CAN YOU

GUESS?
LESSON 12
-Definition and
nature of
Management
Control
 There are many different techniques of managerial control. These can
be classified into two broad categories:
1. Traditional Techniques - are those which are already been doing by the
company for a long time now.
a. Personal Observation
b. Statistical Data
c. Break-even analysis
d. Budgetary control

2. Modern Techniques - are those techniques which are just recently used and
this provide a new way of dealing with the control system on the various aspect of
the organization.
a. Return of Investment
b. Ratio Analysis
c. Responsibility Accounting
d. Management Audit
e. PERT & CPM
(PERT-Programmed Evaluation & Review Technique)/(Critical Path Method)
Activity 12
●IDENTIFICATION: Write the correct answer on the space provided before the number.
____1. Analysis of the financial statement that shows the performance, financial health and risks that the
business have
____2. A technique that measures if the invested capital has been used effectively to generate reasonable
amount of returns.
____3. This measures the ability of the company to pay its obligations.
____4. This shows how much current assets is available to pay current liabilities.
_____5. A department that incurs cost but no revenues.
_____6. Incurs cost and expenses and has revenues
_____7. Analyzes how assets and resources are used by the company.
_____8. An evaluation that shows the management’s efficiency and effectiveness in managing the
organization.
____9. Help the management in planning, scheduling and implementing time-bound activities.
_____10. The amount of money set aside for the development and refinement of product and processes.
____11. Expected in flow and out flow of cash within the budget period.
____12. The total raw materials to be purchased for production used.
_____13. This refers to quantity of products needed to be sold to meet sales requirements.
_____14. A plan made how many units of products needed to be sold within the budget period.
_____15. Expenses that increases as the quantity produced increases.
A. JUMBLED LETTER

Rearrange the jumbled letter to identify the word/s described in the

statement. In a separate sheet of paper write your answer in Capital
letter.
G T R I A I N N - Enhancing employee’s skills by attending seminars
and other activities.
YLQUIALT ESSAURACE – A thorough inspection of product is
needed to maintain quality.
TSOC GSAIVN – Turning off machines when not in used.
BARKE VENE TOINP - The sales volume at which there is no profit,
or
loss.
VRAIAELB TSCO – a cost that changes as the output produced
increases or decreases.
Elements of a good Control System
1. Feed back – The foundation of all control system. There are two
kinds of feed back, the formal and informal feed back. Financial
statements, statistics and reports fall under the formal category.

2. Control must be objective – a control system must not be

subjective at any point in time. For example, managers should
make their
employee’s evaluation based on standards like working hours,
productivity, efficiency, etc. It must not be based on personal
biases.

3. Prompt Reporting of Deviations – A fast and quick reporting of

any deviation and discrepancy should be reported immediately to
facilitate serving of the corrective action immediately.
4. Control should be forward-looking – The managers should be
able to predict or foresee any arising possible deviation to enable to
take course of action to avoid totally the occurrence of such
discrepancy and if possible prepare to respond in case it would
come their way.

5. Flexible Controls – A stiff and strict control system may not be as

effective in every situation possible. There are unpredictable
situation that may arise. Managers should be able to adjust their
control system depending on the need of the situation.
6. Hierarchial Suitability – Every manager should have the
necessary power to exercise their authority and to decide on their
own respective departments regarding any variance that may arise
in their respective post.
7. Economical Control – The benefits that can be derived from
doing the corrective action should be greater than its cost.

8. Strategic Control Points – This means that the organization

should not put an equal priority to every deviation. Any discrepancy
that could cause serious effect in the organization should be given
the priority as compared to the less serious ones.

9. Control must be simple to understand – Every employee should

be able to comprehend and understand the control system easily.
This can be done through meetings, announcements and
memoranda.

10. Control Should Focus on Workers – The main focus of every

control system should be the workers themselves. Workers are the
implementers, so therefore, they should be able to work with the
system effectively.
Importance of Control
Quality assurance
Less wastage
Lower operating costs
Assists decision-making
Production planning
Production control
 Break-even analysis – is a
technique where managers study
the relationship of cost, volume
and profit.

FORMULA:
Breakeven point = Fixed
Costs/Selling price per unit –
variable costs per unit
Break-even point - The amount of sales at which there is
no profit, nor loss is known as the breakeven point.

Fixed Costs –are expenses that have to be paid by the company

independent of any specific business activities. This cost will not
change even if you produce/sold more goods in a specific
accounting period. Example of this is Office or factory rent. You will
pay the same amount of rent every month even if you hire or fire
more employees. Other example of this cost includes: Property
taxes, interest expenses, depreciation etc.

Variable Cost – are expenses that changes when production output

increases or decreases. When the company produces more goods then
variable cost will also increase. On the other hand, if production output
is low and so is variable cost. Example of variable cost is the cost of
Raw materials and packaging.
RAW QUANTITY FIXED VARIABLE TOTAL
MATERIAL IN PCS COST (PHp) COST (PHp) COST (PHp)
Fabrics, 1 backpack PHp 100 PHp 150 PHp 250
Accessories 2 backpacks 100 300 400
Labor 3 backpacks 100 450 550
Total 6 backpacks 300 900 Php 1,200
How are we going to compute for variable cost per unit? Get the total
variable cost then divide it with the total yielded output. In the above case,
the total variable cost is Php900. Hence, 900/6 is equals to 150.
Therefore: Variable cost per unit is Php150

Selling Price
How much the customer is willing to pay for a certain product or service.
We will use the example above and this is calculated as:
Selling Price = Cost + Profit Margin
Cost per pc of bag = 200 + 40% profit margin Therefore: SP = Php280/bag

Computation of Break Even points in units

Using the formula above:
Fixed cost = P300
Selling Price = 280
Variable Cost = 150
Break-even point = 300/(280-150)

Break-even point in units = 2 units

Classify the following expenses from column
A. Identify them if they belong to Fixed cost
or Variable cost. Write your answer in column
B
Column A Column B
1. Rental
2. Insurance
3. Fabric
4. Slider
5. Thread