To Be Effective, Control Systems Should

question 104

Multiple Choice

To be effective, control systems should

• A)keep performance standards flexible and easy.
• B)focus on one-way top-down communication.
• C)be acceptable to all stockholders.
• D)use multiple control approaches.
• E)centralize decision making.

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Definitions:

Contribution Margin Ratio

A ratio that measures the percentage of sales revenue remaining after deducting variable costs, indicating the portion of sales available to cover fixed costs and generate profit.

Variable Expense Ratio

A ratio computed by dividing variable expenses by sales.

Break-even Analysis

A calculation to determine the sales volume at which total revenues equal total costs, indicating no profit or loss.

Contribution Margin Ratios

The ratio of contribution margin (sales minus variable costs) to sales revenue, indicating the percentage of sales revenue that exceeds variable costs.