NATURE AND SCOPE OF

MANAGEMENT CONTROL SYSTEM

NATURE OF MCS
 NATURE OF MCS

• MCS focuses on programs and responsibility centers.

• It is continuous and dynamic process, followed by
consistent monitoring of objectives set in accordance
with employees’ performance.
 NATURE OF MCS

• It has different mechanisms like Total Quality

Management, Time Based Management, Balance
Scorecard, Activity Based Costing, Shareholders’
Value Analysis, Benchmarking, Business Process
Reengineering, Production Management, Material
Requirement Planning, Value Chain Analysis etc.
 NATURE OF MCS

• MCS is forward looking.

• It is Action oriented.
• It is coordinated and integrated system.
SCOPE OF MCS
 SCOPE OF MCS

• Managerial control is an important process in

which accounting information is used as to
accomplish the organization’s objective.
Therefore the scope of control is very wide that
covers a broad range of management activities.
 SCOPE OF MCS

• According to Holden, Fish and Smith the main areas of management control
system are as follows:
• Policies control
• Control over organization
• Control over personnel
• Control over wages and salaries
• Control over cost
• Control over technique
• Control over capital expenditure
• Production control
• Overall control
• Control over External relations
• Control over Research and Development
 SCOPE OF MCS

• Policies control:
The success of business hangs on formulation of
sound policies and proper implementation.
There is a great need of control over policies.
 SCOPE OF MCS

• Control over organization:

For the control over organization the management uses
organization’s manual and organizational chart.
Designing and organizing various departments for
smooth running of business is very essential. If any
problem or conflict arises the management control
attempts to remove the causes of such frictions and
rationalize the organizational structure as to ensure its
efficient working.
 SCOPE OF MCS

• Control over personnel:

Anything that the business accomplishes is the result of
the action of those people who work in the
organization. It is people, not figure, that get things
done. The personnel manager is responsible to draw a
control plan for having control over the personnel of
the concern.
 SCOPE OF MCS

• Control over wages and salaries:

Control over wages and salaries is sometimes assigned
to the personnel department or a specially constituted
wages and salary committee.
 SCOPE OF MCS

• Control over cost:

The cost accountant who is responsible to control cost
set cost standards, labor material and overhead . He
makes comparison of actual cost data with standard
cost. Cost control is delicate task and is supplemented
by budgetary control system.
 SCOPE OF MCS

• Control over technique:

It implies the use of best methods and techniques so as
to eliminate all waste in time, energy and material. The
task is accomplished by periodic analysis and checking
of activities of each department with a view to avoid
and eliminate all non essential motions , functions and
method.
 SCOPE OF MCS

• Control over capital expenditure:

Various projects entailing huge amounts require
control. This is exercised through a system of
evaluation of projects in terms of capital. Capital
budget is prepared for whole concern. Every project is
evaluated in terms of advantage accruing to the firm.
For this purpose capital budgeting, project analysis ,
study of cost of capital etc. are carried on extensively.
 SCOPE OF MCS

• Production control:
The function of production control is to plan, organize,
direct and control the necessary activities to provide
products and services. Once the production system is
designed and activated the problems arise in the areas
of production are minimized.
 SCOPE OF MCS

• Overall control:
A master plan is prepared for overall control and
all the concerned departments are made to
involve in this procedure.
 SCOPE OF MCS

• Control over External relations:

Public relations department should always be
alert in improving external relations. It may also
prescribe norms and measure for other operating
departments to insist on cordial relations with all
the parties.
 SCOPE OF MCS

• Control over Research and Development:

Research activities , being technical in nature cannot be
controlled directly . But is should be seen that all
facilities are provided to research staff to improve their
ability and keeping in touch with the up-to date
techniques and devices . Training facilities should also
be provided by having research budget in the business.