1.
Define Control.
Ans.
Management control is the process by which managers assure that resources are
obtain and used effectively in accomplishment of the organization’s objective.
2.
What are the various stages in control processing?
Ans. The following are the stages
involved on the process of control
a.
Establishment
of standards
b.
Measurement
of Actual performance and making comparisons
c.
Finding
out deviations
3.
List out critical point standards?
Ans.
1. Physical standards.
2. cost standards.
3. Capital standards.
4. Revenue standards.
5. Intangible standards.
4. What are the dangers in budgeting?
Ans.
·
Over budgeting
·
Overriding Enterprise goals.
·
Hiding inefficiencies.
·
Inflexibility.
5.
Define preventive control?
Ans.
A control technique in which better
manager are developed and produced who can apply concepts skillfully, techniques
and principles.
6.
Give advantages of preventive control?
Ans.
1
Better Accuracy.
2 Better Understanding
3 Aware of responsibility
4 Control burdens are eliminated
Ans.
Revenue and expense budget.
Time space budget.
Capital and expense budget.
Cash budget.
8.
State the meaning of Zero base budgeting?
Budgeting in which enterprise programs
are divided into packages comprising goals, activities and need resources, and
costs are calculated for each package from the ground up.
9.
Point out objectives of budget.
Ans.
1.
Planning and forecasting
2.
Co-ordination
3. Control operation
4. Means of Communication.
Section
– B
1.
Explain the importance of controlling?
Ans.
The importance of controlling becomes clear from the following facts:
(1)
Accomplishing Organisational Goals:
The controlling process is implemented
to take care of the plans. With the help of controlling, deviations are
immediately detected and corrective action is taken..
(2)
Judging Accuracy of Standards:
While performing the function of controlling,
a manager compares the actual work performance with the standards.
(3)
Making Efficient Use of Resources:
Controlling makes it possible to use
human and physical resources efficiently. Under controlling, it is ensured that
no employee deliberately delays his work performance.
(4)
Improving Employee Motivation:
Through the medium of controlling, an
effort is made to motivate the employees. The implementation of controlling
makes all the employees to work with complete dedication
(5)
Ensuring Order and Discipline:
Controlling ensures order and
discipline. With its implementation, all the undesirable activities like theft,
corruption, delay in work and uncooperative attitude are checked.
(6)
Facilitating Coordination in Action:
Coordination among all the departments
of the organisation is necessary in order to achieve the organizational
objectives successfully. All the departments of the organisation are
interdependent.
2. Explain the Limitations of Controlling:
Ans.
1. Difficulty in setting quantitative standards:
Control system loses its
effectiveness when standard of performance cannot be defined in quantitative
terms and it is very difficult to set quantitative standard for human
behaviour, efficiency level, job satisfaction, employee’s morale, etc. In such
cases judgment depends upon the discretion of manager.
2. No control on external factors:
An enterprise cannot
control the external factors such as government policy, technological changes,
change in fashion, change in competitor’s policy, etc.
3. Resistance from employees:
Employees often resist
control and as a result effectiveness of control reduces. Employees feel
control reduces or curtails their freedom. Employees may resist and go against
the use of cameras, to observe them minutely.
4. Costly affair:
Control is an expensive
process it involves lot of time and effort as sufficient attention has to be
paid to observe the performance of the employees. To install an expensive
control system organisations have to spend large amount. Management must
compare the benefits
of controlling system with the cost involved in installing them. The benefits
must be more than the cost involved then only controlling will be effective
otherwise it will lead to inefficiency.
3. Explain the limitations
of budgetary control? Some of the limitations are discussed as follows:
Ans.
1. Uncertain Future:
The budgets are prepared
for the future period. Despite best estimates made for the future, the
predictions may not always come true. The future is always uncertain and the
situation which is presumed to prevail in future may change. The change in
future conditions upsets the budgets which have to be prepared on the basis of
certain assumptions. The future uncertainties reduce the utility of budgetary
control system.
2. Budgetary Revision Required:
Budgets arc prepared on
the assumptions that certain conditions will prevail. Because of future
uncertainties, assumed conditions may not prevail necessitating the revision of
budgetary targets
3. Discourage Efficient Persons:
Under budgetary control
system the targets are given to every person in the organization. The common
tendency of people is to achieve the targets only. There may be some efficient
persons who can exceed the targets but they will also feel contented by
reaching the targets. So budgets may serve as constraints on managerial
initiatives.
4. Problem of Co-ordination:
The success of budgetary
control depends upon the co-ordination among different departments. The
performance of one department affects the results of other departments. To
overcome the problem of coordination a Budgetary Officer is needed. Every concern
cannot afford to appoint a Budgetary Officer.
5. Conflict Among Different Departments:
Budgetary
control may lead to conflicts among functional departments. Every departmental
head worries for his department goals without thinking of business goal. Every
department tries to get maximum allocation of funds and this raises a conflict
among different departments.
6. Depends Upon Support of Top Management:
Budgetary
control system depends upon the support of top management. The management
should be enthusiastic for the success of this system and should give full
support for it. If at any time there is a lack of support from top management
then this system will collapse.
Part-
C
1)
Explain the controlling process?
Ans. The controlling process involves:
1.
Establishing standards to measure performance
2.
Measuring actual performance
3.
Comparing performance with the standard
4.
Taking corrective action
Controlling Process
Explained
The controlling process is
simply a set of steps a manager uses to determine whether organizational goals
have been met. Let's explore each step of the process and apply examples
to demonstrate its function for management. Let's use the example of TQM Auto
Repair Shop to understand the controlling process.
Establishing
Standards to Measure Performance
This involves making decisions about the
goals an organization wants to focus on during a period of time. These can be
financial, customer satisfaction, production or employee performance-related
goals.
Measuring
Actual Performance
This involves creating measuring tools
to collect data. The tool should be able to report on performance as it relates
to the standards set, or 'measures,' developed in the first step of the
controlling process. These tools can be a balance sheet, a sales report, data
collected from a customer satisfaction survey or even an employee performance
appraisal.
Comparing
Performance with the Standard
This involves comparing 'actual'
performance to performance standards based on data collected in the second step
of the controlling process. Using the measuring tools created in the second
step, managers are able to compare current performance and productivity to the
standards set.
2)
Explain the Requirements of Effective Control System:
Ans.
A control system is not an automatic
phenomenon but deliberately created. Though different organisations may design
their control systems according to their unique and special characteristics or
conditions, yet in designing a good and effective control system the following
basic requirements must be kept in view:
1.
Focus on Objectives and Needs:
The effective control system should emphasize
on attainment of organizational objectives. It should function in harmony with
the needs of the enterprise. For example, the personnel department may use feed
forward control for recruiting a new employee, and concurrent control for
training.
At the shop level, control has to be
easy, but more sophisticated and broad ranging controls may be developed for
higher level managers. Thus, controls should be tailored to plans and
positions.
2.
Immediate Warning and Timely Action:
Rapid reporting of variations is at the
core of control. An ideal control system could detect, not create bottlenecks
and report significant deviation as promptly as possible so that necessary
corrective action may be taken well in time. This needs an efficient system of
appraisal and timely flow of information.
3.
Indicative, Suggestive as well as corrective:
Controls should not only be able to
point to the deviations, but they should also suggest corrective action that is
supposed to check the recurrence of variations or problems in future. Control
is justified only if indicated or experienced deviations from plans are
corrected through appropriate planning, organizing, staffing and directing.
Control should also lead to making valuable forecasts to the managers so that
they become aware of the problems likely to confront them in the future.
4.
Understandable, Objective, and Economical:
Controls should be
simple and easy to understand, standards of performance are quantified to
appear unbiased, and specific tools and techniques should be comprehensive,
understandable, and economical for the managers.
They must know all the details and
critical points in the control device as well as its usefulness. If developed
and complex statistical and mathematical techniques are adopted, then proper
training has to be imparted to managers.
Standards should be determined based on
facts and participation. Effective control systems must answer questions such
as, “How much does it cost?” “What will it save?” or “What are the returns on
the investment?”
The benefits of controls should outweigh
the costs. Expensive and elaborate control systems will not suit, for example
to small enterprise.
5.
Focus on Functions and Factors:
Control should emphasise the functions,
such as production, marketing, finance, human resources, etc and focus on four
factors – quality, quantity, timely use and costs. Not one, but multiple
controls should be adopted.
6.
Strategic Points Control:
Control should be selective and
concentrate on key result areas of the company. Every detail or thing cannot
and is not to be controlled in order to save time, cost and effort. Certain
strategic, critical or vital points must be identified along with the
expectations at those points where failures cannot be tolerated and appropriate
control devices should be designed and imposed at those stages.
Controls are applied where failure
cannot be tolerated or where costs cannot exceed a certain amount. The critical
points include all the areas of an organization’s operations that directly
affect the success of its key operations.
7.
Flexibility:
Control must not become ends in
themselves. It must be environment friendly and be able to make modifications
or revisions necessitated by the rapidly changing and complex business
environment. Flexibility in control system is generally achieved by the use of
alternative plans or flexible budgets.
8.
Attention to Human Factor:
Excess control causes corruption. It
should not arouse negative reactions but positive feelings among people through
focus on work, not on people. The aim of control should be to create
self-control and creativity among members through enmeshing it in the organisational
culture. Employee involvement in the design of controls can increase
acceptance.
9.
Suitability:
Controls have to be consistent with the
organization structure, where the responsibility for action lies, position,
competence, and needs of the individuals who have to interpret the control
measures and exercise control. The higher the quality of managers and their
subordinates, the less will be the need for indirect controls
3) Explain various control Techniques in
Detail?
Ans:
Many
techniques have been developed to control the activities in management. The
list is very long, and it is difficult to describe them all.
Some of the important techniques are:
Finance is
related with mobilization of funds and their utilization and the return on
them. Financial control is exercised through the following:
1.
Financial Statements:
Income statement (telling about
expenses, segmental incomes, overall income and expenses, and the net
profit/loss), and Balance Sheet (shows the net worth at a single point of time
and the extent to which the debt or equity finance the assets)
2.
Financial Audits:
Financial audits, either internal or
external are conducted to ensure that the financial management is done in line
with the generally accepted policies, procedures, laws, and ethical guidelines.
Audits may be internal (by Organisation’s own staff), external (statutory audit
by chartered accountants), and management audit (by experts).
3.
Ratio Analysis:
Ratio
analysis monitors liquidity, profitability, debt, and activity related aspects.
4.
Budgetary Controls:
Budgetary control is the process of
constructing budgets, comparing actual performance with the budget one and
revising budgets or activities in the light of changed conditions. Budgetary
control is as such not related only to finance area, but all functional areas
do take help of budgetary control. Budgets help not only in planning but also
help to keep a tab on overall spending.
Budgeting may be top-down (managers
prepare the budget and ask subordinates to use); bottom-up (figures come from
lower levels and adjusted at upper levels); zero-based (justifying allocation
of funds on the basis of activities or goals); and flexible budgeting (varying
standards and varying allocations).
5.
Break-even Analysis:
It
is a tool of profit planning and deals with cost-volume-profit relationships.
6.
Accounting:
Accounting includes responsibility
accounting, cost accounting, standard cost approach, direct costing, and
marginal costing.
Marketing
Control:
In the field of marketing, to see that
customer gets right product at the right price at the right place and through
right communication, the control is exercised through the following:
Market
Research:
It is to assess customers’ needs,
expectations and the delivery; and the competitive scenario.
Test
Marketing:
To assess consumer acceptance of a new
product, a small-scale marketing is done. HUL uses Chennai for most of its test
marketing.
Marketing
Statistics:
Marketing
managers control through marketing ratios and other statistics.
Human
resource control:
Human resource control is required to
have a check on the quality of new personnel and also to monitor performances
of existing employees so as to determine firm’s overall effectiveness.
Goal setting, instituting policies and
procedures to guide them are to help them. Common controls include performance
appraisals, disciplinary programmes, observations, and development assessments.
Information
Control:
All organizations have confidential and
sensitive information to be kept secret. How to control access to computer
databases is very important. This has become a key contemporary issue in
control. Organizations keep a watch on employee’s computer usage in general and
internet in particular.
Production
Control:
To ensure quality production in right
quantity at right time economically production controls are required. Two of
the important techniques include: Inventory control (ABC Analysis, Economic
Order Quantity, Just-in time inventory control), and quality control (through
inspection, statistical quality control).
Project
Control:
Network analysis is most suitable for
the projects which are not routine in minimizing cost and completing project
well in time. Network analysis makes use of two techniques
– Programme Evaluation and Review
Technique (PERT), and Critical Path Method (CPM).
4)
Explain the advantages of controlling function?
Ans.
Some
of the advantages of managerial control for an organization are as follows:
Managerial control is essential to
efficient management. It helps the managers to measure actual performance and
guide it towards the achievement of predetermined goals. It is important
activity in any business enterprise.
Just as road signals are necessary at a
busy road crossing to ensure accident free and smooth flow of traffic,
management control devices are necessary in an organisation for the attainment
of its goals. According to Terry, “Effective controlling assists in the efforts
to regulate the planned performance to assure that performance takes place as
planned.”
1.
Efficient Execution:
Control is an important pre-requisite
for an effective and efficient implementation of the pre-determined plans. It
assists in determining variations, pinpointing the factors responsible for them
and taking remedial measures.
2.
Helps Delegation:
Control can be meaningful only when it
is preceded by proper delegation of authority and duties. Thus, it promotes
delegation of authority to the employees at lower levels. In this way they
develop a sense of involvement in the working of an organisation.
3.
Aid to Decentralisation:
The modern trend of business
organizations is towards decentralisation which calls for a systematic attempt
for controlling. Under decentralisation, the authority of decision making is
dispersed throughout the organisation. Management must keep control in its
hands to know whether the authority is being used properly. Without adequate
controls, decentralisation cannot succeed.
4.
Assists Co-ordination:
The size of modern business enterprises
is increasing. A huge amount of capital and large number of people are employed
in them. This creates the problem of adequate control as there are many
divisions producing and distributing different products. In order to
co-ordinate their activities, an efficient system of control is required.
Control simplifies supervision by
pinpointing significant deviations. It keeps the employees under check and
brings discipline among them. A good system of control detects the weak points
very quickly. This helps the expansion of span of control at all levels.
6.
Aids to Efficiency:
Basically, control is concerned with ensuring
that all the important factors in the enterprise move along the right lines and
at the right pace. This assists in promoting efficiency all rounds.
7.
Boosts Morale:
Control techniques help in finding the
deviations and identifying the factors responsible for the same. This boosts
the morale of the employees because they know the work for which they are to be
held responsible.
5.
Explain the advantages of budgetary control?
Ans.
Some of the advantages of budgetary control are:
1.
Maximization of Profits:
The budgetary control aims at the
maximization of profits of the enterprise. To achieve this aim, a proper
planning and co ordination of different functions is undertaken. There is a
proper control over various capital and revenue expenditures. The resources are
put to the best possible use.
2.
Co-ordination:
The working of different departments and
sectors is properly coordinated. The budgets of different departments have a
bearing on one another. The co-ordination of various executives and
subordinates is necessary for achieving budgeted targets.
3.
Specific Aims:
The plans, policies and goals are
decided by the top management. All efforts are put together to reach the common
goal, of the organization. Every department is given a target to be achieved.
The efforts are directed towards achieving some specific aims. If there is no
definite aim then the efforts will be wasted in pursuing different aims.
4.
Tool for Measuring Performance:
By providing targets to various
departments, budgetary control provides a tool for measuring managerial
performance. The budgeted targets are compared to actual results and deviations
are determined.
5.
Economy:
The planning of expenditure will be
systematic and there will be economy in spending. The finances will be put to
optimum use. The benefits derived for the concern will ultimately extend to
industry and then to national economy.
6.
Determining Weaknesses:
The deviations in budgeted and actual
performance will enable the determination of weak spots. Efforts are
concentrated on those aspects where performance is less than the stipulated.
7.
Corrective Action:
The management will be able to take
corrective measures whenever there is a discrepancy in performance. The
deviations will be regularly reported so that necessary action is taken at the
earliest.
8.
Consciousness:
It creates budget consciousness among
the employees. By fixing targets for the employees, they are made conscious of
their responsibility. Everybody knows what he is expected to do and he
continues with his work uninterrupted.
9.
Reduces Costs:
In the present day competitive world
budgetary control has a significant role to play. Every businessman tries to
reduce the cost of production for increasing sales. He tries to have those
combinations of products where profitability is more.
10.
Introduction of Incentive Schemes:
Budgetary control system also enables
the introduction of incentive schemes of remuneration. The comparison of
budgeted and actual performance will enable the use of such schemes.
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