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BA 510: Management Control Systems

BA 510: Day 3 Agenda. 9:00-10:15Chapter 5 Discussion Chapter 5 Problems10:30-11:45Boise Cascade12:00-1:15Chapter 6 DiscussionChapter 6 Problems1:15-2:15 Lunch2:15-3:30Birch Paper Company3:45-5:00Chapter 7 DiscussionQuality Metal Service Center5:15-6:00Chapter 7 Problems. BA 510: Profit Centers.

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BA 510: Management Control Systems

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    1. BA 510: Management Control Systems EMBA: Singapore February, 2007

    2. BA 510: Day 3 Agenda 9:00-10:15 Chapter 5 Discussion Chapter 5 Problems 10:30-11:45 Boise Cascade 12:00-1:15 Chapter 6 Discussion Chapter 6 Problems 1:15-2:15 Lunch 2:15-3:30 Birch Paper Company 3:45-5:00 Chapter 7 Discussion Quality Metal Service Center 5:15-6:00 Chapter 7 Problems

    3. BA 510: Profit Centers What is a profit center? Are all business units profit centers? What are the requirements to qualify as a profit center? What are the BENEFITS of the profit center as a measurement tool? What are the LIMITATIONS of the profit center as a measurement tool?

    4. BA 510: Profit Centers What are some measures of profits? Contribution Margin To understand contribution margin, we must first understand the concept of relevant costing. Direct (traceable) Profit Segment Reporting (slides 9-39) Controllable Profit Pretax Income Net Income Back to Agenda

    5. BA 510: Transfer Pricing What are the objectives of transfer pricing mechanisms? Market prices are ideal… What conditions should exist for market prices to be used? What are methods other than market prices? What is 2-step pricing? Class exercise

    6. BA 510: Transfer Pricing Complete the following chart… SELLER P U R C H A S E R

    7. Measuring and Controlling Assets Employed What is the difference between net present value, internal rate of return, and payback (slides 34-83)? What is the difference between ROI & EVA (slides 40-63)? What assets are included (and how) in the investment base? Is replacement cost superior to historical cost? Should current liabilities be subtracted? What is the problem of including fixed assets at net book value instead of gross book value? What is the difference between straight-line, accelerated, and annuity depreciation (Ex. 7.5, 7.6)?

    8. Measuring and Controlling Assets Employed Why is EVA conceptually superior to ROI? (Exhibit 7.12) What problems exist with the use of EVA (reasons for lack of acceptance)?

    9. Quality Metal Service Center Review the capital investment proposal (Exhibit 3). Is this ordinarily an attractive investment for QMSC? Evaluate the incentive compensation plan (Exhibits 2,5). How could it be improved? What is the effect of the following in the motivation of managers for ROA computation? Charge for income taxes Charge for corporate overhead Should Ken Richards send the proposal to home office for approval? Back to Agenda

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