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Master of Business Administration
Paper Code: MB FM– 205
Paper Title: Management control system
Q. 1. Short answer type questions: Limit 100 – 150
Ques. a. Define the scope of Management Control.
Answer: Scope of managerial control is very wide. It virtually covers all the areas of business, namely policies, procedures, men, money, machines and equipment, public relations, human relations, research and development and so on. Normally, managerial control is exercised by concentration on key areas of business on which the success of the business depends. It is known as “key-point control”. The key-points vary
Ques. b. Why effective control system is required in Management?
Answer: Effective control systems tend to have certain common characteristics. The importance of these characteristics varies with the situation, but in general effective control systems have following characteristics.
Ques. c. Differentiate between PERT and CPM technique.
Answer:
- PERT is a project management technique, whereby planning, scheduling, organising, coordinating and controlling uncertain activities are done. CPM is a statistical technique of project management in which planning, scheduling, organising, coordination and control of well-defined activities take place.
- PERT is a technique of planning and control of time. Unlike CPM, which is a method to control costs and time.
- While PERT is evolved as a research and development project, CPM evolved as a construction project.
- PERT is set according to events while CPM is aligned towards activities.
- A deterministic model is used in CPM.
d. What do you mean by Performance Budgeting?
Answer: Performance budget also referred to as performance-based budgeting is a practice of preparing the budget based on the evaluation of the productivity of the different operations in an organization. Operations which are contributing the most to the profitability, the larger share of the budget is allocated to that division. It leads to optimum utilization of resources such as finance, skills of the staff, use of the productive
Ques. e. What is meant by „Transfer Pricing‟?
Answer: Transfer pricing can be defined as the value which is attached to the goods or services transferred between related parties. In other words, transfer pricing is the price which is paid for goods or services transferred from one unit of an organization to its other units situated in different countries (with exceptions).
Transactions subject to Transfer pricing
Ques. f. What is the function of a Cost Centre?
Answer: A cost center is a unit or a division in an organization that does not take in any income, but must spend money to fulfill an important function. In other words, a cost center only adds to costs. The 1-800 free help line of a consumer products manufacturer is a typical example of a cost center. Such a division costs money to staff and operate, but does not directly add to the revenue of the business.
Ques. g. What is the Concept of Motivation? How does it affect individual behavior and performance?
Answer: Motivation plays an important role in everyday tasks and is specifically essential in the corporate world. The level of motivation of employees determine the success of an organization and shapes the culture of a workplace. Motivation can be divided into extrinsic and intrinsic motivation and both of these
Ques. h. How divisional performance is measured in an organization?
Answer: Performance measurement is the performance-based management process which is flowing from the organizational mission and the strategic planning process. Divisional performance measurement includes the objective and subjective assessments of the performance sub-units of an organization
Ques. i. Discuss the importance of Internal Ahudit.
Answer: The benefits of internal audit to the business include –
1.Provides Objective Insight
Your work cannot be audited without having a definite conflict of interest. The internal auditor or the internal audit team, cannot have any operational responsibility to achieve this objective insight. In smaller situations where smaller businesses don’t have extra resources to devote to this, it is acceptable to cross-train workers in different departments to be able to audit another unit.
2.Decide the Extent of Audit
The internal audit report may provide the effectiveness of various systems in the company which may help the auditor in determining the
Ques. j. Discuss the advantages of Participative Management
Answer: Advantages of Participative Management
Job Satisfaction: In lots or organizations that employ participative management, most of the employees are satisfied with their jobs and the level of satisfaction id very high. This is specially when people see their suggestions and recommendations being implemented or put to practice. Psychologically, this tells the individual employee that, ‘he too has a say in decision making and that he too is an integral component of the organization and not a mere worker’.
Q.2 what is the Concept of Management Control? Also discuss the scope and importance of Implementing adequate Management Control.
Answer: An effective organization is one where managers understand how to manage and control. The objective of control as a concept and process is to help motivate and direct employees in their roles. Understanding managerial control process and systems is essential for the long- term effectiveness of an organization.
Q.3 SalesRs.2520000,CostofsalesRs.1920000,NetProfitRs.360000, InventoryRs.800000, OtherCurrentAssetsRs.1440000,Fixed Assets Rs.1500000,DebtRs.900000,CurrentLiabilities Rs.600000 and Net worth Rs.1500000
Calculate:
a. Current Ratio b. Net Profit Ratio
c. Debt. Equity Ratio d. Return on Investment
Answer: a. The current ratio measures the ease with which current assets can be used in settling current liabilities as they fall due, it is computed as the ratio of current assets divided by current liabilities.
Current ratio=current assets/current liabilities
current assets=Inventory+current assets=800000+1440000=2,240,000
current liabilities=600000
Q.4 “The aim of Responsibility Accounting is not to place blame. Instead, it is to evaluate performance and provide feed back. So that future operations can be improved.” Comment and Discuss the various steps involved in Responsibility Accounting.
Answer: Essential Features of Responsibility Accounting:
An analysis of the definitions given above reveals the following important features or fundamental aspects of responsibility accounting:
1. Inputs and Outputs or Costs and Revenues:
The implementation and maintenance of responsibility accounting system is based upon information relating to inputs and outputs. The
Q.5“Accounting reports are a matter of necessity for the Management”.
Elaborate and explain the different types of reports that are used for the internal management of an enterprise.
Answer: Reporting can be defined as communication of statements with related information between the two parties. The process of providing information to the management is 88 known as management reporting. These reports are provided to the various levels of Reporting to Management 89 management on regular basis to keep the management abreast about the effectiveness of their respective responsibility. Reporting is an important
Q.6 Prepare a Cash Budget from April to June for ABC Co. Ltd.
With the help of following information :
| Month | Sales(Rest.) | Purchases(Rest.) | Wages(Rest.) |
| February | 180000 | 124000 | 12000 |
| March | 192000 | 144000 | 14000 |
| April | 108000 | 243000 | 11000 |
| May | 174000 | 246000 | 10000 |
| June | 126000 | 26800 | 15000 |
b. 50% of the credit sales are realized in the following month sales and remaining 50% sales for in
The second following month.
c. Creditors are paid in the following month of Purchase.
d. Cash at Bankas on 1st April Rs.25000.
Answer:
Explanation:
In the books of Cash Budget
Particulars April may June
Opening balance 25000 (223000) (581000)
Recipts
Collection from debtors 150000 141000 150000
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