Key knowledge points

Topic 1 Decision making

The main focus is on decisions making under uncertainty. Students are expected to know:

How to draw a decision tree and use it to assist decision making

How to calculate the expected value

How to calculate the expected value of perfect information

How to calculate the expected value of sample information

Bayes’ Theorem and its application

Maxi-max and maxi-min utility rule

Prospect theory

Related materials:

Seminar notes, homework questions, ch2 of the textbook by Groot & Selto

Topic 2: Investment analysis

Students are expected to be familiar with commonly-used methods for evaluating capital investment that include discounted cash flow and real option analysis. Key points include:

Discounted cash flow methods and its application in evaluating capital investment NPV analysis

Investment risk and its impact on forecasted future cash flows and NPV

Real options analysis

post audits of investment analyses, decisions and outcomes.

Not required in the exam:

Investment portfolios and capital rationing

Use Excel to perform investment analysis

Use Solver to select projects

Related materials:

Seminar notes, homework questions, ch7 of the textbook by Groot & Selto

Topic 3: strategic management accounting

Students are expected to understand the important role SMA plays in an organization. Key points include:

Porter’s three generic strategies

Strategic positioning

The three distinct sources from which strategic positions emerge

Why operational effectiveness is not strategy

Why choosing a unique strategic position is not enough to guarantee a sustainable advantage

Related materials:

Seminar notes, homework questions, and required reading materials in LM

Topic 4: Balanced scorecard

Students are expected to understand how a balanced scorecard (BSC) as an integrated performance  measurement system differs from the traditional approach to performance management (What is a  BSC? What are the benefits and limitation of a BSC?), how BSC can be used to communicate business strategy, the cause-and-effect relationships between outcome measures and the performance            drivers of those outcomes in the BSC, and be able to develop BSC for an organization or a business     unit.

Related materials:

Seminar notes, homework questions, cases and Ch 10 of textbook by Groot & Selto

Topic 5: Incentive systems in organisations

Students are expected to appreciate the importance of incentive system design and challenges faced by organisations in designing the incentive system and be familiar with the economic and                     psychosocial models of motivation and the implications of employee motivation for incentive system design.

What are incentive systems and the goals of incentive systems

The dilemma of rewarding performance

Key issues to consider when designing incentive systems

Possible ways to improve group performance

Economic and psychological models/theories of motivation (Students should be able to analyse and evaluate incentive systems/performance measures by applying these models)

Related materials:

Seminar notes, homework questions, and ch12 of the textbook by Groot & Selto

Students are expected to be able to calculate the optimal transfer price and the output level that    maximizes the profit of the firm as a whole, understand the arm’s length principle and how to          estimate arm’s length transfer prices, and appreciate the issues in the international transfer pricing context.

The economics of transfer pricing: three scenarios

How to calculate the optimal transfer price and the output level that maximizes the profit of the firm as a whole for each of the three scenarios.

Related materials:

Seminar notes, homework questions, required reading materials in LM including Tippett & Wright (2006) and ch 9 of the textbook by Groot & Selto

Topic 7: inter-organisational management control

Students are expected to know the theoretical underpinning of organisational forms and strategic issues in managing inter-organisational relationships. Key topics include:

Theory of firms (Coase 1936)

Transaction cost economics and how it could be applied to explain the observed organisation forms. The interaction between trust and control in inter-organisational relationships (IORs)

Strategic management issues for IORs

Related materials:

Lecture notes, tutorial questions, required reading materials including the journal papers on ICE and ch11 of the textbook by Groot & Selto

Topic 8: Budgeting

Be able to prepare Flex budgets

Be able to perform variances analysis

Not required in the exam:

Prepare master budget using Excel

Related materials:

Seminar notes, homework questions, required reading materials in LM

Topic 9: Cost analysis and estimation

Appreciate the importance of understanding cost behaviors.

Understand what is a cost function and how a cost function can be established.