Chapter 12 – Fundamentals of Management Control Systems
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The NBC Dateline report included about one minute of crash footage that showed how
the gas tanks of certain old GM trucks could catch fire in a sideways collision. After
12–29. (20 min.) Incentives and Ethics.
The situation in this question is based on an actual case. In the actual case, the
fraudulent activities were discovered by people who worked in the accounting
department who discovered the invoices and shipping documents tucked away in the
12–30. (20 min.) Internal Controls.
a. The internal control is separation of duties between producing the sandwich and the
financial transaction of recording the sale and taking the money. This separation of
duties is a key element of internal controls. By separating production (that is, sandwich
Chapter 12 – Fundamentals of Management Control Systems
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12–31. (20 min.) Internal Controls.
a. The internal control is separation of duties. Because the most senior member pays for
the meal, his or her expense report will be reviewed by someone who was not at the
meal. If a more junior person paid for the meal, the expense report might be reviewed
12–32. Evaluating Management Control Systems: SPG Company.
Answers will vary. It is important to discuss all three elements of control systems
(delegation of decision authority, performance measurement, and compensation
systems) to ensure that recommended changes result in an efficient control system.
Chapter 12 – Fundamentals of Management Control Systems
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Compensation Systems: The bonus parameter of 100% is unusually high providing
12–33. (40 min.) Analyze Performance Report for Decentralized Organization: Hall
O’ Fame Products.
a. An evaluation of the performance of James Davenport for the nine months ending
September Year 3 would appear favorable if only the divisional performance measure
Chapter 12 – Fundamentals of Management Control Systems
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12–33. (continued)
b. A performance evaluation system should reflect the division manager’s (D.M.)
responsibilities (i.e., those things that are specifically controllable by the D.M. and
for which the D.M. is held accountable). A good division performance measurement
receivables and inventories as opposed to some average-value method. An
average value would more accurately reflect the activities in these accounts over
the time period being analyzed.
Chapter 12 – Fundamentals of Management Control Systems
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12–34. (40 min.) Divisional Performance Measurement—Behavioral Issues: Paulista
Corporation.
a. The proposed Achievement of Objectives System (AOS) would be an improvement
over the current measure of divisional performance for the following reasons:
year.
Specific performance measures for the criterion “planning realistically” could include an
analysis of variance between actual and budget and the use of a budget that is
adjusted to reflect some variables outside the managers control to determine sales, net
income, net income as a function of sales, and return on investment.
Chapter 12 – Fundamentals of Management Control Systems
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12–34. (continued)
c. The motivational and behavioral aspects of the achievement of objectives system
depend upon the level of acceptance of the system by top management and the
divisional managers.
him/herself or with other divisions with recognition given to the successful
participants in the form of awards or monetary incentives.