capital is Rs.190 lakhs, Cost of

capital is 35% and tax rate is 40%. The Economic Value Added (EVA) for Snable Ltd., is

(a) + 03.8

(b) 12.5(c) 08.0

(d) + 04.3

(e) + 09.2. (2marks)

86.Lumbini Ltd., has furnished the following details for the year 2007-08:

Particulars Rs. 000s

Net Worth 900

Preference Share Capital 150

Preference Share dividend 11

Net Profit after Taxes 110

Interest 26

The Return on Net Worth (RNOW) for the given data is(a) 0.30

(b) 0.20

(c) 0.80

(d) 0.12

(e) 0.18. (1 mark)

87.A debt-asset ratio of 0.83 of a firm implies

(a) 83% of debt is yet to be repaid from the assets

(b) 83% of total assets are financed from debt sources

(c) 83% of the current assets are financed from debt

(d) 83% of the debt is already repaid from the assets

(e) 83% of the debt is used for financing fixed assets. (2marks)

88.A gross profit margin ratio does not indicate

(a) The earning power

(b) The efficiency of production

(c) The efficiency of pricing

(d) The gap between net sales and cost of goods sold

(e) The balance left to meet the administration and financial expenses. (1 mark)

END OF QUESTION PAPER

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Suggested AnswersManagement Control and Information Systems - I (MB2F3): January 2009

Answer Reason

1. B The critical success factors in case of consumer electronics industry such as Whirlpool would

be sustainable customer relationship with distributors and cutting edge research anddevelopment.

Hence the answer is (b).

0901 mc&is-i (mb2f3)

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