Assignment 1

Name – Akash Bhandari

Roll no - 176
Subject - Management Control System

Q1) Shorts notes :-

A) Management control :-
Management control systems are tools to aid management for steering an organization toward its
strategic objectives and competitive advantage. Management controls are only one of the tools
which managers use in implementing desired strategies. A management control is a system which
gathers and uses information to evaluate the performance of different organizational resources like
human, physical, financial and also the organization as a whole in light of the organizational
strategies pursued.
Management control is concerned with coordination, resource allocation, motivation, and
performance measurement. The practice of management control and the design of management
control systems draws upon a number of academic disciplines.
● Management control involves extensive measurement and it is therefore related to and
requires contributions from accounting especially management accounting.
● Second, it involves resource allocation decisions and is therefore related to and requires
contribution from economics especially managerial economics.
● Third, it involves communication, and motivation which means it is related to and must
draw contributions from social psychology especially organizational behavior

B) Techniques of production control :-

The followings are the techniques of production planning and control:

Planning - It is the first element of production planning and control. Planning is given an important
role in every business. A separate department is set up for this work. Planning is deciding in
advance what is to be done in future. Control devices are also decided in advance so that all
activities are carried on properly. An organizational set up is created to prepare plans and policies.
Various charts, manuals and production budgets are also prepared. If production planning is
defective then control will also be defective. Planning provides a sound base for control.
Routing - The main object of routing is to determine the best and cheapest sequence of operations
to be followed. In case of continuous manufacturing units where standardized products are
produced routing becomes automatic. In case of job order and batch production every product
requires different design and varying sequence of operations, another object of routing is to help
in determining proper tools and equipment and the number of workers required for carrying out
the work.

Scheduling - Scheduling is the determining of time and date when each operation is to be
commenced and completed. It includes the scheduling of materials, machines and all other
requisites of production. A number of components are required to manufacture a product. The time
and date of manufacturing each component is fixed in such a way that assembling for the final
product is not delayed in any way.

Despatching:- The term despatching refers to the process of actually ordering the work to be done.
It involves putting the plan into effect by issuing orders. It is concerned with starting the process
and operation on the basis of route sheets and schedule charts. A practical shape is given to the
production plan. To bring in the analogy of train, despatching means putting oneself into the train
when the route to be followed and the train to be boarded have been selected.

Follow up and expediting :- Follow-up and expediting is related to evaluation and appraisal of
work performed. This is an important function of production control. If goods are to be produced
as per the plans then a proper follow-up of work is essential to see whether production schedule is
properly adhered to or not

Inspection :- Inspection is also an important function of control. The purpose of inspection is to

see whether the products manufactured are of requisite quality or not. It is carried on at various
levels of production process so that predetermined standards of quality are achieved. In case the
products are not of proper quality then immediate steps are taken to correct the things. If inspection
is not regularly undertaken then there may be a possibility of more rejections.
Q2) Short Answers :-

A) Why is control necessary in management?

Controlling is an important function of management. Its importance becomes apparent when we

find that it is needed in all the functions of management. Controlling checks mistakes and tells us
how new challenges can be met or faced. The success of the organisation thus hinges on the
effective controlling. Controlling is the last function of the management process which is
performed after planning, organising, staffing and directing. On the other hand, management
control means the process to be adopted in order to complete the function of controlling. The
following steps are included in it

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. Therefore, the difference between the expected results and the actual results is reduced to
the minimum. In this way, controlling is helpful in achieving the goals of the organisation.

Judging Accuracy of Standards:While performing the function of controlling, a manager

compares the actual work performance with the standards. He tries to find out whether the laid
down standards are not more or less than the general standards. In case of need, they are redefined.

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. In the same way, wastage in all the physical resources is checked.

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 because they know that their work performance will be evaluated and if the
progress report is satisfactory, they will have their identity established in the organisation.
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.

Facilitating Coordination in Action: Coordination among all the departments of the organisation
is necessary in order to achieve the organisational objectives successfully. All the departments of
the organisation are interdependent. For example, the supply of orders by the sales department
depends on the production of goods by the production department.

Through the medium of controlling an effort is made to find out whether the production is being
carried out in accordance with the orders received. If not, the causes of deviation are found out and
corrective action is initiated and hence, coordination between both the departments is established.

B) What are the elements of MCS?

Every decent control system must possess certain basic elements. Since they all play a major role,
the absence of any one of them can make the whole system weak. Hence, managers must ensure
that their control systems contain the following basic elements and considerations.

Feedback: Feedback is the backbone of all control systems. This feedback is nothing but the
information that managers use to correct their organization’s actual performance.

The aim of feedback is basically to adjust future actions using previous experiences. Managers use
the information they receive from feedback to implement corrective measures. Such measures
generally help in bridging the gap between the actual performance of the organization and its goals.
Feedback may be either formal or informal. Formal feedback consists of sources like financial
statements, statistics, reports, other written communication, etc. On the other hand, informal
feedback includes personal opinions, informal discussions and an individual’s observations.

Control must be objective : The second essential requirement of a good control system is that it
must always be objective. A subjective criterion should never be the basis of evaluating actual
performances. For example, evaluation of an employee’s performance should comprise standards
like working hours, productivity, efficiency, etc. Managers should not evaluate employees using
subjective prejudices.

Prompt reporting of deviations : This element of the controlling system basically requires quick
reporting of deviations and discrepancies. If some work is not going according to plans, relevant
managers must take notice of this immediately. This is because any delay in reporting problems
and taking corrective measures can lead to financial losses for a business.

Control should be forward-looking : Control systems can often suffer from the defect of delays
in reporting of deviations and taking of corrective measures. As we saw above, this problem can
lead to financial losses for a business. Hence, managers must ensure that their control systems are
forward-looking. This will help in predicting deviations in advance as well as giving adequate time
for course correction.

Flexible controls : A rigid control system can often make it ineffective in extraordinary and
unpredictable situations. It should, thus, be flexible and open to changes. Managers must be able
to adapt their control measures as per the requirements of every possible scenario.

Hierarchical suitability : Almost all business organizations possess management hierarchies

consisting of managers at various positions and levels. Since each manager performs controlling
functions at his level, the system itself must suit his organization’s hierarchy. Every manager must
have adequate powers for this purpose and the flow of information for evaluation should be
effective.

Economical control

Every good controlling system has to be economical when it comes to its implementation and
maintenance. In other words, its benefits should outweigh its costs. An organization must be able
to afford it and also derive all possible advantages from it.

Strategic control points : Not all deviations require the same level of attention and importance.
For example, if an infrastructure company loses one government tender for constructing roads, it
can work on other projects. However, if the government blacklists it altogether due to its financial
irregularities, this can be a huge issue. A good control system must be able to deal with every
deviation as per its seriousness. No organization can afford to accord equal importance to each and
every problem. This is basically the whole aim of strategic control points.

Control must be simple to understand : Sophisticated policies can often make elements of
control systems difficult to understand and implement. A good system, however, is always simple
to comprehend and work on. Thus, before launching controlling measures, managers should first
check whether their employees will be able to understand them. They should also try to resolve
any ambiguities and confusion that may arise later.

Control should focus on workers : Good control systems always focus on workers instead of the
work itself. Since it is workers who implement these systems, everybody should be able to work
with them effectively.

C) What are the techniques of production control?

Planning - It is the first element of production planning and control. Planning is given an important
role in every business. A separate department is set up for this work. Planning is deciding in
advance what is to be done in future. Control devices are also decided in advance so that all
activities are carried on properly. An organizational set up is created to prepare plans and policies.
Various charts, manuals and production budgets are also prepared. If production planning is
defective then control will also be defective. Planning provides a sound base for control.

Routing - The main object of routing is to determine the best and cheapest sequence of operations
to be followed. In case of continuous manufacturing units where standardized products are
produced routing becomes automatic. In case of job order and batch production every product
requires different design and varying sequence of operations, another object of routing is to help
in determining proper tools and equipments and the number of workers required for carrying out
the work.

Scheduling - Scheduling is the determining of time and date when each operation is to be
commenced and completed. It includes the scheduling of materials, machines and all other
requisites of production. A number of components are required to manufacture a product. The time
and date of manufacturing each component is fixed in such a way that assembling for the final
product is not delayed in any way.
Despatching:- The term despatching refers to the process of actually ordering the work to be done.
It involves putting the plan into effect by issuing orders. It is concerned with starting the process
and operation on the basis of route sheets and schedule charts. A practical shape is given to the
production plan. To bring in the analogy of train, despatching means putting oneself into the train
when the route to be followed and the train to be boarded have been selected.

Follow up and expediting :- Follow-up and expediting is related to evaluation and appraisal of
work performed. This is an important function of production control. If goods are to be produced
as per the plans then a proper follow-up of work is essential to see whether production schedule is
properly adhered to or not

Inspection :- Inspection is also an important function of control. The purpose of inspection is to

see whether the products manufactured are of requisite quality or not. It is carried on at various
levels of production process so that predetermined standards of quality are achieved. In case the
products are not of proper quality then immediate steps are taken to correct the things. If inspection
is not regularly undertaken then there may be a possibility of more rejections.

D) State the need of computers in MIS

The study of MIS is not about the computers, it is about the provision and use of information that
is important to the user. Computers are one important means of generating information and focus
on the means of production rather than the requirements of the user that can cause errors.
Computers are good at making quick and precise calculations, manipulation, storage and retrieval
but are good at unforseen or qualitative work where genuine judgement is needed. It has been
recommended that computers can be used to the best advantage for processing data which has the
following features.
Guiding the Business - Business doesn’t stand still. Internal and external circumstances change
daily, and you need a road map of good information to guide you through the twists and turns. The
whole purpose of MIS is to use the hard data of your business to inform day-to-day and long-term
decisions. Computers ease the task of processing the data.

Capturing the Data - The most sophisticated computers in the world can’t help your business if
they’re not “fed”. Before an MIS can provide useful information, data must first enter the system.
Sales and accounting systems, for example, typically capture data when a customer places an order.
Workers on the factory floor can enter manufacturing data into tablets or PCs, or the production
machines themselves can capture data automatically. These detailed, nuts-and-bolts numbers are
the raw materials that eventually become useful management information.

Calculating, Sorting and Searching - Modern computers excel at repetitive number crunching,
accurately processing many thousands of data items per second. To summarize a month’s business
transactions by hand might take hours or days, while a computer can do this task in moments.
Useful operations include arithmetic calculations, sorting data numerically or alphabetically and
searching for a single record among thousands in a file.

Database Management Systems - Many MIS systems rely on database management systems to
organize, process and protect data. The database is a special program that acts as a data warehouse,
storing the raw data and also cataloging it. The database has levels of security to guard against
unauthorized access. It gives the various MIS applications — accounting, payroll, inventory
management and others — added efficiency, reliability and flexibility.

Reports for Managers - An MIS delivers information to managers in the form of reports. They
may take many forms, including printed lists, informative screens or alerts by text or email.
Generally, reports may have details, listing individual records sorted by date or other criteria, and
summary figures that show totals and averages. For example, a monthly sales report shows
customer names and what they bought. The MIS may generate the reports on demand, on a
schedule or when preset conditions are met.
Ad Hoc Reporting - Many of the reports in an MIS system are “canned”, as software developers
wrote the specifications when the system was first created. Ad hoc (improvised) reports are also
possible. In this instance, you can use database software to create a custom report.

For example, in a certain month, an item you make may have been painted the wrong color. An ad
hoc report can pull useful information from the MIS, such as who bought the item and when or
which production machine made the item. The manager may create the report herself from a menu-
driven reporting system, or she may ask a data technician to do it for her.

Computer Storage and Big Data - With the falling price of computer hard drives, it’s now
possible to store enormous amounts of information cheaply. Even small businesses can afford to
keep reams of detailed records on hand and use them to study customer buying patterns, production
quality statistics and the actions of competitors.

Garbage In, Garbage Out - With tongue in cheek, computer professionals use the term “garbage
in, garbage out” to sum up how errors in data or mistakes in programming can lead to disastrous
outcomes. Because computers deal with large amounts of information, it’s possible that small
arithmetic errors, for example, may give wildly incorrect results. Savvy business people must be
aware of the potential pitfalls of relying too much on computerized reports

Q3) Long answers

A) Describe DSS

A decision support system (DSS) is an information system that aids a business in decision-making
activities that require judgment, determination, and a sequence of actions. The information system
assists the mid- and high-level management of an organization by analyzing huge volumes of
unstructured data and accumulating information that can help to solve problems and help in
decision-making. A DSS is either human-powered, automated, or a combination of both. A
decision support system produces detailed information reports by gathering and analyzing data.
Hence, a DSS is different from a normal operations application, whose goal is to collect data and
not analyze it.

In an organization, a DSS is used by the planning departments – such as the operations department
– which collects data and creates a report that can be used by managers for decision-making.
Mainly, a DSS is used in sales projection, for inventory and operations-related data, and to present
information to customers in an easy-to-understand manner.

Types of Decision Support Systems

● Communication-driven: Allows companies to support tasks that require more than one
person to work on the task. It includes integrated tools such as Microsoft SharePoint
Workspace and Google Docs.
● Model-driven: Allows access to and the management of financial, organizational, and
statistical models. Data is collected, and parameters are determined using the information
provided by users. The information is created into a decision-making model to analyze
situations. An example of a model-driven DSS is Dicodess – an open-source model-
driven DSS.
● Knowledge-driven: Provides factual and specialized solutions to situations by using
stored facts, procedures, rules, or interactive decision-making structures like flowcharts.
● Document-driven: Manages unstructured information in different electronic formats.
● Data-driven: Helps companies to store and analyze internal and external data.

Advantages of a Decision Support System

● A decision support system increases the speed and efficiency of decision-making
activities. It is possible, as a DSS can collect and analyze real-time data.
 ● It promotes training within the organization, as specific skills must be developed to
implement and run a DSS within an organization.
● It automates monotonous managerial processes, which means more of the manager’s time
can be spent on decision-making
● It improves interpersonal communication within the organization.

Disadvantages of a Decision Support System

● The cost to develop and implement a DSS is a huge capital investment, which makes it
less accessible to smaller organizations.
● A company can develop a dependence on a DSS, as it is integrated into daily decision-
making processes to improve efficiency and speed. However, managers tend to rely on
the system too much, which takes away the subjectivity aspect of decision-making.
● A DSS may lead to information overload because an information system tends to
consider all aspects of a problem. It creates a dilemma for end-users, as they are left with
multiple choices.
● Implementation of a DSS can cause fear and backlash from lower-level employees. It is
because many of them are not comfortable with new technology and are afraid of losing
their jobs to technology

B) Explain different kinds of control devices used by personnel managers

In management, Controlling is one of the most important functions in an organization which is

goal-oriented. Types of Control techniques in management are Modern and Traditional control
techniques. Feedforward, feedback and concurrent controls are also types of management control
techniques.

Controlling helps the managers in eliminating the gap between organizations actual performance
and goals. Controlling is the process in which actual performance is compared with the company
standards. Comparing it gives the visibility that activities are performed according to strategy or
not. If it is not performed then necessary corrective action should be taken. Let us learn more
about Control Techniques in Management.

Types of Control Techniques in Management

Management theorists and experts have devised several techniques over the years. They often
divide these techniques into two categories: traditional and modern. Traditional types of
techniques generally focus on non-scientific methods. On the other hand, modern techniques find
their sources in scientific methods which can be more accurate

Traditional Types of Control Techniques in Management

Budgetary Control - Budgeting simply means showcasing plans and expected results using
numerical information. As a corollary to this, budgetary control means controlling regular
operations of an organization for executing budgets.

A budget basically helps in understanding and expressing expected results of projects and tasks
in numerical form. For example, the amounts of sales, production output, machine hours, etc. can
be seen in budgets. There can be several types of budgets depending on the kind of data they aim
to project. For example, a sales budget explains selling and distribution targets. Similarly, there
can also be budgets for purchase, production, capital expenditure, cash, etc. The main aim of
budgetary control is to regulate the activity of an organization using budgeting. This process
firstly requires managers to determine what objectives they wish to achieve from a particular
activity. After that, they have to lay down the exact course of action that they will follow for
weeks and months. Next, they will translate these expected results into monetary and numerical
terms, i.e. under a budget. Finally, managers will compare actual performances with their
budgets and take corrective measures if necessary. This is exactly how the process of budgetary
control works.

Standard Costing - Standard costing is similar to budgeting in the way that it relies on
numerical figures. The difference between the two, however, is that standard costing relies on
standard and regular/recurring costs.

Under this technique, managers record their costs and expenses for every activity and compare
them with standard costs. This controlling technique basically helps in realizing which activity is
profitable and which one is not.

Financial Ratio Analysis - Every business organization has to depict its financial performances
using reports like balance sheets and profit & loss statements. Financial ratio analysis basically
compares these financial reports to show the financial performance of a business in numerical
terms. Comparative studies of financial statements showcase standards like changes in assets,
liabilities, capital, profits, etc. Financial ratio analysis also helps in understanding the liquidity
and solvency status of a business.

Internal Audit - Another popular traditional type of control technique is internal auditing. This
process requires internal auditors to appraise themselves of the operations of an organization.

Generally, the scope of an internal audit is narrow and it relates to financial and accounting
activities. In modern times, however, managers use it to regulate several other tasks. For
example, it can also cover policies, procedures, methods, and management of an organization.
Results of such audits can, consequently, help managers take corrective action for controlling.

Break-Even Analysis - Break-even analysis shows the point at which a business neither earns
profits nor incurs losses. This can be in the form of sale output, production volume, the price of
products, etc. Managers often use break-even analysis to determine the minimum level of results
they must achieve for an activity. Any number that goes below the break-even point triggers
corrective measures for control.

Statistical Control - The use of statistical tools is a great way to understand an organization’s
tasks effectively and efficiently. They help in showing averages, percentages, and ratios using
comprehensible graphs and charts.
Managers often use pie charts and graphs to depict their sales, production, profits, productivity,
etc. Such tools have always been popular traditional control techniques.

Modern Techniques of Managerial Control

Modern techniques of controlling are those which are of recent origin & are comparatively new
in management literature. These techniques provide a refreshingly new thinking on the ways in
which various aspects of an organization can be controlled. These include:

Return on Investment - Return on investment (ROI) can be defined as one of the important and
useful techniques. It provides the basics and guides for measuring whether or not invested capital
has been used effectively for generating a reasonable amount of return. ROI can be used to
measure the overall performance of an organization or of its individual departments or divisions.
It can be calculated as under-

Net income before or after tax may be used for making comparisons. Total investment includes
both working as well as fixed capital invested in the business.

Ratio Analysis - The most commonly used ratios used by organizations can be classified into the
following categories:
● Liquidity ratios
● Solvency ratios
● Profitability ratios
● Turnover ratios

Responsibility Accounting - Responsibility accounting can be defined as a system of

accounting in which overall involvement of different sections, divisions & departments of an
organization are set up as ‘Responsibility centers’. The head of the center is responsible for
achieving the target set for his center. Responsibility centers may be of the following types:

● Cost center
● Revenue center
● Profit center
 ● Investment center

Management Audit - Management audit refers to a systematic appraisal of the overall

performance of the management of an organization. The purpose is to review the efficiency &n
effectiveness of management & to improve its performance in future periods.

PERT & CPM - PERT (programmed evaluation & review technique) & CPM (critical path
method) are important network techniques useful in planning & controlling. These techniques,
therefore, help in performing various functions of management like planning; scheduling &
implementing time-bound projects involving the performance of a variety of complex, diverse &
interrelated activities.

Therefore, these techniques are so interrelated and deal with such factors as time scheduling &
resources allocation for these activities.