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Management Studies
MANAGEMENT CONTROL SYSTEMS
Marks – 80
Note: Attempt any ten questions. All questions carry equal marks.
Question. 1. Explain the various components of control systems.
Answer: A control system is a framework used to regulate and manage processes to achieve desired outcomes. It consists of interconnected components that work together to monitor, compare, and adjust system performance.
- Input
- The desired value or setpoint that the system aims to achieve.
- Represents external factors influencing the system.
- Example: In an air conditioning system, the input is the desired room temperature (e.g., 24°C).
Question. 2. Explain the following models and highlight their usefulness in formulating business unit strategies:
(a) The BCG Model
(b) General Electric (GE) Planning Model
Q.3 Explain the boundary conditions in the context of profit centers. Also, explain the process of performance measurement of profit centers.
Answer: Boundary Conditions in Profit Centers
A profit center is a business unit that is responsible for both revenue generation and cost management, ensuring profitability. However, certain boundary conditions define its operations:
- Authority Over Revenues & Costs
Q.4 What do you understand by Investment Centers? Explain the methods used for measuring investment center performance.
Answer: Definition of Investment Centers
An investment center is a business unit that is responsible for revenues, costs, and capital investment decisions. It operates with greater autonomy and focuses on maximizing returns on investment.
Methods to Measure Investment
Q.5 What do you mean by budgetary control system? Explain the process of budgetary control in an organization.
Answer: Definition of Budgetary Control System
A budgetary control system is a financial tool that helps businesses plan, monitor, and control expenses to ensure alignment with objectives. It ensures resource efficiency, cost control, and performance measurement.
Process of Budgetary Control in an Organization
- Setting Objectives
Q.6 Describe the criteria on which the incentives of business unit managers are decided.
Introduction
Answer: Incentives for business unit managers are designed to motivate performance, align with company goals, and ensure accountability. They are based on financial, operational, and strategic factors.
Criteria for Incentives
- Financial Performance
- Profitability Metrics: Net Profit, Return on Investment (ROI).
- Revenue Growth: Meeting sales targets.
- Cost Control: Reducing unnecessary expenses.
- Operational Efficiency
Q.7 What are the various special control issues faced by Multi-National Corporations (MNCs)?
Introduction
Answer: MNCs operate in multiple countries with diverse economic, legal, and cultural environments, leading to unique control challenges.
Special Control Issues in MNCs
- Currency Fluctuations
- Foreign exchange variations impact profitability.
- Hedging and currency risk management are essential.
- Regulatory and Compliance
Q.8 What are the characteristics of a project organization? Explain how these characteristics affect the control system design of a project.
Answer: Characteristics of a Project Organization
- Temporary Nature
- Projects have a defined start and end date.
- Example: Construction of a new airport.
- Unique Objectives
Q.9 Explain in detail how the new management techniques for management control are being used to assure that resources are obtained and used effectively and efficiently in the accomplishment of organizational goals.
Answer: New Management Techniques for Control
- Balanced Scorecard (BSC)
- Measures financial, customer, process, and learning growth perspectives.
- Provides a comprehensive performance view.
- Total Quality Management (TQM)
- Focuses on
Q.10 What do you understand by Management Information System (MIS)? Explain its significance in designing a Management Control System in an organization.
Answer: Definition of MIS
Definition of MIS
A Management Information System (MIS) is a computerized system that collects, processes, stores, and distributes information to
Q.11 What is meant by Transfer Pricing? Explain the various methods used to determine transfer pricing.
Answer: Definition of Transfer Pricing
Transfer pricing refers to the price at which goods, services, or intellectual property are transferred between divisions of the same company operating in different regions.
Methods of Determining Transfer Pricing
- Market-Based Pricing
- Based on the external market rate for the product/service.
- Ensures fair
Question. 12. Critically examine the basic features of a typical Performance Measurement System.
Question. 13. Explain the Agency Theory Framework and discuss how the Management Control System can reduce the agency cost.
Question. 14. Explain the unique features of Management Control Systems in Insurance Companies.
Question. 15. How does the Control Environment of projects differ from that of the manufacturing organizations? Explain.
Question. 16. What are knowledge organizations? Analyze the role of Management Control System in knowledge organizations
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