Accounting for Performance
Management
MAN-BCU2004, pre-master Corporate Finance and Control, period 2.
Inhoudsopgave
Week 1 ............................................................................................................................................................. 4
Readings ............................................................................................................................................................. 4
Chapter 1 ....................................................................................................................................................... 4
Chapter 4 ....................................................................................................................................................... 6
Chapter 5 (page 156-169) .............................................................................................................................. 8
Article Adler & Borys: Two Types of Bureaucracy: Enabling and Coercive .................................................. 10
Lectures ............................................................................................................................................................ 12
Lecture 1 ...................................................................................................................................................... 12
Lecture 2 ...................................................................................................................................................... 15
Lecture 3 ...................................................................................................................................................... 18
Self-study problems and cases .......................................................................................................................... 21
Case 4.2 Woodhaven Service ....................................................................................................................... 21
Problem 4.1 – Empowerment ...................................................................................................................... 21
Problem 4.14 - Tipping................................................................................................................................ 22
Problem 4.16 –Coase farm .......................................................................................................................... 22
Problem 4.20 – Repro corporation .............................................................................................................. 22
Problem 5.3 – Sunder properties ................................................................................................................. 23
Problem 5.5 – Performance technologies ................................................................................................... 23
Problem 5.6 – Metal press ........................................................................................................................... 23
Week 2 ........................................................................................................................................................... 24
Readings ........................................................................................................................................................... 24
Article Roslender & Dillard: reflections on the interdisciplinary perspectives on accounting project......... 24
Article De Villiers, Dumay & Marroun: qualitative accounting research: dispelling myths and developing a
new research agenda ................................................................................................................................... 25
Article Bentley: Decreasing operational distortion and surrogation through narrative reporting .............. 29
Article Choi: Lost in translation: the effects of incentive compensation on strategy surrogation ............... 32
Article Greene: Reward for performance? What else? ................................................................................ 34
Lectures ............................................................................................................................................................ 36
Lecture 4 ...................................................................................................................................................... 36
Lecture 5 ...................................................................................................................................................... 38
Lecture 6 ...................................................................................................................................................... 43
Week 3 ........................................................................................................................................................... 47
Readings ........................................................................................................................................................... 47
Chapter 5 (page 169-182) ............................................................................................................................ 47
Chapter 6 ..................................................................................................................................................... 48
Article Ferreira & Otley: The design and use of performance management systems: an extended
framework for analysis ................................................................................................................................ 50
Article Kaplan & Norton: The balanced scorecard: Measures that drive performance ............................... 52
Lectures ............................................................................................................................................................ 53
Lecture 7 ...................................................................................................................................................... 53
1
, Lecture 8 ...................................................................................................................................................... 58
Lecture 9 ...................................................................................................................................................... 62
Self-study problems and cases .......................................................................................................................... 66
Problem 5.13 – Zee Spin Wedges ................................................................................................................ 66
Problem 5.24 – Evergreen Nursery and Landscape ..................................................................................... 66
Problem 5.25 – Transfer Price Company ...................................................................................................... 67
Problem 6.7 – Golf World ............................................................................................................................ 67
Problem 6.8 – Coating Department ............................................................................................................. 68
Problem 6.10 – Potter-Bowen...................................................................................................................... 68
Problem 6.19 – Madigan Modems .............................................................................................................. 69
Problem 6.21 – Spa Ariana .......................................................................................................................... 69
Problem 6.24 – Madden International ........................................................................................................ 70
Week 4 ........................................................................................................................................................... 70
Readings ........................................................................................................................................................... 70
Chapter 2 ..................................................................................................................................................... 70
Chapter 7 ..................................................................................................................................................... 72
Article Chawastiak: Rationality, performance measures and representations of reality: ............................ 73
Planning, programming, and budgeting in the Vietnam War ...................................................................... 73
Article Hofstede: Management control of public and not-for-profit activities ............................................ 75
Lectures ............................................................................................................................................................ 77
Lecture 10 .................................................................................................................................................... 77
Lecture 11 .................................................................................................................................................... 79
Self-study problems and cases .......................................................................................................................... 82
Problem 7.2 – Fair Allocations ..................................................................................................................... 82
Problem 7.3 – Dotson .................................................................................................................................. 82
Problem 7.4 – The Corporate Jet ................................................................................................................. 83
Problem 7.18 – Easton Taylor & Becklett LLC............................................................................................... 83
Problem 7.20 – Painting Department .......................................................................................................... 83
Problem 7.25 – Allied Adhesives ................................................................................................................. 84
Problem 7.27 – Law Firm Merger ................................................................................................................ 85
Problem 7.30 – BFR Ship Building ................................................................................................................ 85
Case 7.1 – Phonetex .................................................................................................................................... 85
Week 5 ........................................................................................................................................................... 86
Readings ........................................................................................................................................................... 86
Article Dillard & Ruchal: The rules are no game .......................................................................................... 86
Article Sikka & Willmott: The dark side of transfer pricing: its role in tax avoidance and wealth
retentiveness ............................................................................................................................................... 87
Lectures ............................................................................................................................................................ 89
Lecture 12 .................................................................................................................................................... 89
Lecture 13 - exercise session 1.................................................................................................................... 90
Lecture 14 .................................................................................................................................................... 90
Self-study problems and cases .......................................................................................................................... 92
Problem 4.2 - Pay for Performance ............................................................................................................. 92
Problem 4.7 – American Interconnect I ....................................................................................................... 92
Problem 4.9 – Vanderschmidt’s ................................................................................................................... 92
Problem 5.6 – Metal Press ........................................................................................................................... 92
Problem 5.9 – Microelectronics ................................................................................................................... 93
Problem 6.11 – Feder Purchasing Department ........................................................................................... 93
Problem 6.13 – Videx ................................................................................................................................... 93
Case Ford Pinto ............................................................................................................................................ 93
2
,Week 6 ........................................................................................................................................................... 94
Readings ........................................................................................................................................................... 94
Chapter 8 ..................................................................................................................................................... 94
Chapter 9 ..................................................................................................................................................... 96
Chapter 10 ................................................................................................................................................... 99
Chapter 11 ................................................................................................................................................. 100
Lectures .......................................................................................................................................................... 101
Lecture 15 .................................................................................................................................................. 101
Lecture 16 .................................................................................................................................................. 105
Lecture 17 .................................................................................................................................................. 108
Self-study problems and cases ........................................................................................................................ 113
Problem 8.3 – Rose Hospital ...................................................................................................................... 113
Problem 8.4 – Mystic Herbals .................................................................................................................... 113
Problem 8.16 – Jason Rocks ....................................................................................................................... 114
Problem 8.19 – CCC brands ....................................................................................................................... 115
Problem 8.20 – Karsten Mills ..................................................................................................................... 115
Problem 8.21 – Impact Design ................................................................................................................... 115
Case 8.1 – Carlos Sanguine Winery............................................................................................................ 116
Problem 9.4 – Macgiver Brass ................................................................................................................... 117
Problem 9.17 – Dead Eye Putters .............................................................................................................. 117
Problem 9.18 – Welding Robots ................................................................................................................ 118
Problem 9.25 – Frames Inc. ....................................................................................................................... 118
Problem 9.29 – Pyramid Products ............................................................................................................. 119
Problem 9.30 – Magic Floor ....................................................................................................................... 119
Problem 10.4 – Zipp Cards ......................................................................................................................... 119
Problem 11.4 – Milan Pasta ....................................................................................................................... 120
Problem 11.11 – Sanchez Gadgets ............................................................................................................ 120
Problem 11.15 – Ely Manufacturing .......................................................................................................... 121
Week 7 ......................................................................................................................................................... 121
Readings ......................................................................................................................................................... 121
Chapter 12 ................................................................................................................................................. 121
Lectures .......................................................................................................................................................... 123
Lecture 18 .................................................................................................................................................. 123
Lecture 19 – exercise session 2 .................................................................................................................. 126
Lecture 20 – wrap up and mock exam. ...................................................................................................... 126
Self-study problems and cases ........................................................................................................................ 129
Problem 8.18 – Polymtech ......................................................................................................................... 129
Problem 9.23 – Maya Jewelery .................................................................................................................. 130
Problem 11.21 – Brickley Chains ............................................................................................................... 130
Problem 12.7 – Standard Cost Systems ..................................................................................................... 131
Problem 12.11 – Zinc Faucets .................................................................................................................... 131
Problem 12.12 – Howard Building ............................................................................................................. 132
3
, Week 1
Readings
Chapter 1
A. Managerial accounting: decision making and control.
The information system consists of informal, rudimentary till sophisticated, electronic
management information systems. These are needed to make estimates about firms’ future
costs and revenues. They also consist of nonfinancial information (like customer/employee
satisfaction surveys).
The internal accounting system includes budgets, data on the costs of each product and
current inventory, and periodic financial reports. It serves two purposes:
1. To provide some of the knowledge necessary for planning and making decisions.
2. To help motivate and monitor people in the organization.
There will always be a trade of between those two purposes.
Maximizing firm value is equal to maximizing profits from the organization over its lifetime.
The organization will survive only if its inflow of resources is at least as large as the outflow.
Accounting information is useful to help manage the inflow and outflow of resources and to
help align the owners’ and employees’ interests, no matter what objectives the owners wish
to pursue.
The control system includes performance measures and incentive compensation systems,
promotions, demotions and terminations, security guards and video surveillances, internal
auditors, and the firm’s internal accounting system. These are used to make sure that the
employees operate the organization efficiently.
Chief financial officers (CFO) identify ‘managing cost and profitability’ as their most
important goal.
B. Design and use of cost systems
Accountants are charged with designing, improving, and operating the firm’s accounting
system. They (and the managers) must understand the strengths and weaknesses of the
system.
Internal accounting systems:
1. Provide information to assess the profitability of products or services and to optimally
price and market these products or services.
2. Provide information to detect production inefficiencies to ensure that the proposed
products and volumes are produced at minimum costs.
3. When combined with the performance evaluation and reward systems, create
incentives for managers to maximize firm value.
4. Support the financial accounting and tax accounting
reporting functions.
5. Contribute more to firm value than it costs.
The accounting system supports both the external and
internal reporting system. External: the Securities and
Exchange Commission (SEC) and the Financial Accounting
Standards Board (FASB) regulate the financial statement
issues to shareholders. The Internal Revenue Service (IRS)
administers the accounting procedures used in calculating
4
Management
MAN-BCU2004, pre-master Corporate Finance and Control, period 2.
Inhoudsopgave
Week 1 ............................................................................................................................................................. 4
Readings ............................................................................................................................................................. 4
Chapter 1 ....................................................................................................................................................... 4
Chapter 4 ....................................................................................................................................................... 6
Chapter 5 (page 156-169) .............................................................................................................................. 8
Article Adler & Borys: Two Types of Bureaucracy: Enabling and Coercive .................................................. 10
Lectures ............................................................................................................................................................ 12
Lecture 1 ...................................................................................................................................................... 12
Lecture 2 ...................................................................................................................................................... 15
Lecture 3 ...................................................................................................................................................... 18
Self-study problems and cases .......................................................................................................................... 21
Case 4.2 Woodhaven Service ....................................................................................................................... 21
Problem 4.1 – Empowerment ...................................................................................................................... 21
Problem 4.14 - Tipping................................................................................................................................ 22
Problem 4.16 –Coase farm .......................................................................................................................... 22
Problem 4.20 – Repro corporation .............................................................................................................. 22
Problem 5.3 – Sunder properties ................................................................................................................. 23
Problem 5.5 – Performance technologies ................................................................................................... 23
Problem 5.6 – Metal press ........................................................................................................................... 23
Week 2 ........................................................................................................................................................... 24
Readings ........................................................................................................................................................... 24
Article Roslender & Dillard: reflections on the interdisciplinary perspectives on accounting project......... 24
Article De Villiers, Dumay & Marroun: qualitative accounting research: dispelling myths and developing a
new research agenda ................................................................................................................................... 25
Article Bentley: Decreasing operational distortion and surrogation through narrative reporting .............. 29
Article Choi: Lost in translation: the effects of incentive compensation on strategy surrogation ............... 32
Article Greene: Reward for performance? What else? ................................................................................ 34
Lectures ............................................................................................................................................................ 36
Lecture 4 ...................................................................................................................................................... 36
Lecture 5 ...................................................................................................................................................... 38
Lecture 6 ...................................................................................................................................................... 43
Week 3 ........................................................................................................................................................... 47
Readings ........................................................................................................................................................... 47
Chapter 5 (page 169-182) ............................................................................................................................ 47
Chapter 6 ..................................................................................................................................................... 48
Article Ferreira & Otley: The design and use of performance management systems: an extended
framework for analysis ................................................................................................................................ 50
Article Kaplan & Norton: The balanced scorecard: Measures that drive performance ............................... 52
Lectures ............................................................................................................................................................ 53
Lecture 7 ...................................................................................................................................................... 53
1
, Lecture 8 ...................................................................................................................................................... 58
Lecture 9 ...................................................................................................................................................... 62
Self-study problems and cases .......................................................................................................................... 66
Problem 5.13 – Zee Spin Wedges ................................................................................................................ 66
Problem 5.24 – Evergreen Nursery and Landscape ..................................................................................... 66
Problem 5.25 – Transfer Price Company ...................................................................................................... 67
Problem 6.7 – Golf World ............................................................................................................................ 67
Problem 6.8 – Coating Department ............................................................................................................. 68
Problem 6.10 – Potter-Bowen...................................................................................................................... 68
Problem 6.19 – Madigan Modems .............................................................................................................. 69
Problem 6.21 – Spa Ariana .......................................................................................................................... 69
Problem 6.24 – Madden International ........................................................................................................ 70
Week 4 ........................................................................................................................................................... 70
Readings ........................................................................................................................................................... 70
Chapter 2 ..................................................................................................................................................... 70
Chapter 7 ..................................................................................................................................................... 72
Article Chawastiak: Rationality, performance measures and representations of reality: ............................ 73
Planning, programming, and budgeting in the Vietnam War ...................................................................... 73
Article Hofstede: Management control of public and not-for-profit activities ............................................ 75
Lectures ............................................................................................................................................................ 77
Lecture 10 .................................................................................................................................................... 77
Lecture 11 .................................................................................................................................................... 79
Self-study problems and cases .......................................................................................................................... 82
Problem 7.2 – Fair Allocations ..................................................................................................................... 82
Problem 7.3 – Dotson .................................................................................................................................. 82
Problem 7.4 – The Corporate Jet ................................................................................................................. 83
Problem 7.18 – Easton Taylor & Becklett LLC............................................................................................... 83
Problem 7.20 – Painting Department .......................................................................................................... 83
Problem 7.25 – Allied Adhesives ................................................................................................................. 84
Problem 7.27 – Law Firm Merger ................................................................................................................ 85
Problem 7.30 – BFR Ship Building ................................................................................................................ 85
Case 7.1 – Phonetex .................................................................................................................................... 85
Week 5 ........................................................................................................................................................... 86
Readings ........................................................................................................................................................... 86
Article Dillard & Ruchal: The rules are no game .......................................................................................... 86
Article Sikka & Willmott: The dark side of transfer pricing: its role in tax avoidance and wealth
retentiveness ............................................................................................................................................... 87
Lectures ............................................................................................................................................................ 89
Lecture 12 .................................................................................................................................................... 89
Lecture 13 - exercise session 1.................................................................................................................... 90
Lecture 14 .................................................................................................................................................... 90
Self-study problems and cases .......................................................................................................................... 92
Problem 4.2 - Pay for Performance ............................................................................................................. 92
Problem 4.7 – American Interconnect I ....................................................................................................... 92
Problem 4.9 – Vanderschmidt’s ................................................................................................................... 92
Problem 5.6 – Metal Press ........................................................................................................................... 92
Problem 5.9 – Microelectronics ................................................................................................................... 93
Problem 6.11 – Feder Purchasing Department ........................................................................................... 93
Problem 6.13 – Videx ................................................................................................................................... 93
Case Ford Pinto ............................................................................................................................................ 93
2
,Week 6 ........................................................................................................................................................... 94
Readings ........................................................................................................................................................... 94
Chapter 8 ..................................................................................................................................................... 94
Chapter 9 ..................................................................................................................................................... 96
Chapter 10 ................................................................................................................................................... 99
Chapter 11 ................................................................................................................................................. 100
Lectures .......................................................................................................................................................... 101
Lecture 15 .................................................................................................................................................. 101
Lecture 16 .................................................................................................................................................. 105
Lecture 17 .................................................................................................................................................. 108
Self-study problems and cases ........................................................................................................................ 113
Problem 8.3 – Rose Hospital ...................................................................................................................... 113
Problem 8.4 – Mystic Herbals .................................................................................................................... 113
Problem 8.16 – Jason Rocks ....................................................................................................................... 114
Problem 8.19 – CCC brands ....................................................................................................................... 115
Problem 8.20 – Karsten Mills ..................................................................................................................... 115
Problem 8.21 – Impact Design ................................................................................................................... 115
Case 8.1 – Carlos Sanguine Winery............................................................................................................ 116
Problem 9.4 – Macgiver Brass ................................................................................................................... 117
Problem 9.17 – Dead Eye Putters .............................................................................................................. 117
Problem 9.18 – Welding Robots ................................................................................................................ 118
Problem 9.25 – Frames Inc. ....................................................................................................................... 118
Problem 9.29 – Pyramid Products ............................................................................................................. 119
Problem 9.30 – Magic Floor ....................................................................................................................... 119
Problem 10.4 – Zipp Cards ......................................................................................................................... 119
Problem 11.4 – Milan Pasta ....................................................................................................................... 120
Problem 11.11 – Sanchez Gadgets ............................................................................................................ 120
Problem 11.15 – Ely Manufacturing .......................................................................................................... 121
Week 7 ......................................................................................................................................................... 121
Readings ......................................................................................................................................................... 121
Chapter 12 ................................................................................................................................................. 121
Lectures .......................................................................................................................................................... 123
Lecture 18 .................................................................................................................................................. 123
Lecture 19 – exercise session 2 .................................................................................................................. 126
Lecture 20 – wrap up and mock exam. ...................................................................................................... 126
Self-study problems and cases ........................................................................................................................ 129
Problem 8.18 – Polymtech ......................................................................................................................... 129
Problem 9.23 – Maya Jewelery .................................................................................................................. 130
Problem 11.21 – Brickley Chains ............................................................................................................... 130
Problem 12.7 – Standard Cost Systems ..................................................................................................... 131
Problem 12.11 – Zinc Faucets .................................................................................................................... 131
Problem 12.12 – Howard Building ............................................................................................................. 132
3
, Week 1
Readings
Chapter 1
A. Managerial accounting: decision making and control.
The information system consists of informal, rudimentary till sophisticated, electronic
management information systems. These are needed to make estimates about firms’ future
costs and revenues. They also consist of nonfinancial information (like customer/employee
satisfaction surveys).
The internal accounting system includes budgets, data on the costs of each product and
current inventory, and periodic financial reports. It serves two purposes:
1. To provide some of the knowledge necessary for planning and making decisions.
2. To help motivate and monitor people in the organization.
There will always be a trade of between those two purposes.
Maximizing firm value is equal to maximizing profits from the organization over its lifetime.
The organization will survive only if its inflow of resources is at least as large as the outflow.
Accounting information is useful to help manage the inflow and outflow of resources and to
help align the owners’ and employees’ interests, no matter what objectives the owners wish
to pursue.
The control system includes performance measures and incentive compensation systems,
promotions, demotions and terminations, security guards and video surveillances, internal
auditors, and the firm’s internal accounting system. These are used to make sure that the
employees operate the organization efficiently.
Chief financial officers (CFO) identify ‘managing cost and profitability’ as their most
important goal.
B. Design and use of cost systems
Accountants are charged with designing, improving, and operating the firm’s accounting
system. They (and the managers) must understand the strengths and weaknesses of the
system.
Internal accounting systems:
1. Provide information to assess the profitability of products or services and to optimally
price and market these products or services.
2. Provide information to detect production inefficiencies to ensure that the proposed
products and volumes are produced at minimum costs.
3. When combined with the performance evaluation and reward systems, create
incentives for managers to maximize firm value.
4. Support the financial accounting and tax accounting
reporting functions.
5. Contribute more to firm value than it costs.
The accounting system supports both the external and
internal reporting system. External: the Securities and
Exchange Commission (SEC) and the Financial Accounting
Standards Board (FASB) regulate the financial statement
issues to shareholders. The Internal Revenue Service (IRS)
administers the accounting procedures used in calculating
4
