Management Accounting MCQ Questions and Solutions with Explanations | Management

An organizational practice, according to which decision making freedom is available to lower level managers is known as decentralization. Decentralization refers to a specific form of organizational structure where the top management delegates decision-making responsibilities and daily operations to middle and lower subordinates.

Products or services that are transferred between different subunits of a company are classified as intermediate product. An intermediate good is a product used to produce a final good or finished product also referred to as a consumer good.

Means of collecting and using information, to coordinate decision and planning through an organization are termed as management control systems. Management control systems are the formal and informal structures put in place by a business that compare the goals and strategy of the organization against the actual outcomes.

Minimum freedom for managers and maximum constraints are main features of total centralization. Centralization of authority means the power of planning and decision making are exclusively in the hands of top management.

Price charged by one subunit to supply products or services to another unit is called transfer price. Transfer pricing is an accounting practice that represents the price that one division in a company charges another division for goods or services provided. A transfer price is based on market prices in charging another division, subsidiary, or holding company for services rendered.

Dysfunctional decision making is also known as dysfunctional decision making and incongruent decision making. Dysfunctional decision making can be a big drag on the results unless properly addressed.

Maximum freedom for managers and minimum constraints are main features of total decentralization. Decentralization is the process of distributing or dispersing functions, powers, people or things away from a central location or authority.

Degree to which freedom is given to lower level managers for decision making is classified as autonomy. Autonomy is the control or government of a country, organization, or group by itself rather than by others.

Per unit opportunity cost to selling subunit of company, is added into per unit incremental cost is incurred at point of transfer to calculate minimum transfer price. The minimum transfer price equals the incremental cost to create one product. The incremental price includes direct labor, direct material and direct overhead costs but excludes the expenses the transferring center would have incurred whether or not it made the product.