CLEP Management Exam Answer Key

1. A Michael Porter suggested that companies use three strategies to distinguish themselves from their competition. These strategies are: differentiation (finding a way to be different), cost-leadership (offering lowest prices), and focus (identifying a unique customer base).

2. C In his famous book The Wealth of Nations, Adam Smith argues that productivity can be increased by division of labor and specialization.

3. D The term span of management refers to the number of staff who report to one manager.

4. E A contingency approach is built around the idea that the context in which an organization operates affects the effectiveness of the organization’s form. The four contingencies that research shows affect organizational structure are size, strategy, technology, and environment.

5. B The ideal HR productivity level is generally set at one HR staff member for every 100 employees.

6. B The Equal Pay Act of 1963 sought to eliminate wage disparities based on gender and guarantees equal pay for men and women doing equal work.

7. D Organizations are usually divided into centers responsible for meeting budget requirements. An expense center requires a department to stay within expense constraints, a revenue center requires a department to generate a preset amount of revenue, a profit center looks at revenue minus expense, and an investment center is a profit center with an additional budget for “big ticket” items.

8. B Toyota developed the kanban system to deal with the issue of defective parts. Under the kanban system, a limited number of parts are kept on hand at any one time so that if there are problems with parts, they are found before too many complete products are assembled.

9. E The equity theory posits that employees assess their situations relative to that of their co-workers. It further asserts that if an employee finds an inequity, such as a coworker receiving a raise, the employee will be motivated to resolve that inequity in some way, e.g., by talking to his/her supervisor or finding a different job.

10. D Groups typically go through the following stages in this order: form, storm (conflict among group members), norm (resolution of conflict), perform (task accomplishment), adjourn.