Question 3

An important goal of the management control system is to motivate employees to work in the best interest of the organization.

A. Explain TWO (2) important reasons for evaluating performance, stating how they impact goal congruence and employee effort. (10 marks)

B. Define the following responsibility centres; (give an example for each): i. Cost centre ii. Profit centre (6 marks)

C. Distinguish between the following transfer pricing methods:

i. Market-based

ii. Negotiated (4 marks)

(Total 20 marks)