22421 Management Decisions and Control

Subject level: Undergraduate

Handbook description

This subject introduces the use of management accounting information to support managerial decisions and control various aspects of an organisation. It emphasises decision and control issues in a contemporary environment and introduces appropriate decision and control concepts, techniques and skills such as short- and long-term operational decisions, target costing and life-cycle costing, inventory management and just-in-time, responsibility accounting systems, transfer pricing, performance evaluation systems, and the behavioural impacts of management control systems. It also emphasises the ways in which accounting information can be used to understand and make decisions about the operational and strategic management of an organisation, and to control the implementation and ongoing management of such decisions.

Subject objectives/outcomes

On successful completion of this subject students should be able to:

1. understand, apply and critique the application of a range of different decision models used to enable managers to solve problems, control and evaluate performance within an organisational context
2. within the social context of an organisation, evaluate the impact of different decisions, control systems and performance evaluation methods. Further develop a capacity for independent research and learning
3. develop communication and teamwork skills
4. develop their information technology and accounting application skills.

Contribution to graduate profile

This subject builds upon the core knowledge developed in 22321/0 Cost Management Systems. It provides an extension of management accounting to areas of decision support and managerial control. The subject focuses on the use of accounting information in facilitating (Management Decisions) and influencing (Management Control) managerial decisions in organisations. Managers decision-facilitating role include the responsibility and authority for making decisions with respect to the acquisition and use of an organisation's resources. To do this effectively they must identify the actions (or strategies) available to them, predict the relevant consequences of those actions, and then choose the action that has the most preferred predicted outcome. Whilst managers have the responsibility and authority for making decisions within organisations, they may not do so in the best interest of the organisation. Manager's decision-influencing role emphasis the importance of using management accounting tools effectively to achieve a desired set of managerial decisions and actions that are aligned with the organisational strategies. An understanding of the behavioural impact of accounting systems on managerial behaviour is therefore important in the design of an effective management control systems. In addition to providing students with a useful set of concepts, skills and techniques, the subject requires students to develop analytical and evaluative skills.

Teaching and learning strategies

The material in this subject will be presented in lectures and seminars. Class contact will be 1-hour lecture and 2-hour seminar/workshop. The focus of the learning process will be the seminars where students will be exposed to the fundamental conceptual and technical material through a combination of practical exercises, case studies, debates and discussion. The seminars will be supported by the lectures where theoretical material and illustrations of development in practice will be covered. Students will also take part in independent group project work to explore selected topics in greater depth.

In addition, students will be required to demonstrate a proficiency in the use and application of information technology for the preparation and analysis of management accounting information.

Content

• Introduction to management control systems
• The decision process; relevant information, pricing and product mix decisions
• Budgeting and human behaviour
• Organisational control systems and transfer pricing
• Performance evaluation – traditional versus conventional management techniques
• Incentives and compensation.

Assessment

Assessment item 1: Mid-Semester Examination (Individual)

Assessment item 2: Research Report (Group)

Assessment item 3: Formal Final Examination (Individual)

Required text(s)

Langfield-Smith, K, Thorne, H, and Hilton, R. W, (2006), Management Accounting: Information for Managing and Creating Value, McGraw-Hill

Indicative references

This subject requires students to engage with academic literature. Students are expected to read academic articles relevant to each topic and are also encouraged beyond the reference list provided below. Students are strongly recommended to read the articles for each topic. Additional articles are also referenced for further information. These articles can be obtained through the UTS library website (guidance on how to obtain these articles is provided on UTSOnline).

Lecture 1: Introduction to management accounting

Flamholtz, E., Das, T., Tsui, A.,, 1985, Towards an integrative framework of organisational control, Accounting, Organisations and Society, Vol 10, No. 1, 35-50

Additional reading

Merchant, K (1997), Modern Management Control Systems, Prentice-Hall.

Emmanuel, C., Otley, D. and Merchant, K. (1990) Accounting for Management Control, London: Chapman & Hall, pp57-67. (658.1511EMMA)

Lecture 2: Key concepts in management control systems: Objectives, stakeholders, contingency theory

Freeman, R.E., Wicks, A.C., Parman, B., (May-June 2004) Stakeholder theory and 'the corporate objective revisited', Organisational Science, 15 (3), 364-369

Jensen, M., 'Value Maximization and the Corporate Objective Function,' Business Ethics Quarterly, Vol. 12, No.1, Jan 2002.

Langfield-Smith, K., 1997, Management control systems and strategy: a critical review, Accounting, Organisations and Society, 22 (2), 207-232

Chenhall, R. H. 2003. Management control system design within its organizational context: Findings from contingency-based research and directions for the future. Accounting, Organizations and Society 28(2-3): 127-168.

Otley, D., (1980) The contingency theory of management accounting: achievements and prognosis, Accounting, Organisations and Society, Vol 5, No. 4, 413-428

Lecture 3: Budgeting: Reasons for budgeting, practical applications

Hansen, S.C., and Van Der Stede, W. A., (2004) Multiple facets of budgeting: an exploratory analysis, Management Accounting Research, Vol. 15, pp 415- 439.

Van der Stede, W., 2000, The relationship between two consequences of budgetary controls: budgetary slack creation and managerial short-term orientation, Accounting, Organisations and Society, 25, 609-622

Lecture 4: Budgeting: Behavioural responses to budgeting

Briers, M. and Hirst, M. (1990) The role of budgetary information in performance evaluation, Accounting, Organisations and Society, 15(4) 373-398.

Hopwood, A.G., (1976), Accounting and Human Behaviour, Prentice-Hall. Pp. 57-68 (657.019HOPW)

Kaplan, R.S., (1983), Measuring Manufacturing Performance: A New Challenge for Management Accounting Research, The Accounting Review, LVIII (4), pp.686-705

Macintosh, N.B., (1985), The Social Software of Accounting and Information Systems, Chapters 2 & 3 Wiley, (658.40388MACI)

Lecture 5: Performance measurement: Measuring financial performance, and information systems

Ittner, C., Larcker, D., 1998. Innovations in performance measurement: Trends and research implications. Journal of Management Accounting Research (10): 205-238.

Nicolaou, A., (2004) Quality of post implementation review for enterprise resource planning systems, International Journal of Accounting Information Systems 5

Lecture 6: Performance measurement: Measuring total business performance

Kaplan, R., Norton, D., (Jan/Feb 1992) The Balanced Scorecard - measures that drive performance, Harvard Business Review, vol 70, issue 1, p 71-79

Kaplan, R., Norton, D., (Jan/Feb 1996) Using the Balanced Scorecard as a strategic management system, Harvard Business Review, vol 74, issue 1 p 75-85

Atkinson, A., Waterhouse, J., and Wells, R., 1997, A stakeholder approach to strategic performance measurement, Sloan Management Review, 38 (3), 25

Additional reading

Kaplan, R., Norton, D., (March 2001) Transforming the Balanced Scorecard from performance measurement to strategic management: part 1, Accounting Horizons, vol 15, issue 1 p 87-104

Lecture 7: Performance measurement: Designing the Balanced Scorecard

Lipe, M. and Salterio, S. (2000) The Balanced Scorecard: judgmental effects of common and unique performance measures, Accounting Review, 75 3, 283-303.

Malina, M. and Selto, F. (2001) Communicating and controlling strategy: an empirical study of the effectiveness of the Balanced Scorecard, Journal of Management Accounting Research, 13.

Additional reading

Malina, M., Nørreklit, H. and Selto, F. (2007) Relation among measures, climate of control and performance measurement models, Contemporary Accounting Research, 24(3), pp. 935-982.

Nørreklit, H. (2003) The Balanced Scorecard: what is the score? A rhetorical analysis of the Balanced Scorecard, Accounting, Organizations and Society, 28 (6), 591-619.

Lecture 8: Administrative controls: Organisational structure, governance, responsibility accounting and transfer pricing

Pugh, D. S.; Hickson, D. J.; Hinings, C. R.. An Empirical Taxonomy of Structures of Work Organizations. Administrative Science Quarterly, Mar1969, Vol. 14 Issue 1, p115-126

Arrow, K., (1964), Control in Large Organisations, Management Science, Vol 10, No. 3

Additional reading

Macintosh, N.B., (1994), Management Accounting and Control Systems: An Organizational and Behavioural Approach, Wiley. (658.1511MACI)

Ouchie, W., 1977, The relationship between organisational structure and organisational control , Administrative Science Quarterly, March, 95-113

Lecture 9: Socio-ideological controls: Culture, values and clan controls

Alvesson, M., Karreman., D., 2004, Interfaces of control. Technocratic and socio-ideological control in a global management consultancy firm, Accounting, Organisations and Society, 434-444

Dent, J., 1991, Accounting and organisational cultures: a field study of the emergence of a new organisational reality, 16 (8), 705-732

'Generational differences: What it means for management systems A collaboration between KPMG and University of Technology' Published industry whitepaper 2008. Authors, Emma Petroulas, Heidi Sundin, and David Brown.

Tomkins, C., (2001) Interdependencies, trust and information in relationships, alliances and networks, Accounting, Organizations and Society 26 (2001) 161–191

Alvesson, M. and H. Willmott (2002) 'Identity Regulation as Organizational

Control: Producing the Appropriate Individual', Journal of Management

Studies 39(5): 619–44.

Lecture 10: Reward and compensation systems: Factors that affect performance

Fisher, J., Govindarajan, V., 1993, Incentive compensation design, strategic business unit mission and competitive strategy, Journal of Management Accounting Research , 5, 129-144

Fessler, N., (2003) Experimental Evidence on the Links among Monetary Incentives, Task Attractiveness and Task Performance, Journal of Management Accounting Research , 15, 161-176

Lecture 11: Strategic decision making: Using relevant information

Simon, H. (1964). The concept of organisational goal. Administrative Science. Quarterly, 9(1), 1-22.

Booth, P., Schultz, A., (2003) The Impact of an Ethical Environment on Managers' Project Evaluation Judgments Under Agency Problem Conditions, Accounting, Organisations and Society, 29, 473-488

Geletkanycz, M., Hambrick, D, (1997) The external ties of top executives: implications for strategic choice and performance, Administrative Science Quarterly, 42, 654-681

Lecture 12: Supply chain: Managing suppliers, customers and quality

Additional reading

Christopher, M., Peck, H., Towill, D., (2006) A taxonomy for selecting global supply chain strategies, International Journal of Logistics Management , Vol. 17 Issue 2, p277-287

Ogden, J., (2006). Supply Base Reduction: An Empirical Study of Critical Success Factors. Journal of Supply Chain Management: A Global Review of Purchasing and Supply, Vol. 42 Issue 4, p30-40.