1. The management control system includes
   1. Delegation of decision rights
   2. Commitments
   3. Pricing decisions
   4. Capital budgeting

2. Decentralization:
   1. Takes advantage of local knowledge.
   2. Delays response to local problems.
   3. Reduces dysfunctional decision-making.
   4. Gives top management more control.

3. Delegation of decision authority:
   1. Is the essence of decentralization.
   2. Is followed by performance evaluation and compensation.
   3. Is part of management control system.
   4. All of the above.

4. A manager in charge of research and development is likely to be heading a:
   1. Revenue center.
   2. Profit center.
   3. Standard cost center.
   4. Discretionary cost center.

5. The manager of a profit center is responsible for all of the following except:
   1. Sales revenue.
   2. Corporate overhead.
   3. Production costs.
   4. Marketing costs.

6. Which of the following statements is correct?
   1. When diverse centers exist, management frequently establishes the same target level of performance for all centers.
   2. It is safe to assume that, if the manager is willing to work for the organization, he or she should be paid more.
   3. Managers should be held responsible for costs or profits over which they have decision making authority.
   4. The compensation system cannot be used to align better the risk preferences of the manager and the firm.

7. Which of the following represents an example of relative performance evaluation?
   1. Actual vs. budgeted divisional income
   2. Division A income vs. Division B income
   3. This years income vs. last years income
   4. Actual vs. standard costs

8. A dual rate method:
   1. Allocates costs by separating a common cost into fixed and variable components.
   2. Each cost component has a different allocation base and an allocation rate.
   3. Transforms variable cost into fixed cost for decision making purpose.
   4. Both a and b.

9. If high-pressure performance evaluation systems are adopted:
   1. The pressure motivates employees to perform.
   2. The pressure is concentrated in middle managers.
   3. Fraudulent financial reporting is less likely to occur.
   4. There is a desire to stick with the accounting standards.

10. Internal control:
    1. Is designed to provide absolute assurance of achieving organizations goals.
    2. Is the responsibility of factory foremen.
    3. Helps protect a companys assets.
    4. Is optional for publicly traded companies.