Solution Manual for Management Control Systems 4th Edition by Kenneth Merchant
Table of Contents
The control Function of management
1 Management and Control
Management and control
Causes of management control problems
Characteristics of good management control
Control problem avoidance
Outline of this text
Leo’s Four-Plex Theater
Private Fitness, Inc.
Atlanta Home Loan
Management control alternatives and their effects
2 Results Controls
Prevalence of results controls
Results controls and the control problems
Elements of results controls
Conditions determining the effectiveness
of results controls
Offi ce Solutions, Inc.
Puente Hills Toyota
Houston Fearless 76, Inc.
3 Action, Personnel, and Cultural Controls
Action controls and the control problems
Prevention vs. detection 92
Conditions determining the effectiveness
of action controls
Personnel/cultural controls and
the control problems
Effectiveness of Personnel/cultural
Witsky and Associates, Inc.
The Platinum Pointe Land Deal
EyeOn Pharmaceuticals, Inc.
4 Control System Tightness
Tight results control
Tight action controls
Tight personnel/cultural controls
Controls at the Bellagio
Lincoln Electric: Venturing Abroad
PCL: A Breakdown in the Enforcement
of Management Control
5 Control System Costs
Sunshine Fashion: Fraud, Theft,
and Misbehavior among
Better Beauty, Inc.
Fit Food, Inc.
Atlantis Chemical Industries
6 Designing and Evaluating
Management Control Systems
What is desired and what is likely
Choice of controls
Choice of control tightness
Adapting to change
Keeping a behavioral focus
Maintaining good control
Diagnostic Products Corporation
Game Shop, Inc.
Family Care Specialists Medical Group, Inc.
Financial Results Control Systems
7 Financial Responsibility Centers
Advantages of financial results control systems
Types of financial responsibility centers
Choice of financial responsibility centers
The transfer pricing problem
Kranworth Chair Corporation
Global Investors, Inc.
8 Planning and Budgeting
Purposes of planning and budgeting
Planning and budgeting practices,
Royal Wessanen NV
Multiple Versions of the Plan
Vitesse Semiconductor Corporation
VisuSon, Inc.: Business Stress Testing
9 Incentive Systems
Purposes of incentives
Incentive system design
Criteria for evaluating incentive systems
Harwood Medical Instruments PLC
Superconductor Technologies, Inc.
Raven Capital, LLC
Performance Measurement Issues and their Effects
10 Financial Performance Measures and their Effects
Market measures of performance
Accounting measures of performance
Investment and operating myopia
Residual income measures as a possible
solution to the ROI measurement
Behavioral Implications of Airline Depreciation
Accounting Policy Choices
Las Ferreterías de México, S.A. de C.V.
Industrial Electronics, Inc.
Corbridge Industries, Inc.
King Engineering Group, Inc.
Berkshire Industries PLC
11 Remedies to the Myopia Problem
Pressures to act myopically
Reduce pressures for short-term profit
Control investments with preaction reviews
Extend the measurement horizon
(use long-term incentives)
Measure changes in value directly
Improve the accounting measures
Measure a set of value drivers
Catalytic Solutions, Inc.
Johansen’s: The New Scorecard
12 Using Financial Results Controls in the Presence of Uncontrollable Factors
The controllability principle
Types of uncontrollable factors
Controlling for the distorting effects
Other uncontrollable factor issues
Olympic Car Wash
Beifang Chuang Ye Vehicle Group
Hoffman Discount Drugs, Inc.
The Stimson Company
Bank of the Desert (A)
Bank of the Desert (B)
Fine Harvest Restaurant Group (A)
Fine Harvest Restaurant Group (B)
Corporate Governance, Important Control-Related Roles, and Ethics
13 Corporate Governance and Boards of Directors
Laws and regulations
The Sarbanes-Oxley Act
Boards of directors
Arrow Motorcar Corporation
Pacific Sunwear of California, Inc.
Entropic Communications, Inc.
Bio/Precise Medical Devices, Inc.
14 Controllers and Auditors
Don Russell: Experiences of a Controller/CFO
Desktop Solutions, Inc. (A): Audit
of the St. Louis Branch
Desktop Solutions, Inc. (B): Audit
of Operations Group Systems
Andrew G. Scavell, Chief Risk Officer
15 Management Control-Related Ethical Issues
Good ethical analyses and
Why do people behave unethically?
Some common management
control-related ethical issues
Spreading good ethics within
Two Budget Targets
Conservative Accounting in the General
Education Food Services at Central
Maine State University
The “Sales Acceleration Program”
The Expiring Software License
Mean Screens USA, Inc.
Lernout & Hauspie Speech Products
Management Control when Financial Results are not the Primary Consideration
16 Management Control in Not-for-profit Organizations
Corporations, B corporations, and
Key differences between for-profit
and not-for-profit organizations
Goal ambiguity and conflict
Difficulty in measuring and
SCI Ontario: Achieving, Measuring, and
Communicating Strategic Success
University of Southern California:
Responsibility Center Management System
Amanco: Developing the Sustainability