Management Control Systems
Chapters 16 & 17
ME 2027 Performance and Cost Analysis
ME 2605 Cost Management and Control (for IMIM)
Håkan Kullvén, KTH, 2007
Hakan.kullven@indek.kth.se
Types of control
• Personal control
− Personnel, cultural & social means of
control
• Results control
− Control the output of the operations
• Action control
− Control the behaviour of the employees
Figure 16.1 page 649
Cybernetic control system
Responsibility centers
• Cost center
− Standard and discretionary
• Revenue center
• Profit center
• Investment center
Responsibility accounting
− The controllability principle
Exhibit 17.1 page 697
Contingency theory
•External environment
−Uncertain or certain
−Static or dynamic,
turbulent or calm
−Simple or complex
•Strategies
−Low cost or differentiation
−Defender or prospector
−Build/hold/harvest/divest
•Observability
−Of output, input,
transformation and
behaviour
•Technology
−Small/large batch, process
production, mass production
−Pooled, sequential or
reciprocal interdependence
•Business unit
−Firm size
−Single product, related or
unrelated diversified
−Organizational structure
−Industry variables
Figure 17.4 page 710
Purposes of accounting
•Rational and instrumental
•Symbolic
•Political and bargaining
•Legitimate and retrospective rationalizing
•Repressive, dominating and ideological
b
Next, we…
explore how the volume of the
operations affect the revenues and
costs of the organization. We also
start our discussion about activitybased costing
Chapters 8 & 10