MGT C7 CONT

8/4/2019 MGT C7 CONT

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Chapter 7

CONTROLLING


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Controlling

It is the process of

measuring & correcting

activities (plans,

organization, personnel,

etc.) of an organization.


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Controlling

It is important functionbecause it helps check

errors, take action so thatdeviation from standardsare minimized & stated

goals of firms are achievedin desired manner.


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NATURE OF CONTROLLING

The consequences ofcontrolling means mgmt.

practices means bigsavings of millions ofpesos in operation. The

work is done at less costbut without sacrificingproduct quality.


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Importance of Control:

1. Prevent crises.

2. Standardization outputs.

3. Appraise employeeperformance.

4. Update plans.

5. Protect an organizationsasset.


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Types of Cost

1.Direct Labor

2.Materials3.Production over-head

variable

4.Production over-headfixed


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Types of Cost

1. Direct Labor These are wages &

salaries of workers whoare engage in the directgeneration of goods &services. This typically

does not include wagesand salaries of support ofoffice personnel.


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Types of Cost

2. Materials

Involves cost ofmaterials whichbecome a tangible part

of a finished goodsand services


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Types of Cost

3. Production Overhead Variable

Training new employees, safetytraining, supervision & clerical,

overtime premium, shiftpremium, payroll taxes, vacation& holiday, retirement funds,group insurance, supplies,

travel, repairs and maintenance


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Types of Cost

4. Production Overhead-Fixed

Travel, research anddevelopment, fuel (coal,gas, or oil), electricity,water, repairs &

maintenance, rent,depreciation, rel estatetaxes, insurance.


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CHARACTERISTICS OFCONTROL

Attuned to the activity.Deviations must be identified quickly.Control must be forward-looking.

Control must be strategicallyoriented.Control should be flexible.Control should be economical.

Control should be easy to understand.Control should indicate corrective,action.


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THE CONTROL PROCESS

Most of the definitions of control includethe steps or elements of the controlprocess.

1. Establishing standards

2. Measuring performance against theestablished standards.

3. Comparison of actual performance.

4. Taking corrective action when and

where deviations from the standardsoccur.

5. Follow-through.


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TYPES OF CONTROL

1. Control used to standardizeperformance.

2. Control used to safeguardfirms assets.

3. Control used to standardizequality.

4. Controls designed to set

limits which delegatedauthority can be exercisedwithout further top mgmt.approval.


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TYPES OF CONTROL

5. Controls used to measurejob performance

6. Controls used for planning

& programming operations.7. Controls necessary to allowtop mgmt. keep firms plansand program in balance.

8. Controls designed tomotivate individual.


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TYPES OF CONTROL

1)Control Used toStandardize Performance

This helps to increase

efficiency & decreasecosts. Control factor usedfor this purpose are:(motion & time studies,inspection, writtenprocedures & productionschedules).


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TYPES OF CONTROL

2) Control Used to SafeguardCompany Assets

The assets of a company

must be protected fromtheft, vandalism,wastage and misuse. Anadequate record keeping,

custodial & maintenanceactivities serves ascontrol mechanisms.


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TYPES OF CONTROL

3) Controls used toStandardize Quality -

These help to maintainthe specified qualitylevel of products.Example include

blueprints, inspectionand statistical qualitycontrol methods.


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TYPES OF CONTROL

4) Controls Designed to setlimit within which delegatedauthority can be exercisedwithout further top

management approval

Manuals, procedures, policy

statements and internalaudit are some examples ofthis category


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TYPES OF CONTROL

5) Controls Used toMeasure JobPerformance -

Special reports, outputdata, performanceappraisals and internalaudits are typicalexamples


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TYPES OF CONTROL

6) Controls Used forPlanning & ProgrammingOperations -

This type of controlsinclude sales andproduction forecasts,

budgets, cost standardsand standards for wokmeasurement.


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TYPES OF CONTROL

7)Controls Necessary toallow Top Mgmt. KeepFirms Plans andPrograms Balance -

Master budget, policy &organizations manuals,

committee approachesand the use of outsideconsultants come intothis category.


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TYPES OF CONTROL

8)Controls Designed tomotivate individuals -

Such controls wouldinvolve methods ofrecognizing achievementthrough promotions,

awards and so on.


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CONTROLS METHOD ANDSYSTEMS

There are 2 kinds of controlmethods :

a. Behavior Control (or Personal)

based on direct, personalsurveillance.

b. Output (or Impersonal )

control is based on themeasurement of outputs.


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Other Control Methods andSystems

Direct Observation

Written reports

AuditsTime related charts and techniques

Management by Objectives

Management information systems


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Budget - Is statement ofexpected results or requirementsexpressed in financial ornumerical terms.

Kinds of Budget :1. Flexible Budgets

2. Zero-Based budgeting


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Accounting Concepts &Techniques as Control Devices

Besides budgets, there are other accounting& financial concepts & techniques whichare used as control devices:

Responsibility AccountingRatio Analysis

Costs Accounting

Standard Cost ApproachDirect Costing


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Accounting concepts andtechniques as control devices

Responsibility Accounting

responsibilities for each

manager are identified andaccounting records aredesigned to suit theseresponsibilities.


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Accounting Concepts &Techniques as Control Devices

Ratio analysis

Under responsibility

accounting, responsibilitiesfor each manager areidentified and accountingrecords are designed to suittheseresponsibilities.


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KINDS OF CONTROL

Quality control deals with setting up

to quality standards in advance insuch areas, as physicalcharacteristics, composition of theproducts, weight, size, color, strength,

and performance, and comparingthese with actual standards.

Production control is the backbone

of any production system.Inventory control is an essentialsequence of a business operation.


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KINDS OF CONTROL

Economic order quantity

is issued todetermine the most economic level ofinventory.

Maintenance of inventory

wheninventory is received, people in thereceiving department check the

number and quality of the inventoryand compare it with others.

MGT C7 CONT

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