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2017/2018  KAN-CCMVV3012U  Accounting for Decision and Control

English Title
Accounting for Decision and Control

Course information

Language English
Course ECTS 7.5 ECTS
Type Elective
Level Full Degree Master
Duration One Semester
Start time of the course Autumn
Timetable Course schedule will be posted at calendar.cbs.dk
Study board
Study Board for MSc in Economics and Business Administration
Course coordinator
  • Hans Frimor - Department of Accounting and Auditing (AA)
Kontaktinformation: https:/​/​e-campus.dk/​studium/​kontakt eller Contact information: https:/​/​e-campus.dk/​studium/​kontakt
Main academic disciplines
  • Accounting
  • Economics
Last updated on 22-02-2017

Relevant links

Learning objectives
To achieve the grade 12, students should meet the following learning objectives with no or only minor mistakes or errors: After following this course, students should be able to:
  • Understand and apply basic management accounting concepts and techniques
  • Understand and apply management accounting concepts and techniques for strategic decision making and management control
  • Understand the role of the accounting system in providing decision facilitating and decision influencing information – as well as the tension between these purposes
  • Apply the fundamentals of decision making under uncertainty as it pertains to the decision-facilitating role of accounting
  • Formulate and apply relevant cost structures for decision making - using quantitative formulations and solution techniques
  • Formulate and apply decision problems when contribution margins do not exist – again - using quantitative formulations and solution techniques
  • Apply the fundamentals of risk sharing, incentives and control in decentralized decision making – through agency theory
  • Formulate and apply quantitative models of how different accounting systems (performance measures) can be used to reduce incentive risk and help coordinating responsibility centers
  • Formulate and apply quantitative models of how accounting systems (performance measures) can be used to reduce problems of induced moral hazard
  • In general to use quantitative methods for all of the above
Accounting for Decision and Control:
Exam ECTS 7,5
Examination form Oral exam
Individual or group exam Individual exam
Duration 20 min. per student, including examiners' discussion of grade, and informing plus explaining the grade
Preparation time With the listed preparation time: 15 Minutes
Grading scale 7-step scale
Examiner(s) Internal examiner and second internal examiner
Exam period Winter
Aids Open book: all written and electronic aids
The student is allowed to bring to the preparation room: Simple writing and drawing utensils, laptop/tablet as a reference book (NB: there are no electric outlets available), any calculator, books including translation dictionaries, compendiums, notes. PLEASE NOTE: Students are not allowed to communicate with others during the preparation time.
Make-up exam/re-exam
Same examination form as the ordinary exam
Course content and structure

Accounting has two major roles: A decision-facilitating role, and a decision-influencing role.

The decision-facilitating role: Effective management must identify the available alternative actions, predict the possible consequences of those actions, and then choose that action which has the most preferred outcome. Management accounting systems can be effective tools both in providing information that is useful in predicting the possible consequences of alternative actions and in structuring the description of those consequences. In most management accounting courses cost accumulation techniques are employed to deliver decision facilitating information. In this course more advanced models of structuring decision problems are developed and situations where no well-defined cost functions exist are also analyzed.

The decision-influencing role: Managers may not make the choices most preferred by a firm's owners (or higher level managers). To mitigate this problem, the firm's owners (or higher level managers) frequently establish formal or informal incentive systems that are designed to motivate the manager to choose the actions which they (the owners …) prefer. Management accounting systems are often an important part of these incentive systems as the provider of measures of management performance. In this course the accounting system’s role in resolving agency problems are emphasized. In addition such issues as benchmarking and incomplete contracting are treated.



1. Management accounting models and techniques

2. Fundamentals of decision making under uncertainty

2. Modeling cost behavior

3. Linear cost models for production planning

4. Risk sharing, incentives, and control

5. Reducing incentive risk - controllability principle, comparing outcomes to budgets and standards, and relative performance evaluation

6. Coordinating responsibility centers

7. Goal congruence – induced moral hazard - multiple tasks and investment

8. Bonus pools, repeated contracts, career concerns

Teaching methods
Lectures with cases incorporated
Feedback during the teaching period
Office hours for feedback
Regular short assignments
Student workload
Classroom teaching 30 hours
Preparation for classes 160 hours
Preparation for exam 16 hours
Expected literature

A standard Management Accounting textbook - plus teaching notes and cases:


Gerald A. Feltham, Sauder School of Business, UBC:


The Relation Between Market Values and Accounting Numbers

Impact of Capital Cost Allowance on Decision Analysis

Decision Making under Uncertainty and the Impact of Decision-facilitating Information

Economic Impact of Cost Model Specification Errors

Basic Cost/Production Activity Relations

Basic Resource Allocation Models

Sensitivity Analysis

Extensions to the Basic Resource Allocation Models

Multiple Period Production Planning

Wealth and Risk Sharing

Optimal Incentive Contracts

Decision-influencing Information


Cases and Solutions:

Albert's Gadgets (A and B)

Albert's Wizzers


Albert's Machine Shop

Albert's Rules-of-Thumb

Cholesterol Producers (I - IV)

Katastrofik Kemikals

Albert's Chemical Plant

Albert's Phantom Stock Plan

Albert's Partnership

Marion's Pie Shop (A and B)

Ralph's Informativeness Criterion

Albert's Divisions

Investment Center Problems


Peter Ove Christensen:

Lecture notes and Case Solutions:

A1 - A3; B1; C1 - C5; D1 - D3; E1 - E4; F1 - F2.


Demski, Joel S.: Managerial Uses of Accounting Information, Kluwer Academic Publishers, 1994, Chapter 19-21.


Zimmerman, Jerold L.: Accounting for Decision Making and Control, McGraw-Hill, latest edition. Chapters 4 - 5.


Christensen, P.O., G.A. Feltham and F. Sabac (2003): Dynamic incentives and responsibility accounting: a comment, Journal of Accounting and Economics , pp. 423-436.


Christensen, P.O., G.A. Feltham and M. Wu (2001): 'Cost of Capital' in Residual Income for Performance Evaluation, The Accounting Review , pp. 1-23.


Last updated on 22-02-2017