National University of Singapore Department of Finance and Accounting ACC3602: Managerial Planning and Control Semester I, 2009/2010

Instructor: A/P Michael Shih Office BIZ1-02-06 Tel: 6516-3087 Email: bizshihm@nus.edu.sg

Course Objectives One of the primary functions of accounting is control. Control is a closed loop consisting of setting goals, measuring results and taking corrective actions if necessary. Firms exercise control by planning for the long term and budgeting for the short term, monitoring various parts of an organization to determine whether the organizational goals are being attained, and taking actions if necessary to bring the organization back "in control." The course examines various means by which control can be exercised and the types of accounting information that allow for such means of control. Specific topics examined include the nature of control, responsibility centers, economic value added, transfer pricing, strategic planning, budgeting, performance evaluation systems, executive compensation and the contingency approach to planning and control. The course is conducted by way of formal lectures and case discussions. The case approach is adopted to give the students a sense of how control is exercised in the "real world."

Text Anthony and Govindarajan (A & G). Management Control Systems, 12th ed., 2007, McGraw-Hill/Irwin: New York, NY. Supplementary Reading Package (articles can be downloaded from Proquest, Factiva or EJournals at NUS digital library)

Grading - Case Analyses 25% - Mid-term exam - Final Exam - Class Participation (Attendance Included)

25% 44% 6%

There are two meetings each week for the module. The first meeting (on Thursday or Friday) is for a lecture on a new chapter, and the second (on Wednesday) is for tutorial on materials 1

covered two weeks ago. The tutorial is conducted through case presentations by student teams, with a specific case assigned for each tutorial (see the class schedule below). Two student teams are responsible for each case. The teams are each required to submit a written report on the case (doubled-spaced, 12-point font, and no more than 9 pages) and make a formal presentation to the class. There will be seven teams in each section. Given the number of cases, each team is expected to present three cases during the course of the module. Members of the class who do not present in any given week are advised not to sit back and enjoy the view. Theyre required to familiarize themselves with the case assigned, and critique and ask questions of the presenting student(s). The quality and frequency of such questioning in part determines the grade for class participation. More importantly, the case materials WILL be included in the mid-term and final exams.

Class Schedule Week 1 (Aug 10-16) Lecture A & G, Chapters 1 & 3: The Nature of Management Control Reading: Hofstede, The Poverty of Management Control Philosophy. Bro Uttal., Turing Points, Texas Instruments (on reserve at HSSML RBR) No Tutorial

Week 2 (Aug 17-23) Lecture A & G, Chapters 4 & 5: Responsibility Centers Readings: Merchant, The Control Function of Management. Wilke, At Digital Equipment, A Resignation Reveals Key Problem: Selling. No Tutorial

Week 3 (Aug 24-30) Lecture A & G, Chapter 6: Transfer Pricing Reading: Shih, M., Optimal Transfer Pricing and Fixed Cost Allocation. Tutorial Presentation: Case 13-4. Texas Instruments (for Ch. 1&3)

Week 4 (Aug 31-Sep 6) Lecture A & G, Chapter 7: Measuring and Controlling Assets Employed Reading: Tully, S., The Real Key to Creating Wealth. Tutorial Presentation: Case 15-1 AB Thorsten (for Ch. 4&5)

Week 5 (Sep 7-13) Lecture A & G, Chapter 8: Strategic Planning 2

Tutorial

Readings: Shank et al., Balance 'Creativity' and 'Practicality' in formal planning. Presentation: Case 6-4 Medoc Company (for Ch. 6)

Week 6 (Sep 7-13) Lecture A & G, Chapters 9: Budget Preparation Tutorial Presentation: Case 7-3. Quality Metal Service Center (for Ch. 7)

Recess Sep. 19 to 27

Week 7 (Sep 14-20) Lecture Mid-term Exam Tutorial Presentation: Case 8-4. Emerson Electric Company (for Ch. 8)

Week 8 (Sep 21-27) Lecture A&G, Chapter 10: Analyzing Financial Performance Reports Tutorial Presentation: Case 10-3 Galvor Company (for Ch. 9)

Week 9 (Sep 28-Oct 4) Lecture A & G, Chapters 11: Performance Measurement Reading Beckett, P., M. Pacelle and T. Lauricella, "Risky Securities Cause a Major Loss at American Express: A Gamble in One Unit Surprises the New Boss" Tutorial Presentation: Case Boston Creamery, Inc. (for Ch. 10) (to be distributed)

Week 10 (Oct 5-11) Lecture A & G, Chapters 12: Management Compensation Reading: Tully, Raising the Bar. Shuchman, New Tool in Tokyo: It's now legal for... Tutorial Presentation: Case 12-2. Crown Point Cabinetry (for Ch. 11)

Week 11 (Oct 12-18) Lecture A & G, Chapter 2: Understanding Strategies Tutorial Presentation: Case 12-1: Lincoln Electric Company (for Ch. 12)

Week 12 (Oct 19-25) 3

Lecture Tutorial

A & G, Chapter 13: Controls for Differentiated Strategies II Presentation: Case: 1-1: Nucor Corporation (for Ch. 2)

Week 13 (Oct 26-Nov 1) Lecture A & G, Chapter 15: Multinational Organizations Reading: Lopez, Former Managers at Swatch Claim Evasion of Taxes Tutorial Presentation: Presentation: Case 7-4 Aloha (for Ch. 13)

Readings List Beckett, P., M. Pacelle and T. Lauricella, "Risky Securities Cause a Major Loss at American Express: A Gamble in One Unit Surprises the New Boss," Asian Wall Street Journal (July 31, 2001). Uttal, B., Turning Points, Texas Instruments: With profits under stack Fortune (August 9, 1982). Hofstede, G., The Poverty of Management Control Philosophy, Academy of Management Review (July 1978). Lopez, L., Former Managers at Swatch Claim Evasion of Taxes Ex-controllers in Asia File U.S. Complaints Outlining Transfer Pricing Strategy, Asian Wall Street Journal (August 13, A1, 2004) Merchant, K., The Control Function of Management, Sloan Management Review (Summer 1982). Shank, J., E. Niblock and W. Sandalls, Jr., Balance 'Creativity' and 'Practicality' in Formal Planning, Harvard Business Review (January-February, 1973). Shih, M., Optimal Transfer Pricing Method and Fixed Cost Allocation, Abacus 32 (September 1996) Shuchman, L. New Tool in Tokyo: It's now legal for Japanese companies to offer stock options; But will they? The Wall Street Journal (April 9, 1998) Tully, S., The Real Key to Creating Wealth, Fortune (September 20, 1993). Tully, S., Raising the Bar, Fortune (July 8, 1998). Wilke, J. At Digital Equipment, A Resignation Reveals Key Problem: Selling, The Wall Street Journal (April 26, 1994) 4