CLEMENTE, LEAH MAE L.

| BA10
Problem 11 ORGANIZATION STRUCTURE AND SPAN OF CONTROL
Refer to the organization charts labeled Structure A and
Structure B in the figure for Problem 11.
Required:
A. For organization structure A describe the:
1) Advantages and disadvantages of this structure
ADVANTAGES
It has a narrower span of control, meaning the managers have
more involvement in processes and procedures made by their
subordinates.
The managers can closely supervise and monitor their
subordinates.
A more detailed report will be submitted.
DISADVANTAGES
Having a narrower span of control can cause more operational
costs by the organization. (i.e. the amount of managers needed).

A narrow span of control with many layers of management means

less efficient communication upward and less interest in
communication downward.
2) Impact of the resulting span of control
The impact of using this kind of span of control is closer superiorsubordinate relationships due to close supervision. But, it may
foster the loss of morale and drive of the employees
3) Effect on employee behavior
Close supervision on employees can lead to good relationships
with supervisors, but it can also lead to lowering of morale which
causes lower quality of work done by the employees.
B. For organization structure A describe the:
1) Advantages and disadvantages of this structure
ADVANTAGES
Structure B implements a wider span of controls, which indicates
fewer managers. With this, communication with the persons at the
top of the hierarchy is not compromised.
In the decision making process, the subordinates have a lot of
involvement because authority is vested upon them.
Managers having broad controls operate more effectively.
DISADVANTAGES

Having a wide set of controls can cause managers to be

overworked, have trouble with decision making, and loss of control
over their subordinates.
Subordinates having authority to make decisions can cause
disastrous effects if they make the wrong calls or pronouncements.
2) Impact of the resulting span of control
The impact of using this kind of controls is that it influences the
effectivity of operations in an organization, but may also cause
faulty decision making by employees.
3) Effect on employee behavior
Subordinates being given authority for decision making can foster
higher morale; it can also build a subordinates rapport to higherups because of direct communication to top management. But,
subordinates may be subjected to problems which they cannot
counter and in turn leads to faulty decisions.
C. When determining the appropriate span of control discuss the
factors that should be considered.

If tasks performed are routine in nature (wider set of controls) or of

great complexity (narrow set of controls).
If the business is stable or dynamic.
Relationships with superiors and subordinates.
Skill level of the employees.
Responsibilities and capabilities of the managers and supervisor.

CLEMENTE, LEAH MAE L. | BA10

Problem 16 MANAGEMENT BY EXCEPTION
A variety of quantitative measures are used to evaluate
employee performance, including standard costs, financial ratios,
human resource forecasts, and operating budgets.
Required:
A. Discuss the following aspects of a standard cost system.
1. Discuss the characteristics that should be present to encourage
employee motivation
The standard cost system should be supported by management.
Translation of organizational goals and objectives into monetary and
understandable terms for the employees.
2. Discuss how the system should be implemented
The system should be implemented through tying an employees
performance with their reward system.
The corporate objectives of the system should be clearly
communicated.
B. The use of variance analysis often results in management by
exception.
1. Explain the meaning of management by exception
Management by Exception suggests that managers should limit
their attention to potential problem areas rather than being involved
in other activities. Through this, the managers have more time to
concentrate on the activities that need them.
2. Discuss the behavioral implications of management by exception.
Management by Exception increases management efficiency by
concentrating only on material variances, which in turn gives
managers time to concentrate on other activities.
Adversely, in management by exception managers tend to only
focus on the negative variances limiting their employee
interactions.
C. Explain how employee behavior could be adversely affected when
actual-to-budget comparisons are used as the basis for performance
evaluation.
When using actual-to-budget comparisons as the basis for
performance valuation employees may sabotage the system. The
employees may change the results of budgets that are low and
make them greater or even exceed the budget expectations to get a
higher performance.

CLEMENTE, LEAH MAE L. | BA10

REVIEW QUESTIONS CHAPTER 8
1. What information is contained in a journal voucher?
The information contained is a summary of many transactions can be single or
multiple.
2. How are journal vouchers used as a control mechanism?
They can provide controls against errors through the approval of journal vouchers
by authorized persons only.
3. What information is contained in the general ledger master file?
The information contained are account numbers, descriptions, asset classes, normal
balances, beginning balances, the sum of the debits and credits, and the current
balances.
4. What is the purpose of the general ledger history file?
It provides historical data for comparative financial reports.
5. What is the purpose of a responsibility center file?
The information contained here such as the revenues and expenditures for each
responsibility center in the organization is used by management resources system.
6. List the primary users of the FRS, and discuss their information needs.
The primary users are external users like investors, IRS, and SEC. They use this
information to assess performance and making sure regulations are being followed
correctly.
7. Name in order the 11 steps of the financial reporting process.
1. Capture transaction, 2. Record in special journal, 3. Post in subsidiary ledger, 4.
Post to general ledger, 5. Prepare unadjusted trail balance, 6. Make adjusting
entries, 7. Journalize and post adjusting entries, 8. Prepare the adjusted trail
balance, 9. Prepare financial statements, 10. Journalize and post-closing entries, and
11. Prepare the post-closing trail balance.
8. What assumption is made regarding the external users of financial
statements?
That the users of the financial reports understand the conventions and accounting
principles that are applied, and that the financial statements have information
content that is useful.
9. What are adjusting entries made, and what is their purpose? When are the
corresponding voucher entries made?
Adjusting entries are made after regular accounting entries are posted to their
significant ledgers, these are made to correct errors and to record any unrecorded
transactions. Voucher entries are made after adjusting entries.
10.
What tasks should he general accounting clerk not be allowed to do?
He/she should not be allowed to keep responsibility for special or subsidiary ledgers
nor prepare journal vouchers.
11.
What are the two operational reports produced by the FRS that
provide proof of the accuracy of the process?
These are the journal voucher listing and the general ledger change report.
12.
Explain which of the 4 potential risks may be controlled better by a
close examination of the journal list.

It should help uncover any journal voucher error, either incorrect or unauthorized
errors.
13.
What does XML stand for?
14.
eXtensible Markup Language.
15.
What does XBRL stand for?
16.
eXtensible Business Reporting Language.
17.
What is an XBRL taxonomy?
18.
It is a classified scheme of how to accomplish a specific information
exchange.
19.
What is an XBRL instance document?
20.
These are financial reports that can be printed by computer programs that
recognize tags.
21.
What is an XBRL tag?
22.
XBRL tags are typically held as comments within the document.
23.
Explain how the formalization of tasks promote internal control.
24.
It clearly specifies the responsibilities of a certain job position that helps to
assign compatible tasks to an individual.
25.
Explain why it is important that both responsibility and authority are
appropriately assigned to employees.
26.
Responsibility and authority should be appropriately assigned to employees
to avoid ineffective decision making done by unqualified employees.
27.
Distinguish between narrow and wide span of control. Give an
example of tasks appropriate to each.
28.
Narrow span of controls has lesser numbers of subordinates reporting to a
manager it has a narrow structure, while a wide span of controls has more
subordinates reporting to a manager it has a wider structure. Narrow span of
controls are appropriate for unstructured highly technical tasks, while a wider set of
controls are appropriate for handling structured and routine tasks.
29.
How does management by exception help to alleviate information
overload by a manager?
30.
Management by exception helps managers because it limits them to only
address critical tasks.
31.
Identify the instances for which feedback becomes useless in
helping to control activities.
32.
When it is hidden in other data or if it is not received in time to make a
difference.
33.
Contrast the four decision types strategic, tactical, management,
and operational control by the five decision characteristics time frame,
level of detail, recurrence, and certainty.
34.
Strategic Planning are typically long-term, have high impact on the firm,
summarized info, and uncertain in nature. Tactical Planning is typically mediumterm in nature, have limited impact, detailed, periodic recurring problems, and
highly certain. Management Decisions are medium-term, narrower impact, requires
summarized info, periodic recurring problems, and uncertain. Operational Decisions
are typically short-term, narrowest impact on firm, requires highly detailed info,
periodic problems, and highly certain in nature.
35.
What are the three elements that distinguish structured and
unstructured problems? Give an example.

36.
The three elements are data (values or information), procedures (sequence of
the steps or rules), and objectives (results that are to be obtained to solve a
problem). Structured cash disbursements. Unstructured transaction processing
systems.
37.
What management levels are more likely to deal with unstructured
problems? With structured problems? Why?
38.
The lower level management is more likely to deal with structured problems.
Because the higher the management the more unstructured the problems. Top
management will deal with structured.
39.
What are the two objectives that enable reports to be considered
useful?
40.
The 2 objectives are to reduce the level of uncertainty and to influence
behavior of the decision maker.
41.
42.
43.
44.
List and define the seven
objectives, they also need to make
report attributes.
a contribution to the objectives of
45.
Relevance must support
their superiors.
managers decision. Summarization
54.
What is data mining?
must be summarized according to
55.
It is the process of selecting,
organizational hierarchy. Exception
exploring, and modeling large
Orientation reports should
amounts of data to uncover
identify activities at risk of going
relationships and patterns that are
out of control. Accuracy free from
hidden among vast amounts of
material error. Completeness no
facts.
information should be missing.
56.
What is a data
Timeliness information must not
warehouse?
be older than the period it pertains.
57.
It is a centralized relational
Conciseness info should be
database system that has been
presented as concisely as possible.
designed to meet the needs of data
46.
What is responsibility
mining.
accounting?
58.
What is information
47.
It implies that every
overload?
economic event that affects the
59.
It occurs when a manager in
organization is the responsibility of
inundated with more information
and can be traced to an individual
than he/she can assimilate.
manager.
60.
Explain some reporting
48.
What are the two faces of
techniques that may cause
responsibility accounting?
dysfunctional behavior by a
49.
Setting financial goals and
manager.
measuring reporting performance.
61.
One is when reports contain
50.
What are three most
irrelevant information.
common forms of responsibility
62.
Explain how ad hoc
centers?
reports have allowed managers
51.
Cost centers, profit centers,
to make more better-quality
and investment centers.
decisions.
52.
What is goal congruence?
63.
Ad hoc reports allow
53.
It means that when lower
managers to retrieve information
managers pursue their own

very quickly thus allowing them to

respond to situations much faster.
64.
Explain how exception
reporting would be invaluable
to the manager of a credit
department.
65.
It helps to flag customers
who still have unpaid balances, or
suspicious purchases.
66.
What types of variances are
found on cost center reports?

67.
These are material
variances, Labor variances, and
overhead variances.
68.
Distinguish between a profit
center and an investment center.
69.
A profit center has the
responsibility for both cost control
and revenue generation. While in
an investment center, managers
have the general authority to make
decisions that profoundly affect the
organization.