1. Strategic Control
Control is taking measures that synchronize outcomes as closely as possible with plans
Traditionally, has been almost completely based on financial performance
Hence, top internal accounting officer became the “In Charge” official for organization control policies and procedures
What do we call the chief accounting officer of an organization?
Answer: The Controller
Financial Information was primary source
Rewarded Efficiency
Encouraged Dysfunctional Behavior

2. Strategic Control Strategic Control Methods
Integrates Quantitative & Qualitative Measures
Uses Financial and Non-financial information
Customer (External) focus
Rewards based upon relative contributions to organization success
Encourages desired organizational behavior
Implementing
Planning
Control Cycle
Measuring
Adjusting

3. Strategic Control and Control Systems
Should motivate people toward desired organizational behavior rather than promote dysfunctional behavior 
Traditional
1990’s thru 21st Century
Customer Satisfaction
New Product Development Rates
Outcomes
Quantitative & Qualitative Performance
Meeting Budget
Production Efficiency
Inputs
Quantitative Performance(Mostly Financial)
What is Measured?

4. Responsibility Centers Cross-Functional People
Who is evaluated? 
1990’s thru 21st Century
Traditional
Individuals
Functions
Responsibility Centers
Individuals
Teams (Groups)
Cross-Functional People

5. Overall Company Performance
Basis of Rewards control Systems 
Traditional
1990’s thru 21st Century
Efficiency
Profits
ROI
Quality
Innovation
Creativity
Overall Company Performance

6. Focus of Contemporary Control Systems
Traditional
1990’s thru 21st Century
Internal
Macro Environment
Industry Environment
Internal

7. Capacity Management
Capacity is the potential or capability, of a set of resources to do work of some type to create value for the customer.
Importance of capacity management (control) of organizations
Huge initial outlays
Sunk costs
Inflexible
Long-run costs
Mostly Fixed Costs
Goal of capacity management is to manage fixed costs (plant assets) in a manner that spreads costs over the largest possible volume
A very difficult area of management because it involves long-range planning

8. Strategic Control of Capacity
Must have right amount of capacity to produce to customer demands
*If there is excess capacity fixed costs must be spread over fewer units thereby
making the units cost more
*If there is insufficient capacity the company must incur additional costs to
generate more capacity

9. A Capacity Management Example
Company A and Company B each manufacture one product that is very similar in nature. Company A recently invested in modern machinery (new technology) that reduces its manufacturing labor cost. Company B continues to be labor intensive using its older machinery. Accordingly, Company A has much more fixed factory overhead annually than Company B ($ 1,500,000 compared to $ 600,000). The respective selling price and variable costs per unit are as follows:
Company A
Company B
Selling Price $ $20.00
Direct Mat $ $2.00
Direct Labor $ $6.00
Var. Overhead $ $1.00
Required: Compute the gross margins on the product of each company. Assume an annual volume of production and sales of 100,000 units; then 200,000 units.

10. Solution: (100,000 Units) Company A Company B Cost:
Variable Costs/Unit $4.00 $9.00
Fixed Cost/Unit
Total Cost/Unit $ $15.00
Selling Price $ $20.00
Total Gross Margin $100, $500,000
(200,000 Units)
The only Change is Fixed
costs per unit $ $3.00
Total Gross Margin $1,700, $1,600,000

11. Cost-Volume-Profit Analysis
Revenue Line
Contribution Margin
Profit Area
Break
Even
Point $
Fixed Costs
& Total Costs Line
Loss Area
Variable Cost Line
Activity Level