TEMBA

BA 382T--Managerial Accounting
Syllabus
Spring2004

Professor:
Office:
Phone:
FAX:
EMail:
ClassMeetingTimes:

RobertG.May
CBA3.412A
(512)4715155
(512)4713904
bob.may@mccombs.utexas.edu
Perthecoursesummary

BA 382T Syllabus

Course Information
Overview

Any organizations long-term competitive success is critically dependent on

(1) the quality of information about its products, services, processes,
organizational units, suppliers, and customers, (2) its ability to act
[rationally] on that information, and (3) its ability to control its performance
consistent with that information. The term managerial accounting refers to
the set of information concepts, models and systems that provide this
information and control for managers. This course will introduce the student
to the modern concepts of managerial accounting. The main objectives are
to:

Topics

The following key topics will be emphasized:

Teaching
Materials

Consider the cost and performance information necessary for

long-term success in various competitive environments.
Develop a framework for utilizing information generated by
managerial information systems for tactical and strategic
decisions.
Consider the current and emerging practices in cost management.
Evaluate the many methods developed by firms for decentralizing
and controlling large organizations.

Designing managerial information systems to support an

organizations strategy.
The limitations of traditional costing systems.
Activity-based costing and activity-based management.
Management of capacity costs.
Revenue-cost behavior and cost-volume-profit analysis.
Relevant costs and relevant revenues in business decisions.
Performance evaluation
Decentralization and transfer pricing.
Management control and control systems.

Teaching materials include a mix of case studies, articles, and a textbook.

The textbook is Managerial Accounting, by Ronald W. Hilton, Fifth Edition,
McGraw Hill, 2002.
Additional teaching materials will be distributed at least ten days prior to the
relevant class session.

Class
Organization

In this class, we will follow a modified case-method style, which I have

found to be most effective for executives who must learn technical content

BA 382T Syllabus

and apply it in a managerial context. The modified case method relies

heavily on class participation, but with more guidance through specific
questions than the pure case method.
Students will be active participants in case discussions, providing summaries
of issues, analyses, and recommendations. This involves the preparation of
the case and reading assignments before class and the active sharing of your
insights during class. My role is primarily to facilitate your analysis and
discussion. Note that many of the managerial problems we will address
through cases will not have clear-cut or "correct" solutions; do not let this
discourage you.
To prepare for class, you must read the assigned readings carefully and
understand the accounting techniques described in them. You must also
attempt to answer all of the case questions in your own way in advance so
that you will be prepared for class discussion and will learn by doing. This
is essential when specific technical knowledge has a bearing on solutions to
managerial decisions. Do not obsessively pursue the right answer or format
your preparations to look nice. Such pursuits will waste your time and
contribute nothing.
Policy on
Scholastic
Dishonesty

The McCombs School of Business has no tolerance for acts of scholastic

dishonesty. The responsibilities of both students and faculty with regard to
the Honor System have been described to you by the Executive MBA staff.
YouhaveembarkedonafirstclassMBAexperienceandanMBAdegree
willbeawardedtoyouindividuallyuponcompletion.Oneofthefacultys
responsibilitiesistoassesstheachievementsofeachmemberoftheclassand
ensurethatallwhoreceivecredit,aparticulargradeand/orthedegreeitself
haveaccomplishedwhatsuchrecognitionimplies.Thesestandardsare
essentialnotonlytothemaintenanceoftheacademicintegrityofthe
programbutalsoitsbrandequity,animportantpartofitsvaluetoall
graduates.
Academicintegrityrequiresthatallworkgradedinthecourse,including
casesandexaminations,bedoneandsubmittedindividually,exceptwork
explicitlydescribedasgroupassignments.
Youshouldnotaskothermembersoftheclassspecificallywhatthey
wroteforapartofanassignment,shareelectronicversionsofyourwriteups
andanalysesorhaveonegroupmembertypethesolutionandsharethe
document,electronicorotherwise,withtheothermembers.Doingsoisnot
onlyanactofacademicdishonesty,butsignificantlyreducesthelearning
experienceinthecourse.
AcademicintegrityalsorequiresthatallGROUPworkgradedinthe
coursebeproducedbyacollaborationinvolvingequaleffortsandthereport
submittedbeajointproductfullycomprehendedbyallgroupmembers.
Noinformationaboutassignmentsorexaminationsinthiscourseshould

BA 382T Syllabus

beusedorsoughtfrommembersofpreviousorconcurrentclassesatthe
McCombsSchool(orothersources).Moreover,youwillbegivenaccessto
casediscussionpresentationsandlecturenotes.Thesearecopyrighted
materialsforyouruseandonlyyouruseinthisclass.Alongwithyourown
homeworksolutionsandclassnotes,theyarenottobepassedonto
subsequentclassesorindividualstudents.
Evaluation

The course grade will be determined as follows:

1. Cost Case Write-up (group)
2. Control Systems Case Write-up (group)
3. Individual Case Write-Ups
4. Class Attendance and participation
5. Midterm examination
6. Final Examination
Total

Instructions
for Case
Write-Ups

20 pts
20 pts
40 pts
40 pts
50 pts
80 pts
250 pts

ALL INDIVIDUAL AND GROUP CASE WRITE-UPS WILL BE

SUBMITTED THROUGH THE ELECTRONIC DROP BOX FEATURE OF
BLACKBOARD. Instructions for submitting write-ups will be given in class
and will be posted under Assignments on Blackboard.
All case write-ups are due before the case is discussed in class.
The group case write-ups should be done in your pre-assigned class groups.
Individual required case write-ups are specified in the course summary with
a single *. Group case write-ups are designated with a double **.
Reminders to turn in the write-ups before class appear in the Study Guide.
Your points earned on the case write-ups will be determined as follows:
Individual case write-ups will be judged on your good-faith effort to answer
all questions. There will be no credit differentiation for right answers.
However, good-faith effort does imply that you will have actually tried to
completely answer each question. Individual write-ups should be done in
Microsoft Excel using conventional spreadsheet operations to satisfy the
quantitative questions. Cells should be expanded to serve as text boxes
containing verbal answers. All answers must be numbered sequentially to
agree with the case requirements and all must appear in order vertically on
one worksheet.
Group case write-ups will be judged on the quality of analysis and quality of
organization and writing. These cases represent cap-stone cases of particular
phases of the course and, therefore, the expectation is high that cohesive and
complete answers can be given, with acceptable reasoning underlying them.

BA 382T Syllabus

Group write-ups are to be formatted in Microsoft Word as professional

management reports that are original and concise: no more than five doublespaced pages of twelve-point font and one-inch margins all around (no
exceptions). The analysis section should probably occupy the most space.
You may add a one-page executive summary. In addition, you may embed
tables of data and graphs in the presentation or include appendices or exhibits
with data or graphs (in which case they should not require significant
separate analysis by the reader).
Midterm Exam

In-class, four hours (or less)

Final Exam

In-class, four hours (or less)

BA 382T Syllabus

Course Summary
January 21

Transition from financial accounting to management accounting

Introduction to the course
Lecture/discussion
Product costing for financial accounting
Western Chipsets
January 26
Transition from financial accounting to management accounting
Absorption costingmore mischief
Bridgeton*
Master budgeting/cash budgeting
Lecture/discussion
February 2
Applied budgeting
Cash budgeting
Hanson Ski Company*
Budgeting/forecasting for business opportunities
Caribbean Internet Cafe
February 9
Cost systems
Costing systems/cost estimation
Lecture/discussion
Simple costing systems illustrated
Seligram*
February 16
Activity-based cost systems
Activity-based costing systems
Siemens*
Costing for marketing
Kanthal
February 23
Cost and revenue functions and decision making
Costing for management decisions
Sloan Styles, Inc.**
CVP analysis and cost behavior analysis
Lecture/discussion
Analyzing cost behavior
Deltas New Song
February 29Q&A review session before midterm.
March 1Midterm Exam.
March 29
Cost-volume-profit analysis and short-run decisions
Applying CVP analysis
Bill French*
Short-run decisions
Lecture/discussion
April 5
Short-run decisions
Special order costing and pricing
Sub-Micron Devices Inc*
New product costing and pricing
Baldwin Bicycles
April 12
Short-run decisions and control
Service/customer profitability analysis
Co-Operative Bank*
Management control systems
Lecture/discussion
April 19
Performance evaluation systems
Variance analysis
Waltham Motors Div.
Management control systems design
Automation Consulting*
April 26
Control and evaluation systems
Budgeting as decentralized control
Citibank Indonesia
Transfer pricing
Stone Group Corp.*
May 3
Performance evaluation, control and motivation
Performance evaluation and control
Compagnie du Froid**
Balanced scorecard
Chadwick, Inc -Abridged.
May 9Q&A review session before midterm.
May 10 Final Examination

BA 382T Syllabus

Study Guide
January 21 2004
Lecture/discussion: Introduction to the course.
Topics

Primary Reading

Hilton, Chapter 1.

Relationship between financial and managerial accounting.

Budgeting and cash management
Cost estimation and cost management.
Cost behavior and decision models.
Decentralization and delegation of decisions.
Performance evaluation.
Control.
Control systems

Product (absorption) costing for financial accounting

Topics

Primary Readings

Hilton, Chapter 2

Prepare

Case study: Western Chipsets, Inc. (A) and (B)

Absorption costing.
Direct (variable) costing.
Accuracy of reported financial accounting information.
Incentive effects of absorption costing.

See the questions following the study guide.

January 26 2004
Absorption costingmore mischief.
Topics

Cost objects and cost drivers.

Direct and indirect costs.
Variable and fixed costs.
The relevant range of analysis.
Identifying and managing excess capacity costs.
The death spiral.

BA 382T Syllabus

Primary Readings

Hilton, Chapter 3 and 19 (the latter is 9 pages).

Prepare

Case study: Bridgeton Industries Automotive Component and

Fabrication Plant.
See the questions following this study guide.

Lecture/discussion: Master budgeting and cash budgeting

Topics

Primary Reading

Chapter 9

Profit planning.
Cash budgeting and planning.
Feasibility of plans.
Seasonality and planning.

February 2, 2004
Cash budgeting
Topics

Primary Reading

Hilton, Chapter .9

Prepare

Case study:. Hanson Ski Products

Profit planning.
Cash budgeting and planning.
Feasibility of plans.
Seasonality and planning.

See the questions in the case. Turn in your individual case

write-up of this case prior to discussion. (Keep a copy for inclass discussion.)
Budgeting/forecasting for business opportunities.
Topics

Primary Reading

Hilton, Chapter 7.

Estimating both costs and revenues

Evaluating business ventures

BA 382T Syllabus

Prepare

Case study: Caribbean Internet Caf.

See the questions following the study guide.

February 9 2004
Lecture/discussion: Costing systems/cost estimation.
Topics

Primary Readings

Hilton, Chapter 3

Cost estimation and cost management.

Two-stage structure of costing systems.
Selection of Cost Drivers.
Failure of traditional costing systems.

John K. Shank and Vijay Govindarajan, The Perils of Cost

Allocation Based on Production Volumes, Accounting
Horizons, December 1988, pp. 71-79.
Simple costing systems illustrated.
Topics

Primary Readings

Same as above

Prepare

Case study: Seligram, Inc.: Electronic Testing Operations.

Cost estimation and cost management.

Two-stage structure of costing systems.
Selection of Cost Drivers.
Failure of traditional costing systems.

See the questions following the study guide. Turn in your

individual case write-up of this case prior to discussion.
(Keep a copy for in-class discussion.)

February 16 2004
Activity based costing systems.
Topics

Activity-based costing.
Activity drivers.
Cost drivers.
Differences from and advantages over traditional costing
systems.

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10

Hierarchy of activities.
Designing activity-based-costing systems.

Primary Readings

Hilton, Chapter 5.

Prepare

Case study: Siemens Electric Motor Works (A).

See the questions following the study guide. Turn in your
individual case write-up of this case prior to discussion.
(Keep a copy for in-class discussion.)

Costing for marketing.

Topics

Primary Readings

Rick Brooks, Unequal Treatment: Alienating Customers Isnt

Always a Bad Idea, Many Firms Discover, The Wall Street
Journal, January 1, 1999, p. A1+.

Analysis of General, Selling, and Administrative expenses.

Customer profitability analysis.

Werner Reinartz and V. Kumar. The Mismanagement of

Customer Loyalty, Harvard Business Review, July 2002, pp.
86-94.
Prepare

Case study: Kanthal (A).

See the questions following the study guide.

February 23 2004
Costing for management decisions.
Topics

Primary Reading

Gary Cokins, Measuring Costs Across the Supply Chain Cost

Engineering, October 2001, pp. 25-31.

Prepare

Case study: Sloan Styles, Inc.

The business value chain.

Managing the profitability of products and channels.

See the questions in the case. Turn in your group case write-

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11

up of this case prior to discussion. (Keep a copy for in-class

discussion.)
Lecture/Discussion: Cost-volume-profit analysis and cost behavior analysis
Topics

Primary Reading

Hilton, Chapter 8.

Variable and fixed costs.

The break-even point.
Introduction to cost-volume-profit (CVP) analysis.
CVP Analysis with income taxes.
CVP Analysis with multiple products.
Estimating cost behavior patterns.

Analyzing cost behavior

Topics

Primary Reading

Hilton, Chapters 7 & 8.

Prepare

Case study: Deltas New Song

Variable and fixed costs.

Engineering method of estimate
The high-low data analysis method
Regression analysis

See the questions in the case.

Expectations for the midterm exam
Topics

All of the above

March 29, 2004

Applying cost-volume-profit analysis
Topics

Variable and fixed costs.

The break-even point.
Introduction to cost-volume-profit (CVP) analysis.
CVP Analysis with income taxes.
CVP Analysis with multiple products.
Analysis with constrained capacity.
Analysis with uncertainty.

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12

Primary Reading

Hilton, Chapters 7 & 8.

Prepare

Case study:. Bill French, Accountant

See the questions in the case. Turn in your individual case
write-up of this case prior to discussion. (Keep a copy for inclass discussion.)

Lecture/Discussion: Short run decisions.

Topics

Primary Reading

Hilton, Chapter 14.

Marginal costing.
Relevant costs
Avoidable costs
Flexible budgets

April 5, 2004
Special order costing and pricing.
Topics

Primary Reading

Hilton, Chapter 14.

Prepare

Case study:. Sub-Micron Devices

Quantifying effects of decisions.

Relevant costs and revenues.
Appropriate costing and pricing.
Issues in accepting special orders.
Implications for existing sales, costs and revenues.

See the questions following the study guide. Turn in your

individual case write-up of this case prior to
discussion. (Keep a copy for in-class
discussion.)
New product line costing and pricing.
Topics

Quantifying effects of decisions.

Relevant costs and revenues.

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13

Appropriate costing and pricing.

Issues in accepting major customer relationship.
Implications for existing sales, costs and revenues.

Primary Reading

Hilton, Chapter 14.

Prepare

Case study:. Baldwin Bicycles

See the questions in the case.

April 12, 2004

Service/customer profitability analysis
Topics

Primary Reading

Hilton, Chapter 14 (review), Chapter 12.

Prepare

Case study:. Co-Operative Bank

Relevant costs and revenues.

Appropriate costing and pricing.
Product-line contribution to profitability.
Customer contribution to profitability.
Strategy for customer profitability.

See the questions following the study guide. Turn in your

individual case write-up of this case prior to
discussion. (Keep a copy for in-class
discussion.)
Lecture/Discussion: Management control systems
Topics

Primary Reading

Skim Hilton, Chapters 10-13.

Standard Costing.
Flexible Budgets.
Responsibility Accounting.
Decentralization.
Controlling investment centers.
Financial controls versus management controls.
Balanced scorecards.

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14

April 19, 2004

Variance analysis
Topics

Primary Reading

Hilton, Chapter 10 and 11.

Prepare

Case study:. Waltham Motors Div.

Responsibility accounting.
Cost analysis.
Variance calculation.
Variance analysis.

See the questions in the case.

Management control systems design
Topics

Primary Reading

Hilton, Chapter 12.

Performance measurement.
Responsibility centers.
Growth and creativityincentives versus constraints.
Control systems.
Levers of control.

Robert Simons, Control in an Age of Empowerment, Harvard

Business Review OnPoint, 2000.
Prepare

Case study:. Automation Consulting

See the questions following the study guide. Turn in your
individual case write-up of this case prior to
discussion. (Keep a copy for in-class
discussion.)

April 26, 2004

Budgeting as decentralized control
Topics

Budgeting in global organizations.

International issues in managerial accounting.

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15

Primary Reading

Review Hilton, Chapters 9 and 11.

Prepare

Case study:. Citibank Indonesia

See the questions following the study guide.

Transfer pricing
Topics

Primary Reading

Hilton, Chapter 13.

Prepare

Case study:. Stone Group Corp.

Decentralization.
Optimal decisions for the organization as a whole.
Transfer prices for managing decentralization.

See the questions following the study guide. Turn in your

individual case write-up of this case prior to discussion.
(Keep a copy for in-class discussion.)

May 3, 2004
Performance evaluation and control
Topics

Primary Reading

Review Hilton, Chapter 13.

Prepare

Case study:. Compagnie du Froid

Variance investigation for cost management and control.

Transfer pricing
Problems in performance evaluation

See the questions following the study guide.

Turn in your group case write-up of this case prior to
discussion. (Keep a copy for in-class discussion.)
Balanced scorecard
Topics

Management controls versus financial controls.

Balanced scorecard.

BA 382T Syllabus

Primary Reading

16

Robert Kaplan and David Norton, The Balanced Scorecard

Measures that Drive Performance, Harvard Business Review
OnPoint, 2000.
Robert Kaplan and David Norton, Putting the Balanced
Scorecard to Work, Harvard Business Review OnPoint, 2000.

Prepare

Case study:. Chadwick, Inc -Abridged

See the questions following the study guide.

Questions for Case Analysis

Western Chpsets (A) and (B)
1. (A)come up with as many potential solutions to the problem of making up an approximate
$2 million profit short-fall as you can. Comment on their probable feasibility.
2. (B)analyze the solution put forth by the controller and show how it generates over $9
million in additional profit without the sale of one unit more than expected in December.
Bridgeton Industries Automotive Component and Fabrication Plant.
1. The overhead allocation rate used in the 1987 model-year strategy study at the ACF was
435% of direct labor cost. Calculate the overhead allocation rate using the 1987 model year
budget. Why do you get different numbers?
2. Calculate the overhead allocation rate for each of the model years, 1988 through 1990. Are
the changes since 1987 in overhead allocation rates significant? Why have these changes
occurred?
3. Consider two products in the same product line:
Product 1

Product 2

Expected selling price

$ 62

$ 54

Standard material cost

16

27

Standard labor cost

Calculate the expected gross margins as a percentage of selling price on each product based
on the 1988 and 1990 model year budgets assuming selling price and material and labor cost
do not change from standard.
4. Are the product costs reported by the cost system appropriate for use in the strategic
analysis?

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17

5. Assume that the selling prices, volumes, and material costs for the 1991 model year will not
change for fuel tanks and doors produced by the ACF of Bridgeton Industries. Assume also
that if manifolds are produced, their selling prices, volume, and material costs will not
change either.
a) Prepare an estimated model year budget for the ACF in 1991,
i)

if no additional products are dropped;

ii)

if the manifold line is dropped.

Explain any additional assumptions you make in preparing your estimated model-year
budgets.
b) What will be the overhead allocation rate under the two scenarios?
6. Would you outsource manifolds from the ACF in 1991? Why or why not? What other
information would you want before reaching a final decision?
Caribbean Internet Caf
1. Prepare revenue and cost estimates for the Internet Caf proposal using the information in the
case for each of the three forecasting scenarios. Support your estimates of revenues and costs
with appropriate back-up calculations.
2. Prepare an analysis of annual net income and net cash flows from your estimates.
3. Does your analysis imply a clear go or no go decision? Why or why not?
4. How would you resolve the decision situation? Whats your call.
Seligram, Inc.: Electronic Testing Operations.
1. What caused the existing system at ETO to fail?
2. Calculate the reported costs of the five components described as computed by
a. the existing system;
b. the system proposed by the accounting manager;
c. the system proposed by the consultant.
3. Which system is preferable? Why?
4. Would you recommend any changes to the system you prefer? Why?
5. Would you treat the new machine as a separate cost center or as part of the main test room?
Siemens Electric Motor Works (A).
1. Calculate the cost of the five orders in Exhibit 4 under the traditional and new cost systems.
Hint: First calculate the revised cost of processing an order and handling a special
component.

BA 382T Syllabus

18

2. Calculate traditional and revised costs for each order if 1 unit, 10 units, 20 units, or 100 units
are ordered. Graph the product costs against volume ordered.
3. Does the new cost system support the strategy of the firm in ways that the traditional system
cannot? Is Mr. Karl-Heinz Lottes overestimating the value of the new cost system?
Kanthal (A).
1. Why have selling and administrative costs not traditionally been traced to individual products
and customers?
2. Evaluate the approach taken at Kanthal to compute the profit of individual orderlines,
including assigning S&A costs to each customer order. How were the costs of customer
orders and of producing non-stocked items estimated?
3. Consider a product-line with 50% gross margins (after subtracting volume-related expenses
from prices). The cost for handling an individual customer order is SEK 750, and the extra
cost to handle a production order for a non-stocked item is SEK 2,250.
(a) Compare the operating profits and profit margins of two small orders, both for SEK
2,000. One order is for a stocked item, and the other order is for a non-stocked item.
(b).Compare the operating profits and profit margins for two large customers. Customers
A and B both purchased SEK 160,000 worth of products this year. Customer A
placed just three orders, for three different non-stocked items. Customer B placed 28
orders 6 for stocked items, and 22 for non-stocked items.
4. What should Ridderstrale do about the large number of unprofitable customers revealed by
the account management system? Should salespersons be allowed to accept an unprofitable
order from a customer?
Sub-Micron Devices
1.

Compute the cost assigned under the present costing system to one ASIC
(application-specific integrated circuit) chip produced for transfer internally to the
Systems Division. Show each element of production cost assigned by the system.
[Note that one silicon wafer produces 100 ASIC chips.]

2.

Calculate the annual incremental contribution to profits of accepting the Western

Digital offer.

3.

Based on contribution to profits alone, should Sub-Micron accept the offer? Why?

4.

What other considerations should enter into this decision and what are their
implications for Sub-Micron?

5.

On balance, what do you recommend that Sub-Micron do with the Western Digital
offer? Explain your position.

6.

We can infer from the case that practical capacity of the ASIC production facility is
approximately 13,600,000 chips of the internal-transfer (Systems) type (from page 1:
16 million systems-type chips with an 85% yield). Re-compute the cost of an ASIC

BA 382T Syllabus

19

chip for internal transfer to the Systems Division if an appropriate amount of cost is
assigned to excess capacity.
7.

Comment on the consequences of taking idle capacity into account, given SubMicrons transfer pricing policy.

The Co-Operative Bank.

1. What were the main characteristics of the costing system used by the Co-Operative Bank
before the Project Sabre study was launched? What were the systems strengths and
weaknesses?
2. Evaluate the Co-Operative Banks ABC system and its implementation.
3. Should the Co-Operative Bank phase out Independent Financial Advice / Insurance and
Pathfinder products?
4. What does customer profitability add to the product profitability analysis? How can the
information on customer profitability be used to improve the banks financial condition?
5. What should be done with customers identified as unprofitable?
6. Should the Marketing Manager concentrate on Visa customers?
7. What differences do you see between applying ABC in a service company setting and in a
manufacturing company?
Automation Consulting Services.
1. How should the ACS founders deal with the problems that they have identified? Be as
specific as possible in making recommendations for each of the four offices.
2. The object of this case is to get us started thinking about what control systems are and how
they operate. Relate the problems (and your solutions) of this case to the Hilton text and the
reading by Simons.
Citibank Indonesia.
1. How does the Citibank budgeting process work?
2. Is this a participative budgeting process? Is participative budgeting consistent with
decentralized planning?
3. What challenge does Mistri face, and what possibilities are available to him?
4. How should Gibson allocate the $4 million increase in profits that he has committed to?
5. How might Citibank discourage Mistri and other country managers from taking actions to
meet their short-term goals at the expense of Citibanks long-term good?

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20

Stone Group Corp.

1. What is a transfer price and what circumstances make it necessary or desirable for a company
to establish transfer prices and policies?
2. What are the major options for calculating transfer prices (bases for transfer pricing policy)?
3. What incentives will the alternative transfer prices provide to sell or not to sell the
multimeters to the Industrial Controllers Division?
4. Who set the transfer price in this case? If you were in that persons position, what transfer
price would you set? What are your motives?
5. What overall transfer pricing policy, if any, would be best for Stone Group Corp. Defend you
r choice.
Compagnie du Froid, S.A.
1.

In evaluating Spain and France, what, if any, adjustments should be made for the transfer
pricing information?
a. Justify your position.
b. Revise the actual results for the two regions accordingly (if appropriate).

2. After any appropriate adjustment, analyze the overall performance of the three regions
according to the criteria (expressed or implied) in Jacques profit planning process.
3. After any appropriate adjustment, do a complete variance analysis and evaluate the
performance of the Spanish region from a responsibility accounting perspective.
4. Does Jacques Trumen need a policy on transfer pricing? If so, what should it be?
5. What system do you recommend for use by Jacques to evaluate and reward his regional
managers? Justify your recommendation.
6. How do you think that temperature-induced variances should be treated in the evaluation
and reward system? Justify your recommendation.
Chadwick, Inc. (abridged)
1. How does the balanced scorecard approach differ from other approaches to performance
measurement that we have examined and discussed in other cases? What, if anything,
distinguishes the balanced scorecard approach from a measure everything, and you might
get what you want philosophy?
2. Develop a balanced scorecard for Norwalk Pharmaceutical Division of Chadwick, Inc. What
parts of the business strategy that John Greenfield sketched out should be included? Are
there any parts that should be excluded or cannot be made operational?

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21

3. What are the scorecard measures that you would use to implement your scorecard in the
Norwalk Pharmaceutical Division?
4. What are the new measures that need to be developed, and how would you go about
developing them?
5. How would you advise John Greenfield on how to sell your balanced scorecard to
Chadwick management as a basis for evaluating Norwalk?
6. How would a balanced scorecard for Chadwick, Inc. differ from ones developed for its
divisions such as Norwalk?
7. Do you anticipate that there might be major conflicts between divisional scorecards and that
of the corporation? If so, should those conflicts be resolved and, if so, how should they be
resolved?