CN22HO - Management Control Systems, Transfer Pricing, and...

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2008 Foster School of Business Accounting 311 L.DuCharme 1 Management Control Systems, Transfer Pricing, and Multinational Considerations Chapter 22
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2008 Foster School of Business Accounting 311 L.DuCharme 2 Learning Objective 1 Describe a management control system and its three key properties.
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2008 Foster School of Business Accounting 311 L.DuCharme 3 Management Control Systems A management control system is a means of gathering and using information. It guides the behavior of managers and employees.
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2008 Foster School of Business Accounting 311 L.DuCharme 4 Management Control Systems Financial data Formal control system Nonfinancial data Informal control system
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2008 Foster School of Business Accounting 311 L.DuCharme 5 Evaluating Management Control Systems Motivation Goal congruence Effort Lead to rewards Monetary Nonmonetary
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2008 Foster School of Business Accounting 311 L.DuCharme 6 Learning Objective 2 Describe the benefits and costs of decentralization.
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2008 Foster School of Business Accounting 311 L.DuCharme 7 Organization Structure Total decentralization Total centralization
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2008 Foster School of Business Accounting 311 L.DuCharme 8 Benefits of Decentralization Creates greater responsiveness to local needs Leads to gains from quicker decision making Increases motivation of subunit managers Assists management development and learning Sharpens the focus of subunit managers
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2008 Foster School of Business Accounting 311 L.DuCharme 9 Costs of Decentralization Suboptimal decision making may occur Focuses the manager’s attention on the subunit rather than the organization as a whole Increases the costs of gathering information Results in duplication of activities
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2008 Foster School of Business Accounting 311 L.DuCharme 10 Decentralization in Multinational Companies Decentralization enables country managers to make decisions that exploit their knowledge of local business and political conditions. Multinational corporations often rotate managers between foreign locations and corporate headquarters. Control Problem: Barings Bank (200 yrs old)—1995 Nick Leeson caused over ₤1 B loss.
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2008 Foster School of Business Accounting 311 L.DuCharme 11 Responsibility Centers Cost center Revenue center Investment center Profit center
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2008 Foster School of Business Accounting 311 L.DuCharme 12 Learning Objective 3 Explain transfer prices and four criteria used to evaluate them.
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2008 Foster School of Business Accounting 311
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This note was uploaded on 04/07/2008 for the course ACCTG 311 taught by Professor Ducharme during the Spring '08 term at University of Washington.

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CN22HO - Management Control Systems, Transfer Pricing, and...

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