Management Control Systems

Course overview and objectives
The course aims to present management accounting as the process of measuring, analysing, and reporting financial and nonfinancial information that helps managers make decisions to fulfil the goals of an organization.
The course will be based on one theoretical and two practical weekly classes (1h20m each), taught in English.
The main objectives are:
• Understand the complementarities between Cost Management, Accounting Systems and Responsibility Accounting. 
• Appreciate the importance of using information for management decisions and of using opportunity costs, relevant costs, and revenues in the decision-making process.
• Use C-V-P (Cost-Volume-Profit) analysis for decision-making. 
• Comprehend the budgeting cycle and the behavioural context of business planning and controlling. 
• Understand the Management Control process based on quantification, analysis, and interpretation of variances – the flexible budgets. 
• Apprehend the principles of a performance evaluation system and the most used techniques and measures – responsibility accounting and controllability. 
• Understand the transfer-pricing system - the methods for its calculation and its relevance in the analysis of specific responsibility centres. 
• Know how to measure performance from a financial and a nonfinancial perspective –using performance measures as Return on Investment, Residual Income and Economic Value Added. 
• Realise the strategic dimension of control - the Balanced Scorecard and its relevance in the implementation and evaluation of an organization´s strategy.

Course Content
Part One – Decision Making and Cost Behaviour
1.1.The accountant´s role in the organization – Management Accounting, Financial Accounting and Cost Accounting
1.2.An introduction to Cost Terms and Purposes
1.3.Cost behaviour patterns – Reasons for Companies to distinguish between Variable and 
Fixed Costs:
1.3.1 Using C-V-P (Cost-Volume-Profit) analysis for Decision Making – The Breakeven Point (BEP)
1.3.2 Cost Planning and CVP 
1.3.3 Effects of Sales Mix on Income
1.3.4 The effect of discounts in BEP
1.4.Full and Direct Costing
1.5.Relevant Costs and Relevant Revenues
1.6.Opportunity Costs
1.7.Relevant–Revenue and Relevant-Cost Analysis of Adding a Customer
Part Two – Budgeting and Responsibility Accounting
2.1. The budget’s role in the organization – Strategy and Plans
2.2. Human Aspects of Budgeting - advantages and limitations of budgets
2.3. The budgeting cycles – The development of an Operating Budget
2.4. Budget´s Types:
2.4.1. The Zero Budget
2.4.2. Kaizen Budgeting
2.5. Flexible Budgets and variances´ interpretation
2.6. The variance´s investigation:
2.6.1. Volume Variances
2.6.2. Mix Variances
2.6.3. Efficiency Variances
2.6.4. Price Variances
2.7. Steps in Cash and Financial Budgeting
2.7.1. Cash Budget
2.7.2. Financial Budget
2.7.3. Budgeted Income Statement 
2.7.4. Budgeted Balance Sheet
Part Three – Pricing Decisions and Transfer Pricing
3.1. Evaluating Management Control Systems
3.2. Organization Structure and Decentralization
3.3. Transfer Pricing Methods
Part Four – Evaluating the success of Strategy and the performance evaluation
4.1 Responsibility Centres and Benefits and Cost of Decentralization
4.2 Financial Performance Measures – ROI, RI and EVA
4.3 Choosing measurement alternatives for Performance Measures
4.4 The Balanced Scorecard:
4.4.1 Strategy Implementation and the Balanced Scorecard
4.4.2 Implementing a Balanced Scorecard

Grading
1. Course grade
• Term grade = (Midterm Test x 35%) + (Endterm Test x 30%) + (Group Project [Final Report x 20% + Presentation x 10%]) + (Individual Practical grade x 5%). 
• Alternative Term grade – Students that (I) have already been normally enrolled in a previous semester, (II) were evaluated in all 5 components in that semester and (III) had a positive evaluation on both group project components, will have the option not to do the group project.

To activate this option, students must send an e-mail to ltribuna@ucp.pt until the day before the Midterm Test clearly stating their preference.For students that choose this alternative, the Term grade will be = (Midterm Test x 50%) + (Endterm Test x 45%) + (Individual Practical grade x 5%).
• Final exam: CLSBE rules apply for final exam admission – all students whose term grade is 8 or 9 (with a term grade of 7 or less, a student will be excluded).
Additionally, any student (with a positive Term grade) that has less than 6,5 in any of the tests or less than 9,5 in the arithmetical average of both tests will have to do the final exam.In either of these situations, a pass will only be obtained if the final exam grade is at least 9,5 and, in that case, the course grade will correspond to (Final Exam x 70%) + (Final Report x 20%) + (Presentation x 10%).
• Grade improvement – Students that passed the course in the current semester and wish to improve their grade can do so under the following terms:
• register for a grade improvement in the final exam;
• decide, during the exam, whether they wish to hand it in or not;
• the final course grade in this situation will be the arithmetical average of the final exam grade and the previous term grade;
• the “pass” status is at risk, i.e., if the above-mentioned average grade (final exam and previous term) is below 9,5, a student will fail the course.
For students that have passed the course in previous semesters and enrol for a grade improvement in this semester, the course grade will correspond to 100% of the final exam (if higher than the previous term grade).
2. Consultation and Re-Examination of tests
• After the publication of the results of each test, a time and place will be scheduled for students’ consultation of their tests and, if needed, re-examination by the instructors.
• All the instructors will be present in these sessions and any student can attend.
3. Changes to the grading system
• If changes to the grading system prove to be required by the prevailing teaching model (on-campus, online, hybrid), proper and timely communication to the students will be implemented.