1.Which theory is most useful in explaining the need for incentives in decentralized organizations?

a)Theory of constraints.

b)Agency theory.

c)Allocation theory.

d)Theory of capacity.

2.Which of the following is the dominant theme in management control?

a)Goal congruence

b)Profit maximization

c)Decentralization

d)Responsibility accounting

3.The economic rule dictates an opportunity cost of zero for an internal transfer under which of the following conditions?

a)If there is excess capacity in the selling unit.

b)If there is excess capacity in the buying unit.

c)If both the selling and the buying unit operate in a monopolistic market setting.

d)If there is excess capacity in both the selling unit and the buying unit.

4.Which of the following groups of costs are considered agency costs?

a)Benchmarking, bonding, and monitoring.

b)Bonding, incentive compensation, and monitoring.

c)Bonding, manufacturing, and monitoring.

d)Monitoring, manufacturing, and residual loss.

5.In a multi-product firm with limited resources, the choice of the most profitable product mix is best determined by which of the following?

a)Allocating the scarce resource to the product with the greatest contribution margin per unit sold.

b)Allocating the scarce resource to the product with the greatest contribution margin ratio per unit sold.

c)Allocating the scarce resource to the product which yields the greatest output, in units, for one unit of the scarce resource.

d)Allocating the scarce resource to the product with the greatest contribution margin per unit of the scarce resource.