Concepts in Management Control

1. Concepts in Management Control

2. Management Control Systems • Definition • logical integration of management accounting tools to gather and report data and evaluate performance • Purposes of Management Control Systems (MCS) • communicate the organisation’s goals clearly • ensure that every manager understands the specific actions required to achieve organisational goals • communicate results of actions across the organisation

3. Issues in Designing Management Control Systems • Responsibility Centres • are defined as a set of activities assigned to a manager or a group of employees • report on • results of activities • the manager’s influence on those results • effects of uncontrollable events • Classification according to financial responsibilities • cost centre • profit centre • investment centre

4. An Example for Separating Controllable and Uncontrollable Costs (I)

5. An Example for Separating Controllable and Uncontrollable Costs (II)

6. Nonfinancial Measures • Reasons to incorporate nonfinancials • improvement of organisational control • increased timeliness • ease of understanding by employees at lower levels • stress on activities • Examples • quality level • cycle time • productivity

7. Components of a Successful Organisation and Measures of Achievement

8. Combining Financials and Nonfinancials in a Balanced Scorecard Results (Financial)Perspective BalancedScorecard External (Market) Perspective Internal (Process) Perspective Future (Learning) Perspective

9. Examples for Balanced Scorecard Measures

10. Further Issues in Management Control and Performance Management • Alternative Measures of Achievements • Profits • Residual Profits (EVAs) • Return on Investments • Mechanism of Setting and Evaluating Transfer Prices • Motivation, Performance and Rewards • Incorporation of Risk  Managerial Accounting Elective