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Question 1

Management accounting

Answer 1

involves the use of financial measures to evaluate an organisation’s
and management performance. The focus of attention could be a product or service, customers, a department, a division, or the entire
organisation

Question 2

Management control

Answer 2

is a broader concept; MA is a primary input into management control (MC) system, but MC also relies on non-financial information to support managerial decisionmaking, strategy development, measurement of strategy implementation, incentivising employees
to achieve goals of an organization

Question 3

Direct Cost vs indirect?

Answer 3

a cost that is uniquely and unequivocally attributable to a single product.

Indirect attirtubale to many (Power (VC), Depreciation (FC)

Question 4

What is a responsibility centre

Answer 4

An organisation unit headed by a manager
with responsibility for a particular set of inputs
and/or outputs
– Typically, a manager is in charge of some
assets, people and responsible for a certain
outcome (costs, revenues, profit, profitability).

Question 5

Cost centres

Answer 5

• Managers of cost centres are held accountable for costs:
• Standard cost centres
• Inputs and outputs can be measured in monetary terms
• There is a causal relationship between inputs and outputs
• (manufacturing departments)
• Performance control of a cost centre:
• Actual vs. standard costs (comparing the actual costs to the
  budgeted)

Question 6

Discretionary costs centres

Answer 6

“Managed” or “discretionary” cost centres
* Outputs are difficult to measure in financial terms
* Relationship between inputs and outputs is hard to establish (advertising, R&D
and human resources, admin departments)
* Performance control of discretionary cost centres:
* Ensuring that managers adhere to the budgeted expenses while successfully
accomplishing the tasks of their centre
* Subjective, non-financial controls (quality of service provided)
* Personnel control

Question 7

Revenue centre

Answer 7

A responsibility centre’s manager controls only revenues in terms of the volumes sold. Prices are quite often set. They do not control the manufacturing nor acquisition costs of the products or services the centresells nor the level of investment made.
* Some revenue centres control:
* price,
* the mix of stock on hand,
* and promotional activities

Question 8

Revenue centres performance control

Answer 8

Performance control: Budgeted vs. actual
sales (quantities of products/services or
revenues)
* Most revenue centres’ managers are also
held accountable for some expenses (e.g.,
salespeople’s salaries and commissions) -
performance control: budgeted vs actual
costs.

Question 9

Investment centres

Answer 9

Managers of investment centres are held accountable for the profits on the investment made to generate those profits.
* Absolute differences in profits are not
meaningful if various organisational
entities use different amounts of resources
* Performance control: return on capital

Question 10

Measuring Return on
Investment

Answer 10

Income / Investment. Is compared to the firms cost of capital to see if the investment is higher.

Question 11

Residual Income

Answer 11

Income - (r * Investment). Residual Income equals income less the economic cost of the investment used to generate that income

Question 12

What are transfer prices?

Answer 12

is the set of rules an organisation uses to allocate jointly earned
revenue among responsibility centers

Question 13

Types of transfer pricing

Answer 13

• Market-based transfer prices
• Cost-based transfer prices
• Negotiated transfer prices
• Administered transfer prices

Question 14

Market-based transfer prices

Answer 14

Priced based on the market. Price similair to competitors.

Question 15

Full cost transfer pricing and what is the problem

Answer 15

Pricing set at the exact amount created for the product. However, variations occur due to higher than budgeted costs, misc overhead costs.

If there is also a mark-up to the full costs, there is little incentive for the selling BU to transact internally since there is little profit margin.
On the other hand, as full cost transfer prices cover full costs of production, no incentive to improve productivity in the selling BU

Question 16

What is BEPS?

Answer 16

Base erosion and profit shifting (BEPS) refers to corporate tax planning strategies used by multinationals to “shift” profits from higher-tax jurisdictions to lower-tax jurisdictions or no-tax

Question 17

What is the international two pillar agreement that adresses the problem?

Answer 17

Pillar One will reallocate some taxing rights for large multinational enterprises from their home countries to the market jurisdictions where their users and customers are located. The rules will apply to multinational enterprises with global sales above €20 billion (AUD 32 billion). 25% of residual profit defined as profit in excess of 10% of revenue will be allocated to market jurisdictions in which it was generated

Pillar Two will introduce a global minimum corporate tax rate of 15% for corporations in scope. It will apply to multinational groups with revenue exceeding EUR 750 million (AUD 1.1 billion).

Question 18

What is the principal-agency relationship.

Answer 18

The principal-agent relationship is an arrangement in which one entity legally appoints another to act on its behalf

Question 19

Effects of principal agency relationship

Answer 19

There is no automatic pursuit of
organisation’s goals
* A concern that managers would
not create shareholders’ value
or would destroy it
* Different risk appetite of
managers
* Dysfunctional behaviors of
managers and employees
* Lack of ability disguised by
accounting manipulation

Question 20

what is the modern slavery act?

Answer 20

Large businesses which have annual consolidated revenue of at least AUD$100 million in the Australian market need to provide detailed annual statements addressing their actions to prevent modern slavery risks in their supply chain.

Question 21

What are options to enforec human rights b y suppliers operating in 3rd world countries.

Answer 21

1. Cut off connection/ties.
2. Implementation of Ethical Audits
3. Training and Capacity Building
4. Transparency and Reporting

Question 22

Profit centres

Answer 22

Managers are held accountable for profits.
Performance control: budgeted vs. actual profit

Question 23

Controllability principle

Answer 23

The controllability principle states that the manager of a responsibility centre should be held accountable only for the revenues, costs, or investments that a responsibility centre controls.

Question 24

What is the customer life time value / life cycle profitability?

Answer 24

The critical parameters for calculating Lifetime
Customer Value are:
* Initial acquisition cost
* Margins on the customer earned each
year/day
* Additional costs to retain the customer
* Duration of the relationship or
* Retention rate (if working on average numbers)

(m-c)*r / i -r

Question 25

What is BSC? and what are Pros and Cons of

Answer 25

Balanced Score card.

BSC brings about more subjectivity
Benefits of subjectivity
* Difficult-to-measure aspects can
be taken into account
* Effects of uncontrollable factors
on performance can be
considered
* Relevant unanticipated events
can be taken into account

Costs of subjectivity
* Social pressure: leniency, favouritism
* Arbitrary evaluations
* Requires trust in the superior
- Shareholders oppose BSC “Impossible to not earn bonus. Cherry picked metrics for easier evaluation.”

Question 26

What is the stakeholder/shareholder perspective of the firm and how does it influence corporate objectives?

Answer 26

The stakeholder and shareholder perspectives offer different paradigms for corporate governance and strategy. The shareholder perspective drives companies to focus on financial performance and efficiency, potentially leading to short-term gains. In contrast, the stakeholder perspective encourages a more balanced approach, considering the well-being of all stakeholders, fostering long-term sustainability, and potentially building a more resilient and ethical business.

Question 27

What transfer prices used in Santalo vs Adriatic

Answer 27

In the Santaló case study, the transfer pricing method used was primarily cost-based. This involved setting transfer prices based on the cost of production with an added markup for profit.

in contrast, the Adriatic Bank case study utilized a market-based transfer pricing approach. This method involved setting transfer prices based on comparable market prices for similar financial services or products. The market-based approach was chosen to reflect external competitive conditions more accurately and to satisfy regulatory requirements, ensuring that the transfer prices adhered to the arm’s length principle.