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					                  CHAPTER 17
                    CONTROLLING




4 November 2011     CONTROLLING   1
Introduction
    Control is the last function of
     management. The controlling function
     will be unnecessary to the management
     if other functions of management are
     performed properly. Planning identifies
     the activities and controlling regulates
     the activities. Success or failure of
     planning depends upon the results of
     success or failure of controlling.
4 November 2011      CONTROLLING            2
                                PLANNING




4 November 2011   CONTROLLING          3
Definition

    “Control     is any process that guides activity
     towards       some pre-determined goal. The
     essence       of the concept is in determining
     whether      the activity is the achieving desire
     results”




4 November 2011            CONTROLLING               4
Areas or scope pf control
        Control over the policies of the concern,
         organization, the personnel employed in an
         organization, capital available to the
         concern, capital expenditure, production,
         wages and salaries paid to the employed,
         the cost of production, public relation,
         research and development, tools and
         equipment and overall control.



4 November 2011          CONTROLLING              5
Steps in Control process


                  Establishing                    Measuring
                   standards                     performance

                                 Taking
                             corrective action



                                 Comparison
                                      of
                                     actual
                                 with standards

4 November 2011                    CONTROLLING                 6
Requirements of effective control system
             Feedback
             Objective
             Suitability
             Prompt reporting
             Pointing out exceptions
             Flexible
             Economy
             Indelible
             Suggest remedial action
             Motivation
4 November 2011               CONTROLLING   7
                        Techniques of control
Statistical           Management             Gantt          Critical path
   control              information          milestone           method
   reports                system               chart

personal
                                                                             Zero-based
   observation
                                                                               budgeting

Cost accounting and                                                           Production
      cost control                                                               control
                                         Control
Break –even                                                                  Performance
   analysis                                                                   evaluation

 Special control
                                                                              Managerial
      repots
                                                                                statistics

management             Standard                          return on          Responsibility
    audit                costing      Internal Audit
                                                         investments          Accounting
    4 November 2011                       CONTROLLING                                  8
                  Pert/Cpm
Advantage of pert/cpm
 Ensure planning:

 identification of favorable factors:

 Savings of cost and time:

 Taking preventive or corrective
  actions:
 Attention on critical activities:

 Everything at right:

4 November 2011      CONTROLLING         9
Advantage of pert/cpm
        Making awareness of responsibilities:
        Securing co-operation:
        Facilities decision-making:
        Improved communication:
        Simultaneous performance of works:
        Advance control action:
        Timely completion of a project:
4 November 2011         CONTROLLING              10
Limitations of pert/cpm
        Error in estimation of time and cost
        application
        Time consuming and expensive




4 November 2011            CONTROLLING          11
Distinction between pert and cpm
PERT                            CPM

Three times estimation done     Three times estimation done

It gives importance to time     It gives importance to cost

It is suitable where activity It is suitable where activity
   timings are not known         timings are well known


It is event oriented            It is activity oriented

4 November 2011           CONTROLLING                         12
   Characteristics or features of control

Controlling process                         An Essence of
                                              action




 Universal                                    Influencing
                                                  factor


   Forward                             Control involves
      looking                            management
                      Dynamic
                         process

4 November 2011          CONTROLLING                        13
Need of control
        Judging the accuracy of
         standards:
        Minimize dishonest behavior:
        Better performance:



4 November 2011       CONTROLLING       14
  Advantages of control
       Adjustments in operation
       verification of policy
       managerial accountability
       Psychological pressure
       Maintaining morality
       Co-ordination
       Efficiency

4 November 2011        CONTROLLING   15
Limitations of control

        Absence of perfect standards
        Uncontrollable factors
        Difficulty in fixing responsibility
        Expensive process


4 November 2011        CONTROLLING             16
Types of managerial control
        Standardizing control
        preserving control
        Delegation of authority control
        Measurement control
        Motivating control

4 November 2011        CONTROLLING         17
Budget & Definition of budget
        Budget is derived from the French word
         „Budgette‟ which means small leather bag.
         Budget is a financial and quantitative
         statement.
         “Budget is a plan for income or outgo or
         both, of money, personal, purchased items,
         sales items, or any other entity about which
         the manager believes that determining the
         future course of action will assist in the
         managerial efforts”
4 November 2011           CONTROLLING               18
Budgetary control & Definition
of budgetary control
        “The term budgetary control is applied
         to a system of management and
         according control by which all
         operations and output are forecast as
         far ahead as possible and the actual
         results when known are compared
         with the budge t estimates.”

4 November 2011         CONTROLLING           19
Characteristics of budgetary control
        The activities the organizations are
         presented department-wise or section-wise.
        Budgets give the extent of expenditure
         though which cost control is achieved.
        The co-ordination of various departmental
         activates helps to prepare the determined
         standards.
        Clear-cut and specific requirement of the
         organization are expressed in quantitative
         terms.
4 November 2011          CONTROLLING              20
Characteristics of budgetary control

        Determines the deviations by comparisons
         and causes of such deviations.
        Recommends and implements the
         corrective actions when ever necessary.
        The future is planned on the basis of past
         experience.
        Recording the present performance for
         comparing purpose with the pre-determined
         standards.
4 November 2011          CONTROLLING              21
    Advantages of budgetary control
                                                                     promotion of
Tool for planning
                                                                      efficiency
   the activities
                                                                   Better utilization
Thinking in advance                                                   of resources

                                                                      Promoters
                                                                      balanced
                                                                       activities
Co-ordination
   of efforts
                                                                         Budgetary
                        Achievement         Criteria of self-
                          of goals           examination          Delegation        of
 Control         of                                                  authority
     expenditure
                  Encourages    Fixation of    Ensures proper Solving      financial
                  exchange of   responsibility communication     difficulties
 4 November 2011
                  information     CONTROLLING                                 22
Disadvantages, Limitations or
problems of budgetary control
        Inaccuracy
        personal bias
        Non-availability of Co-
         operation
        Rigidity
        Results are not attainable
4 November 2011      CONTROLLING      23
Disadvantages, Limitations or
problems of budgetary control
        Consistency
        Time Consuming process
        Ineffective budgetary control
        Discourage the initiative
        More paperwork

4 November 2011      CONTROLLING         24
Essentials of Effective budgeting system

        Efficient organization
        Preparing master budget
        Quick reporting
        Flexible


4 November 2011      CONTROLLING           25
Essentials of Effective budgeting system

        Support of top management
        Based on reasonable
         assumption
        Reward and punishment
        Appropriate authority

4 November 2011      CONTROLLING           26
                        Techniques of control
Statistical           Management             Gantt          Critical path
   control              information          milestone           method
   reports                system               chart

personal
                                                                             Zero-based
   observation
                                                                               budgeting

Cost accounting and                                                           Production
      cost control                                                               control
                                         Control
Break –even                                                                  Performance
   analysis                                                                   evaluation

 Special control
                                                                              Managerial
      repots
                                                                                statistics

management             Standard                          return on          Responsibility
    audit                costing      Internal Audit
                                                         investments          Accounting
    4 November 2011                       CONTROLLING                                  27
                            Types of budgets
                                Master          Physical property
             Sales budget
                                  budget           budget

 Cash budget                                                 Research
                                                                and
                                                            development
Production                                                    budget
   budget

                                Types of                    Production
  Time and                      budgets                       overhead
    material                                                   budget
     budget

                                                            Production
  Selling and                                                cost budget
   distribution                   Balance
   cost budget                  sheet budget         Supplies budget
4 November 2011                   CONTROLLING                          28
Budget can also be classified as
        Fixed budget
        Flexible budgets




4 November 2011      CONTROLLING   29
Preparation of a budget
        Sound forecasting
        Developed accounting system
        Fixation of responsibility
         centers
        Formation of budget
         committees
4 November 2011     CONTROLLING        30
Preparation of a budget
        Clear definition of business
         policies
        Statistical information
        Support of top management
        Budget period

4 November 2011      CONTROLLING        31

				
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posted:11/5/2011
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