Management Control systems guide management decision-making and behaviour by coordinating the process of planning and control.These control systems are often used in conjunction with performance measurement systems.The control systems can be set up to evaluate managers' ability to perform in the best interest of the owners and to evaluate their success in delivering sustainable value.

REQUIRED:

A.Agency theory presents a model of the relationship between a principal and a contracted agent.Examples of agency contracts are those that exist between company managers and company owners.Agency theory makes simplifying assumptions about such managers as part of the focus on management control systems.Name three and comment on each assumption. (6 marks)

B.There are categories of economic costs that are paid or lost under Agency Theory. Name and describe in detail these costs. (4 marks)