ASSIGNMENTMANAGEMENT CONTROL SYSTEM
Name : Ms. Priyanka Dilip Kadam
Course:2ND YEAR MMS-A
Roll no: 12
Subject In-charge: Prof. Sengupta
Institute: Aditya Institute of Management Studies and
Research
University: University of Mumbai
Academic Year:2013-2015
Return on InvestmentReturn on investment, or ROI, is the most
common profitability ratio. There are several ways to determine
ROI, but the most frequently used method is to divide net profit by
total assets. Return on investment isn't necessarily the same as
profit. ROI deals with the money you invest in the company and the
return you realize on that money based on the net profit of the
business. Profit, on the other hand, measures the performance of
the business. Don't confuse ROI with the return on the owner's
equity. This is an entirely different item as well. Only in sole
proprietorships does equity equal the total investment or assets of
the business.You can use ROI in several different ways to gauge the
profitability of your business. For instance, you can measure the
performance of your pricing policies, inventory investment, capital
equipment investment, and so forth.The return oninvestmentformula
is:ROI= (Net Profit/ Cost ofInvestment)x100 Sensitivity AnalysisA
technique used to determine how different values of an independent
variable will impact a particular dependent variable under a given
set of assumptions. This technique is used within specific
boundaries that will depend on one or more input variables, such as
the effect that changes in interest rates will have on a bond's
price.Sensitivity analysis is a way to predict the outcome of a
decision if a situation turns out to be different compared to the
key prediction(s).Sensitivity analysis is very useful when
attempting to determine the impact the actual outcome of a
particular variable will have if it differs from what was
previously assumed. By creating a given set of scenarios, the
analyst can determine how changes in one variable(s) will impact
the target variable.For example, an analyst might create a
financial model that will value a company's equity (the dependent
variable) given the amount of earnings per share (an independent
variable) the company reports at the end of the year and the
company's price-to-earnings multiple (another independent variable)
at that time. The analyst can create a table of predicted
price-to-earnings multiples and a corresponding value of the
company's equity based on different values for each of the
independent variables. Financial goalsFinancial goals are exactly
what the term describes - goals you set that revolve around finance
or money. Financial goals are targets, usually driven by specific
future financial needs. Some financial goals you might set as an
individual include saving for a comfortable retirement, saving to
send your children to college, or managing your finances to enable
a home purchase.Financial Goal Time FrameWhen setting a financial
goal, you must determine the length of time it is going to take to
reach your goal. Your goal can be considered a short-term,
medium-term, or long-term goal. Below are some examples: Short-term
goals are those that can be achieved in three months or less. As an
example of this, you might want to save $100 to buy an MP3 player
in three months. Medium-term goals are those that will take between
three months to one year to achieve. For example, you might want to
save money for six months so that you could take a trip during your
spring break. Long-term goals take more than one year to
accomplish. One of your long-term goals could be paying off your
student loans early by paying an extra $200 per month.1.How to set
your goalsBe specific, realistic, and write down your goals. Keep
each goal simple and give it a timeframe and a dollar amount.Set
some big goals - like buying a home in the next five years or
saving for your retirement (this could be your biggest goal of
all).Set some smaller goals to help you get there like saving for a
deposit or paying off your credit cards.2.Saving and paying off
debtFinancial goals are often about saving or paying off debt:If
you have high-interest debt, like credit card or hire purchase,
your main goal should be to pay that debt off first and as soon as
possible. This could involve re-structuring your debt into
lower-interest loans.Saving two to three months income for an
emergency fund can help you and your family if anything unexpected
happens. Its a good idea to have this fund in a savings account
separate from your normal everyday bank account.If you have a
mortgage and can afford to increase your repayments, your goal may
be to save on interest by paying off your loan faster.The earlier
you start saving for your retirement the better. Even a small
amount saved every week or month can add up to a lot over time.3.
Actions to achieve your goalsActions are the steps you take to
reach your goals. Here are some examples:If your goal is to save
for a house deposit, your action may be to open a savings account
by next pay day and save $50 a week into this new account.If your
goal is to save for your retirement (or to save for a deposit on
your first home), your action might be to talk to your employer
about joining KiwiSaver.If you pay your mortgage monthly, your goal
could be to change to fortnightly repayments of at least half the
amount you were paying each month. This will pay off your mortgage
faster and save on interest.4.Review your goalsReview your progress
every six months or once a year, on a specific date written in your
diary or calendar. When you achieve a goal, celebrate! Then set
yourself a new goal.New Year is a great time to think about your
goals write those resolutions down!5.Using the goals
worksheetSetting goals is easy with the goals worksheet. Use it to
write down your short, medium and long-term financial goals, then
save them to My Sorted to review later.With the worksheet you can
also set actions to achieve your goals.6.Planning in a
relationshipIf you are in a relationship and making a financial
plan, it's important that you both get involved in the process.Find
out more about planning in a relationship.7.Net worthKnowing your
net worth the difference between what you own and what you owe is
an important part of setting your financial goals and building your
financial plan.Find out more about net worth. Responsibility
BudgetA responsibility accounting budget is a report designed to
track the controllable costs and revenues of a manager as well as
chart their efficiency and effectiveness. In other words, a
responsibility budget is a budget that companies make for the
expenses and revenues that are controlled by a specific manager.
Since not all costs can controlled by managers, it makes sense to
make a budget specifically charting the expenses that managers can
control.Many non-controllable costs or uncontrollable costs like
insurance premiums or fixed asset purchases are out of a department
manager's control and authority. Executives and people higher in
the company decide financial decisions like these. Management is
generally not held responsible for these types of expenses.The
responsibility accounting budget is generally prepared by officers
or upper level management to track the responsibilities of each
department manager. Upper level management can use these
responsibility budgets to track performance of managers as well as
track goals for the future.The responsibility accounting budget is
only one piece of the responsibility accounting performance report
or RAPR where executives and upper level management track
efficiency and profitability by department and person. The RAPR is
also used to help explain changes in cost structure and
profitability.For instance, if the manufacturing department just
invested in new robotic assembly line equipment, the RAPR should
show a decrease in the variable costs per product produced.
Likewise, over labor hours and labor costs should be lower for this
department as well. Management by objectivesAccording to George
Odiome, MBO is "a process whereby superior and subordinate managers
of an Organisation jointly define its common goals, define each
individual's major areas of responsibility in terms Of results
expected of him and use these measures as guides for operating the
unit and assessing the contribution of each of its members."The
core concept of MBO is planning, which means that an organization
and its members are not merely reacting to events and problems but
are instead being proactive. MBO requires that employees set
measurable personal goals based upon the organizational goals. For
example, a goal for a civil engineer may be to complete the
infrastructure of a housing division within the next twelve months.
The personal goal aligns with the organizational goal of completing
the subdivision.MBO is a supervised and managed activity so that
all of the individual goals can be coordinated to work towards the
overall organizational goal. You can think of an individual,
personal goal as one piece of a puzzle that must fit together with
all of the other pieces to form the complete puzzle: the
organizational goal. Goals are set down in writing annually and are
continually monitored by managers to check progress. Rewards are
based upon goal achievement.Management by objectives has become de
facto practice for management in knowledge-based organizations such
as software development companies. The employees are given
sufficient responsibility and authority to achieve their individual
objectives.Accomplishment of individual objectives eventually
contributes to achieving organizational goals. Therefore, there
should be a strong and robust process of assessing the objective
achievements of each individual.This review process should take
place periodically and sufficient feedback will make sure that the
individual objectives are in par with the organizational goals.
Profit Centre And ControlProfit centres take the basic idea of
cost centres somewhat further. In this case, a profit centre is run
as a separate business within a business. The profit centre will
buy services from other divisions and profit centres within the
parent organisation, and then selling their output on to the final
customer or to another part of the parent organisation.The profit
Centre will have its own profit and loss account and bid for
investment capital from the parent company. In recent years there
has been a huge growth in the development of cost centres and
profit centres within large Organizations. There are several
reasons for the growth and most of these can be linked to personal
motivation and more effective control.Profit centres take the idea
of overhead allocating further; in this case each division of large
business is run as an independent business, with it's own profit
and loss account. An example of an organisation operating profit
centres is Corus. Within Corus TIn PLate division operates as a
profit centre. Corus Tin Plate buys service and goods from within
the organisation and sells output to tougher divisions and to
external customers.
Profit centres are often evaluated on the basis of different
measures of profitability like1) Contribution Margin2) Direct
Profit3) Controllable Profit4) EBIT Margin5) Net IncomeEach type of
profitability measure is used by some companies and their relative
importance varies from organization to organization.Advantages of
Profit Centres: Allows decision-making and power to be delegated
effectively. Improves speed and efficiency of decision making.
Increased motivation- now working for a smaller, more local
business. Allows more effective use of bonuses and other forms of
financial motivation - all linked to profitability of profit
centre.Disadvantages of profit Centres: Loss of overall central
control of the company Profit centre could be working towards
different and non-company agendas Increased opportunity for empire
building by management.
Transfer PricingCommercial transactions between the different
parts of the multinational groups may not be subject to the same
market forces shaping relations between the two independent firms.
One party transfers to another goods or services, for a price. That
price is known as "transfer price". This may be arbitrary and
dictated, with no relation to cost and added value, diverge from
the market forces. Transfer price is, thus, a price which
represents the value of good; or services between independently
operating units of an organisation. But, the expression "transfer
pricing" generally refers to prices of transactions between
associated enterprises which may take place under conditions
differing from those taking place between independent enterprises.
It refers to the value attached to transfers of goods, services and
technology between related entities. It also refers to the value
attached to transfers between unrelated parties which are
controlled by a common entity.Suppose a company A purchases goods
for 100 rupees and sells it to its associated company B in another
country for 200 rupees, who in turn sells in the open market for
400 rupees. Had A sold it direct, it would have made a profit of
300 rupees. But by routing it through B, it restricted it to 100
rupees, permitting B to appropriate the balance. The transaction
between A and B is arranged and not governed by market forces. The
profit of 200 rupees is, thereby, shifted to the country of B. The
goods is transferred on a price (transfer price) which is arbitrary
or dictated (200 hundred rupees), but not on the market price (400
rupees).Thus, the effect of transfer pricing is that the parent
company or a specific subsidiary tends to produce insufficient
taxable income or excessive loss on a transaction. For instance,
profits accruing to the parent can be increased by setting high
transfer prices to siphon profits from subsidiaries domiciled in
high tax countries, and low transfer prices to move profits to
subsidiaries located in low tax jurisdiction. As an example of
this, a group which manufacture products in a high tax countries
may decide to sell them at a low profit to its affiliate sales
company based in a tax haven country. That company would in turn
sell the product at an arm's length price and the resulting
(inflated) profit would be subject to little or no tax in that
country. The result is revenue loss and also a drain on foreign
exchange reserves. R&D controlResearch and Development
(R&D) is a key factor that contributes to the success of any
business organization. But the outcome of R&D is highly
uncertain. Organizations face three important dilemmas while
planning and controlling the R&D activities. First, the
integration of the objectives of the R&D function with those of
the organization and linking customer preferences with the
objectives of R&D. Lack of proper information from the
marketing function, lack of proper integration of the other
functions with R&D, and poor commercial viability of the
R&D projects are factors that influence this integration.
Second, the problem in planning and managing the R&D
activities. A proper R&D plan has to be devised and each
R&D project should be controlled by controlling the
intermediate targets, time frames and budgets, and by creating
appropriate performance measurement systems for the R&D
function. Third, considering R&D as a strategic infrastructure
that includes knowledge assets and competencies, and not merely as
a function or collection of projects.National culture and
organizational culture have a significant impact on R&D and
innovation respectively. The R&D function is characterized by
three structures: production structure - tasks, cooperation, and
conflicts; control structure - autonomy, decision making, and
leadership; and employee relationship - reward and appraisal
systems. These structures are influenced by factors like the type
of research undertaken - basic research, applied research, or
development; and nature of the R&D processes - task
uncertainty, task interdependence, and size. These structures are
also influenced by the national culture. National culture is
described through the following dimensions: power distance,
uncertainty avoidance, masculinity/femininity, and
individualism/collectivism. R&D personnel from national
cultures that rank high on power distance and uncertainty avoidance
tend to prefer less autonomy and strong leadership, accompanied by
appropriate reward and appraisal systems. On the other hand, those
from a national culture ranking low on power distance and
uncertainty avoidance and high on femininity prefer greater
autonomy and decision-making authority. They also prefer a
leadership which is nurturing and not dominating. This seems to
foster higher creativity and innovation.Instead of adopting formal
controls, a more effective method of managing innovation would be
through the organizational culture. Organizations successful in
making the employees feel like family or imbuing a sense of
belonging in the employees usually score higher on innovation as
against organizations that use formal methods of control. To create
goal directed communities, the top management sets the objectives
for the employees but the means to achieve the objectives are
decided by the employees themselves. To help enhance
innovativeness, organizations should ensure balanced autonomy, a
proper integration of technical skills and teamwork, and
personalized recognition/reward systems. Scrap ControlDuck R.E.V.
(2001) claims that cost reduction methods involve a periodic
reappraisal of issues such as components used, design, possible
substitution with cheaper materials, and production methods. Scrap
control can also be used for cost reduction purposes. With regard
to the control of labour costs, labour efficiency and labour
productivity techniques are commonly used to assess the production
levels attained. Labour productivity measurements result in output
measured in physical units and calculated as output per man-hour,
however only for productive labour. Quality is a vital component in
business strategies of which the improvement is closely linked to
the competitive environment (Adam et al., 2001). In this respect,
the focus of firms on the customer as well as on the involvement of
employees is positively related to quality improvement. Adam et
al.s study shows that an increase in the involvement of employees
in Mexico and the USA led to quality improvement in terms of
decreased costs of internal failures, defective items and costs of
quality.
Administrative Cost ControlCost control, also known as cost
management or cost containment, is a broad set ofcost
accountingmethods and management techniques with the common goal of
improving business cost-efficiency by reducing costs, or at least
restricting their rate of growth. Businesses use cost control
methods to monitor, evaluate, and ultimately enhance the efficiency
of specific areas, such as departments, divisions, or product
lines, within their operations.During the 1990s cost control
initiatives received paramount attention from corporate America.
Often taking the form ofcorporate restructuring, divestmentof
peripheral activities, masslayoffs,oroutsourcing,cost control
strategies were seen as necessary to preserveor boostcorporate
profits and to maintainor gaina competitive advantage. The
objective was often to be the low-cost producer in a given
industry, which would typically allow the company to take a greater
profit per unit of sales than its competitors at a given price
level.Some cost control proponents believe that such strategic
cost-cutting must be planned carefully, as not all cost reduction
techniques yield the same benefits. In a notable late 1990s
example, chief executiveAlbertJ. Dunlap, nicknamed "Chainsaw Al"
because of his penchant for deep cost cutting at the companies he
headed, failed to restore the ailing small appliance makerSunbeam
Corporationto profitability despite his drastic cost reduction
tactics. Dunlap laid off thousands of workers and sold off business
units, but made little contribution to Sunbeam's competitive
position or share price in his two years as CEO. Consequently, in
1998 Sunbeam's board fired Dunlap, having lost confidence in his
"one-trick" approach to management. AuditManagement Audit'is a
systematic examination of decisions and actions of the management
to analyse the performance. Management audit involves the review of
managerial aspects like organizational objective, policies,
procedures, structure, control and system in order to check the
efficiency or performance of the management over the activities of
the Company. Unlikefinancial audit,management audit mainly examine
the non financial data toauditthe efficiency of the management.
Somehowaudittries to search the answer of how well the management
has been operating the business of the company? Is managerial style
well suited for business operation? Management Audit focuses on
results, evaluating the effectiveness and suitability of controls
by challenging underlying rules, procedures and methods. Management
Audit is an assessment of methods and policies of an organization's
management in the administration and the use of resources, tactical
and strategic planning, and employee and organizational
improvement. Management Audit is generally conducted by the
employee of the company or by theindependentconsultant and focused
on the critical evaluation of management as a team rather than
appraisal of individual.
Objectives of Management Audit Establish the current level of
effectiveness Suggest Improvement Lay down standards for future
performance Increased levels of service quality and performance
Guidelines for organizational restructuring Introduction of
management information systems to assist in meeting productivity
and effectiveness goals Better use of resources due to program
improvements
Efficiency AuditAn economy and efficiency audit, or simply
efficiency audit, focuses on the resources and practices of a
program or department, according to the Encyclopedia of Public
Administration and Public Policy, which provides descriptions of
typical audit activities. An economy and efficiency audit might
analyze the procurement, maintenance and implementation of
resources, such as equipment, to identify areas that require
improvement. Alternately, it might examine the practices of a
department or program to find inefficient or wasteful processes.
LawsEnsuring adherence to laws and regulations is another important
aspect of an economy and efficiency audit. For example, an auditor
might analyze operations to ensure records were kept in accordance
with state and federal regulations, or an auditor might inspect a
property to determine whether the facility is operating according
to work-safety guidelines. Internal AuditInternal auditing is an
independent, objective assurance and consulting activity designed
to add value and improve an organization's operations. It helps an
organization accomplish its objectives by bringing a systematic,
disciplined approach to evaluate and improve the effectiveness of
risk management, control, and governance processes.[1] Internal
auditing is a catalyst for improving an organization's governance,
risk management and management controls by providing insight and
recommendations based on analyses and assessments of data and
business processes. With commitment to integrity and
accountability, internal auditing provides value to governing
bodies and senior management as an objective source of independent
advice. Professionals called internal auditors are employed by
organizations to perform the internal auditing activity.The scope
of internal auditing within an organization is broad and may
involve topics such as an organization's governance, risk
management and management controls over: efficiency/effectiveness
of operations (including safeguarding of assets), the reliability
of financial and management reporting, and compliance with laws and
regulations. Internal auditing may also involve conducting
proactive fraud audits to identify potentially fraudulent acts;
participating in fraud investigations under the direction of fraud
investigation professionals, and conducting post investigation
fraud audits to identify control breakdowns and establish financial
loss.Internal auditors are not responsible for the execution of
company activities; they advise management and the Board of
Directors (or similar oversight body) regarding how to better
execute their responsibilities. As a result of their broad scope of
involvement, internal auditors may have a variety of higher
educational and professional backgrounds.The Institute of Internal
Auditors (IIA) is the recognized international standard setting
body for the internal audit profession and awards the Certified
Internal Auditor designation internationally through rigorous
written examination. Other designations are available in certain
countries.[2] In the United States the professional standards of
the Institute of Internal Auditors have been codified in several
states' statutes pertaining to the practice of internal auditing in
government (New York State, Texas, and Florida being three
examples). There are also a number of other international standard
setting bodies.Internal auditors work for government agencies
(federal, state and local); for publicly traded companies; and for
non-profit companies across all industries. Internal auditing
departments are led by a Chief Audit Executive ("CAE") who
generally reports to the Audit Committee of the Board of Directors,
with administrative reporting to the Chief Executive Officer (In
the United States this reporting relationship is required by law
for publicly traded companies). Government Cost AuditCost Audit
represents the verification of cost accounts and check on the
adherence to cost accounting plan. Cost Audit ascertain the
accuracy of cost accounting records to ensure that they are in
conformity with Cost Accounting principles, plans, procedures and
objective.[1] Cost Audit comprises following;1. Verification of the
cost accounting records such as the accuracy of the cost accounts,
cost reports, cost statements, cost data and costing technique
and2. Examination of these records to ensure that they adhere to
the cost accounting principles, plans, procedures and
objective.Objectives of Cost Audit1. Prospective Objective: Under
which cost audit aims to identify the undue wastage or losses and
ensure that costing system determines the correct and realistic
cost of production.2. Constructive Objectives: Cost audit provides
useful information to the management regarding regulating
production, economical method of operation, reducing cost of
operation and reformulating Cost accounting plans .Types of Cost
Audit1. Cost Audit on behalf of the management:2. Cost audit on
behalf of a customer3. Cost Audit on behalf of Government4. Cost
Audit by trade association Management AuditA systematic assessment
of methods and policies of an organization's management in the
administration and the use of resources, tactical and strategic
planning, and employee and organizational improvement.The
objectives of a management audit are to (1) establish the current
level of effectiveness, (2) suggest improvements, and (3) lay down
standards for future performance. Management auditors (employees of
the company or independent consultants) do not appraise individual
performance, but may critically evaluate the senior executives as a
management team. See also performance audit.Simply defined, the
managementauditis a comprehensive and thorough examination of an
organization or one of its components. The audit is implemented to
identify problems or significant weaknesses in the organization or
corporation, thus providingmanagementwith a tool to address and
repair the problem area.The audit is not a new or recent idea.
History tells us of the presence of auditors in Pharaoh's Egypt and
the classical periods of Greek and Roman history. As businesses
developed and grew over the centuries of recorded history, the need
for controls became increasingly important. Financialauditingbecame
a standard in American businesses and, following the lead of New
York State, certification for accountants was enacted as
legislation in many states. The financial audit is now fully
integrated into business practices. The internal audit follows the
spirit of financial auditing and surpasses it to examine
operational matters as well. Another natural extension is
operational auditing. Whileinternal auditingis conducted by
employees within the organization, anoperational auditis generally
completed by an internal task force or external analysts. Financial
Reporting to ManagementA financial statement (or financial report)
is a formal record of the financial activities of a business,
person, or other entity.Relevant financial information is presented
in a structured manner and in a form easy to understand. They
typically include basic financial statements, accompanied by a
management discussion and analysis:1. A balance sheet, also
referred to as a statement of financial position, reports on a
company's assets, liabilities, and ownership equity at a given
point in time.2. An income statement, also known as a statement of
comprehensive income, statement of revenue & expense, P&L
or profit and loss report, reports on a company's income, expenses,
and profits over a period of time. A profit and loss statement
provides information on the operation of the enterprise. These
include sales and the various expenses incurred during the stated
period.3. A statement of cash flows reports on a company's cash
flow activities, particularly its operating, investing and
financing activities.For large corporations, these statements may
be complex and may include an extensive set of footnotes to the
financial statements and management discussion and analysis. The
notes typically describe each item on the balance sheet, income
statement and cash flow statement in further detail. Notes to
financial statements are considered an integral part of the
financial statements.Management discussion and analysisManagement
discussion and analysis or MD&A is an integrated part of a
company's annual financial statements. The purpose of the MD&A
is to provide a narrative explanation, through the eyes of
management, of how an entity has performed in the past, its
financial condition, and its future prospects. In so doing, the
MD&A attempt to provide investors with complete, fair, and
balanced information to help them decide whether to invest or
continue to invest in an entity.The section contains a description
of the year gone by and some of the key factors that influenced the
business of the company in that year, as well as a fair and
unbiased overview of the company's past, present, and
future.MD&A typically describes the corporation's liquidity
position, capital resources, results of its operations, underlying
causes of material changes in financial statement items (such as
asset impairment and restructuring charges), events of unusual or
infrequent nature (such as mergers and acquisitions or share
buybacks), positive and negative trends, effects of inflation,
domestic and international market risks, and significant
uncertainties. MCS in Public Sector Units Service Organisation and
Propriety1. Pricing The selling price of work is set in a
traditional way in many professional firms. If the profession is
one in which members are accustomed to keeping track of their time,
fees generally are related to professional time spent on the
engagement. The hourly billing rate typically is based on the
compensation of the grade of the professional (rather than the
compensation of the specific person), plus a loading for overhead
costs and profit. In other professions, such as investment banking,
the fee typically is based on the monetary size of the security
issue.
2. Profit Centers and Transfer Pricing Support units, such as
maintenance, information processing, transportation,
telecommunication, printing, and procurement of material and
services, charge consuming units for their services.
3. Strategic Planning and Budgeting In general, formal strategic
planning systems are not as well developed in professional
organizations as in manufacturing companies of similar size. Part
of the explanation is that professional organizations have no great
need for such systems. In manufacturing companies, many program
decisions involve commitments to procure plant and equipment; they
have a predictable effect on both capacity and costs for several
future years, and, once made, they are essentially irreversible. In
a professional organization, the principal assets are people;
although the organization tries to avoid short-run fluctuations in
personnel levels, changes in the size and composition of the staff
are easier to make and are more easily reversed than changes in the
capacity of a physical plant.
4. Control of Operations Much attention is, or should be, given
to scheduling the time of professionals. The billed time ratio,
which is the ratio of hours billed to total professional hours
available, is watched closely. If, to use otherwise idle time or
for marketing or public service reasons, some engagements are
billed at lower than normal rates, the resulting price variance
warrants close attention. 5. Performance Measurement and Appraisal
As noted above in regard to teachers, at the extremes the
performance of professionals is easy to judge. Appraisal of the
large percentage of professionals who are within the extremes is
much more difficult. For some professions, objective measures of
performance are sometime available: The recommendations of an
investment analyst can be compared with actual market behavior of
the securities; the accuracy of a surgeons diagnosis can be
verified by an examination of the tissue that was removed; and the
doctors skill can be measured by the success ratio of operations.
These measures are, of course, subject to appropriate
qualifications, and in most circumstances the assessment of
performance is finally a matter of human judgment by superiors,
peers, self, sub ordinates, and clients.
Financial Service Organizations Financial service organizations
include commercial bank and thrift institutions, insurance
companies, and securities firms. These companies are in business
primarily to manage money. Some act as intermediaries; that is,
they obtain money from depositors and lend it to individuals or
companies. Others act as risk shifters; they obtain money in the
form of premiums, invest these premiums, and accept the risk of the
occurrence of specific events, such as death or damages to
property. Still others are traders; they buy and sell securities
,either for their own account or for customers.
Healthcare Organizations Because of the shift in the product mix
an because of the increase in the quality an cost of new equipment
, the strategic planning in hospitals is important. The annual
budget preparation processes is conventional. Huge quantities of
information are available quickly for the control of operating
activities. Financial performance is analyzed by comparing actual
revenues, an expenses with budgets, identifying important
variances, an taking appropriate actions on them.
MCS Interface with Management Information Service and Cost and
Management Accounting Direct costs pertain to the acquisition
expenses or the cost of buying the system, and cover all of the
following activities: Researching possible products to buy, which
is essentially a labor cost but may also include materials cost,
such as purchase of third-party research reports or consultant
fees. Designing the system and all the necessary components to
ensure that they work well together. Naturally, this cost component
will be higher if a move to a totally different system platform is
being considered. Sourcing the products, which means getting the
best possible deal from all possible vendors through solicited bids
or market research With the Internet, it's even easy to get price
quotations from sources outside the country, to get a good spectrum
of pricing options. Purchasing the product(s), which includes the
selling price of the hardware, software, and other materials as
negotiated with the chosen suppliers. Include all applicable taxes
that might be incurred. Delivering the system, which includes any
shipping or transportation charges that might be incurred to get
the product into its final installation location. Installing the
system. Bear in mind that installation also incurs costs in
utilities and other environmentalnot just labor costs. If the
installation of the system will result in downtime for an existing
system, relevant outage costs must be included. Any lost end-user
productivity hours during this activity should also be factored in.
Developing or customizing the application(s) to be used. Training
users on the new system. Deploying the system, including
transitioning existing business processes and complete integration
with other existing computing resources and applications. Include
here the costs to promote the use of the new system among end
users. Indirect costs address the issues of maintaining
availability of the system to end users and keeping the system
running, which includes the following: Operations management,
including every aspect of maintaining normal operations, such as
activation and shutdown, job control, output management, and backup
and recovery. Systems management, such as problem management,
change management, performance management, and other areas.
Maintenance of hardware and software components, including
preventive maintenance, corrective maintenance, and general
housekeeping. Ongoing license fees, especially for software and
applications. Upgrade costs over time that may be required. User
support, including ongoing training, help desk facilities, and
problem-resolution costs. Remember to include any costs to get
assistance from third-parties, such as maintenance agreements and
other service subscriptions. Environmental factors affecting the
system's external requirements for proper operation, such as air
conditioning, power supply, housing, and floor space. Other factors
that don't fall into any of the above categories, depending on the
type of system deployed and the prevailing circumstances. All these
cost factors seem fairly obvious, but quantifying each cost is
difficult or impractical in today's world, because few
organizations have an accounting practice that's mature enough to
identify and break down all these types of expenses in sufficient
detail.
Management control system integrated with strategic
management
Management control system is an integrated technique for
collecting and using information to motivate employee behavior and
to evaluate performance. Management control systems use many
techniques such as 1. Activity-based costing Activity-based costing
(ABC) is a costing methodology that identifies activities in an
organization and assigns the cost of each activity with resources
to all products and services according to the actual consumption by
each. This model assigns more indirect costs (overhead) into direct
costs compared to conventional costing.
2. Balanced scorecard The balanced scorecard (BSC) is a strategy
performance management tool - a semi-standard structured report,
supported by design methods and automation tools, that can be used
by managers to keep track of the execution of activities by the
staff within their control and to monitor the consequences arising
from these actions.
3. Benchmarking and Bench trending Benchmarking is the process
of comparing one's business processes and performance metrics to
industry bests or best practices from other companies. Dimensions
typically measured are quality, time and cost. In the process of
best practice benchmarking, management identifies the best firms in
their industry, or in another industry where similar processes
exist, and compares the results and processes of those studied (the
"targets") to one's own results and processes. In this way, they
learn how well the targets perform and, more importantly, the
business processes that explain why these firms are successful.
Benchmarking is used to measure performance using a specific
indicator (cost per unit of measure, productivity per unit of
measure, cycle time of x per unit of measure or defects per unit of
measure) resulting in a metric of performance that is then compared
to others
4. Budgeting A budget is a quantitative expression of a plan for
a defined period of time. It may include planned sales volumes and
revenues, resource quantities, costs and expenses, assets,
liabilities and cash flows. It expresses strategic plans of
business units, organizations, activities or events in measurable
terms.
5. Capital budgeting Capital budgeting, or investment appraisal,
is the planning process used to determine whether an organization's
long term investments such as new machinery, replacement machinery,
new plants, new products, and research development projects are
worth the funding of cash through the firm's capitalization
structure (debt, equity or retained earnings). It is the process of
allocating resources for major capital, or investment,
expenditures. One of the primary goals of capital budgeting
investments is to increase the value of the firm to the
shareholders. Many formal methods are used in capital budgeting,
including the techniques such as Accounting rate of return Payback
period Net present value Profitability index Internal rate of
return Modified internal rate of return Equivalent annual cost Real
options valuation6. Program management techniques Program
management or programmed management is the process of managing
several related projects, often with the intention of improving an
organization's performance. In practice and in its aims it is often
closely related to systems engineering and industrial
engineering.
7. Target costing Target costing is a pricing method used by
firms. It is defined as "a cost management tool for reducing the
overall cost of a product over its entire life-cycle with the help
of production, engineering, research and design". A target cost is
the maximum amount of cost that can be incurred on a product and
with it the firm can still earn the required profit margin from
that product at a particular selling price. In the traditional
cost-plus pricing method, materials, labor and overhead costs are
measured and a desired profit is added to determine the selling
price.
8. Total quality management (TQM) Total quality management (TQM)
consists of organization-wide efforts to install and make permanent
a climate in which an organization continuously improves its
ability to deliver highquality products and services to customers.
While there is no widely agreed-upon approach, TQM efforts
typically draw heavily on the previously developed tools and
techniques of quality control.