Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 35

Some people argue that paying contingent compensation is unnecessary. Instead, the firm should just pay a “fair salary” and the manager will do what is expected. Do you agree?

Step 1 of 2

Management control system

Management control system is needed to manage the complications arising out of decentralization like dysfunctional decision making. Owners of the organization use structure and procedures of management control system to influence the actions of its managers and other employees to ensure smooth implementation of organizational strategies. Management controls system comprises of three elements such as delegation fo decision making authorities, evaluation of performance and measurement systems and finally awarding compensation and rewards for performance.