MGT C7 CONT
Transcript of 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.