-- MSc Accounting and Control --
Exam Advanced ManagementAccounting
Friday 21"December2007 (first sit)
SonanPRnvrous REMARKS
This exam consistsof 6 questions and 25 subquestions.You can earn a maximum of
100 points. Next to each question you find the maximum number of points for that
particular question.
In this exam we will test your knowledge and insight. rWhile answering our questions, please make use of the literature and phrase your answers clearly and concisely.
The resultswill be publishedon January 18,2008.
You can review your exÍtm on January 23 from 15.00to 16.00 hrs. The place will be
announcedon the results list.
Good luck!
Question I
12 points
Robert Kaplan describes in his article The evolution of Management Accounting the
historical developmentof ManagementAccouniing.
a. Describe briefly some of the major historical developments in Management Accounting.
b. V/hat has causedthe major innovations in ManagementAccounting?
c. What is the reason of the large gap between practice and theory in the seventies
and eighties of the 20mcentury?
2
I
l6 points
Question2
proA bicycle manufacturer wants to analyzethe production line's cost behavior. The
prothinks
He
ductión is done in two shifts: a moming shift and an afternoon shift.
duction volume, number of labor hours and shift may influence total production costs.
He has collected data from 50 months, starting at l-l-2003 and ending 1-3-2007. Multiple regressionanalysesgeneratesthe following results:
SAMENVATTINGUITVOER
Gegerens roor de regr
MeervoudisecorrelatiecoëfficièntR
R-kwadraat
Aangepaste kleinste kwadraat
Standaardfout
Waarnemingen
0'400í06467
0,160085185
32
0,1053081
56992,97883
50
Variantie-analvse
Regressie
Storing
Totaal
!
46
49
43,30942096
-79,87544426
1,494178+11
1,778968+11
70625,96335
1 5 , ' 1 5 9í 19 3 6
207,8856691
16334,41604
4928'18816 2'922486263
3248199636
:
0'043790247
3,3261
2,8569879240,006401127 I 2,79569679
-o,384227757o,702580143 498,3275861
-0,269947330.788408161 -37
a. Give your assessmentof the above results. Clarify your evaluation using the appropriate statistics.How should we read and interpret the relationship found?
The following graph depicts the standard error terms when arranged according to
months:
StandaaÍdstoringen
2,5
2
1,5
1
0,5
0
-0,5
-1
-1,5
-2,5
. Standaardstoringen
b. please evaluate these error terms. What possible problems do they indicate, if
aíry2
c. How would you correct for theseerror patterns?
I
J
d. What are the five basic assumptionsof linear regressionanalysis?Provide a brief
explanation of eachone.
Question3
20 poínts
A printing house producesjoumals about Leasure Time. The current market is difficult, leading to a maximum selling price of 3 euro per journal. Expected next year's
salesis 200.000 copies.Fixed productioncostsare € 100.000per year and direct unit
costsare €,2,50. Corporatetax rate is35oÁ.
a. What is next year's expectednet profit?
b. Management is expectedto reducedirect variable production cost in order to generate a net profit of at least€ 39.000. The averagevariable production costs during
the last years was C 2,40 per journal and the standarddeviationwas 0,2. What is
the probability of gaining at least€ 39.000 proht in the coming year?
Z-table
areaunderthe normalcurvebetweenthe mean
andsuccessive
valuesof z
0.0 0.00000
0.1 0.03983
o.2 0.07926
0.3 0.11791
0.4 0.15542
0.5 0.19146
0.6 0.22575
o.7 0.25804
0.8 0.28814
0.9 0.31594
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
0.34134
0.36433
0.38493
0.40320
0.41924
0.43319
4.44520
0.45543
0.46407
0.47128
2.0
2.1
2.2
2,3
2.4
2.5
2.6
2.7
2.8
2.9
0.47725
0.48214
0.48610
0.48928
0.49í80
0.49379
0.49534
0.49653
0.49744
0.49813
c. What is the difference between decision making without any information and decision making under risk?
Supposethe printing house expectsa market improvement for next year. The manager
has the choice to start an extra marketing campaign. When next year's market is
strong, he expects a 19.000 euro profit when he campaigns and 6.000 euro when he
doesn't campaign. Under a weak market, the campaign will lead to a 4.000 euro loss
and not holding the campaignleadsto a € 12.000profit.
d. ïVhat alternative will be preferred when the manageruses the maximin criterium?
What does this criterium mean?
e. What alternative will be choosenunder the minimax regret criterium?
this criterium represent?
'What
does
4
Question 4
24 points
a' Groot distinguishes three different episodesin
the development of management
control theory. lvhat are theseepisodès,and exprain
each one briefly.
b' What are the causesof managementcontrol problems?
Classify each of them in
the source/manifestationmatrix.
c' What is the difference between behqvioral displacement
and.gamesmanship? Give
an exampleof eachone.
d' Robert Simons presentsin his article How new top
managers use conírol systems
a1 l.eversof strategic renewal an alternatiu" -*ág.ment
control framework. Explain briefly this o'Leversof Control" system.
Hoí does this system compaÍe to
Merchant's managementcontrol framework?
Sally widener tests Robert Simons' model^empirically
in her article An empirical
analysis of the leverslf controlframework. She focuses
on three different issues: (l)
the antecedentvariables that influence control system
design, (2) thecomplementary
workings of the Levers of control system elements,
and (3) the 6ehaviorui ,rrponr.,
(the effects) generatedby the controisystem.
e' How are the different levers of control combined
in control systems (the second
issue)?Pleaseexplain briefly why thesecombinations
seemto work.
f'
What effects can be-reachedby the control system (the
third topic)? How do elements of the control system relate to the .yrt.*',
behavioral iesponses? please
explain briefly how this works.
Question5
I6 points
Budgeting has becomea heavily discussedsubject
lately. Most bugeting systemscost
too much money and managementtime, whill they
dó not seem to lead to significantly better managementand control decisions.
a' Hansen,Otley and Van der Stedediscussin their
article practice Developmentsin
Budgeting two main alternative developmentsin
budgeting. What are these two
alternatives?pleaseexplain eachone brieny.
b' How is the Beyond Budgeting model implemented
by organizationsnowadays
according to Groot in his article The many
of
beyind
bídgeting7 What is the
faces
role of decentralizationin budgeting practióesoróutch
companies?
c' Fisher, Peffer and Sprinkle also looked at budgeting
practices in their article
Budgerbased contracts, budget reryrs, ard groui p"lrtor-orce.
They chalrenge
the generally acceptedidea that piece-ratelncátive"
schemesmotivate people
more to perform than a budget-basedincentive scheme.
what are the reasonsfor
this finding? what budget-basedsystemworks best
and why?
5
d. Parker and Kyj looked in their article Vertical information sharing in the budger
ing process at one specific elementof budgeting, namely the exchangeof information between budget giver (for instance top management)and budget holder (for
instance division management).Budget givers want to disclose information because they want to be clear about the firm's strategy and work methods. Budget
holders however are not keen at disclosing their private information, because it
may jeopardize their position. Under what circumstancesdo local managersshare
their information according to Parker and Kyj? What can top managers do to
stimulate budget holders to share their private information more with top management?
Question6
12points
The introduction of the Balanced Scorecardhas lead to many new developments in
the field of performance measurementand performanceevaluation.
a. What kind of organizationstend to use the BSC?
b. Lipe and Salterio question in their article Ihe Balanced Scorecard: jugmental efmeasureswhether using the BSC will
fects of common and unique performance
'What
lead to better management decisions.
is the main conclusion of their research?
c. One important elementin designing BSC's is finding causal links between leading
indicators and lagging indicators. What are leading and lagging indicators? Give
some examples of the potential complexities of the causal linkages between these
two types of variables (this has been demonstratedin Groot's introduction of the
BSC during class).