FIN 912 - TRIMESTER 2, 2018 MID TRIMESTER EXAM PAP PART A: SHORT ANSWERS & EXPLANATION Q.1. "Control systems are a very important tool in business. The control systems designed or used can lead to the success or failure of the business." Do you agree? Why or why not? In your answer you are to give some specific examples of controls that have either made the business successful or failed the business. (5 Marks) Q. 2. In your studies, it has been mentioned that there are three (3) types of control mechanisms used. These controls are; Action, Results & Personnel Controls. Explain with examples the mentioned controls. You are to also give some insight of how these controls work (10 Marks) Q.3 Definition Questions (10 Marks) In your own words define the following and give examples of each: A. Automate/ Automation B. Gamesmanship C. Intrinsic Rewards D. Expectancy Theory E. Centralization Page 2 of 4FIN 912 - TRIMESTER 2, 2018 MID TRIMESTER EXAM PART B: CASE STUDY (35 Marks) Case Study - Leo's Four-Plex Theatre (Merchant & Van der Stede, 2nd ed) Leo's Four-Plex Theatre was a single-location, four screen theatre located in a small town in west Texas. Leo Antonelli bought the theatre a year ago and hired Bill Reilly, his nephew, to manage it. Leo was concerned, however, because the theatre was not as profitable as he had thought it would be. He suspected the theatre had some control problems and asked Park Cockerill, an accounting professor at a college in the adjacent town, to study the situation and provide suggestions. Park found the following: 1. Customers purchased their tickets at one of two ticket booths located at the front of the theatre. The theatre used general admission (not assigned) seating. The tickets were colour coded to indicate which movie the customer wanted to see. The tickets were also dated and stamped "good on day of sale only". The tickets at each price (adult, child, matinee, evening) were prenumbered serially, so that the number of tickets sold each day at each price for each movie could be determined by subtracting the number of the first ticket sold from the ending number. 2. The amounts of cash collected were counted daily and compared with the total value of tickets sold. The cash counts revealed, almost invariably, less cash than the amounts that should have been collected. The discrepancies were usually small, less than $10 per cashier. However, on one day two weeks before Park's study, one cashier was short by almost $100. 3. Just inside the theatre's front doors was a lobby with a refreshment stand. Park observed the refreshment stand's operations for a while. He noted that most of the stand's attendants were young, probably of high school or college age. They seemed to Page 3 of 4FIN 912 - TRIMESTER 2, 2018 MID TRIMESTER EXAM know many of the customers, a majority of whom were of similar ages, which was not surprising given the theatre's small-town location. But the familiarity concerned Park because he had also observed several occasions where the stand's attendants either failed to collect cash from the customers or failed to ring up the sale on the cash register. 4. Customers entered the screening rooms by passing through a turnstile manned by an attendant who separated the ticket and placed part of it in a locked "stub box". Test counts of customers entering and leaving the theatre did not reconcile either with the number of ticket sales or the stub counts. Park found evidence of two specific problems. First, he found a few tickets of the wrong colour or with the wrong dates in the ticket stub boxes. Second, he found a sometimes significant number of free ticket passes with Bill Reilly's signature on them. These problems did not account for all of the customer test count discrepancies, however. Park suspected that the ticket collectors might also be admitting friends who had not purchased tickets, although his observations provided no direct evidence of this When his study was complete, Park sat down and wondered whether he could give Leo suggestions that would address all the actual and potential problems, yet not be too costly. Questions: 1. Where is the theatre's control system lacking? Are the controls themselves weak or incomplete, or are the theatre's problems caused primarily because of lack of discipline in using the existing controls? 2. What control improvements would you suggest? THE END! Page 4 of 4