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Q.4 Explain briefly the various stages of management control process. Citing and
criticality of each?
ANS:
The management control process for ongoing operating activities has the following
four phases:
(1) programming
(2) Budgeting
(3) Execution
(4) Evaluation
Control process in the of non operating activities such as project consist of the above
phases except that two phases, programming and budgeting are combined into a single
activity. Project planning, they are difference in the nature of a project and that are operating
activities. A project generally has a single objective and ongoing operating activities have
multiple objective. A project comes to an end when the objective is accomplished. An
ongoing operating organization intends to operate indefinitely. In some process cases, the
completion of project may result into an ongoing operating organization although this may
involves complex management control problems.
The discussion of the four phases of management control – Programming, budget
preparation, Execution, Evaluation- are as follows:

Programming :
Programming is defined as making programs by top/senior management in terms of
organization, goals and strategies and deciding the fund and resources needed to accomplish
the programs. Programs can be made about development of new products, research and
development activities, merger takeover, and other activities that are not related much with
existing product lines. In service organizations, such as a hotel
Chain management may draw programs for each hotel on each region where the
hotels are to be set up. In decentralization, organization, for each segment or central,
programming can be done.
Programming is a long rang plan, covering period of approximately five future years.
The reason is that if programming is made for shorter periods, the result and benefits of
programming can not be realized within this period. Some organization like public utilities
prepare long rang plans for even a periods of twenty years. Because of relatively long time
plan, only rough estimates are possible for revenues, expenses and capital expenditure.

Criticality
(1) Its top management is convinced that programming is very important. Otherwise
programming is likely to become a staff exercise that has little impact an actual
decision making.
(2) It is relatively a large and complex. In small, simple organization, an informal
understanding of an organization future direction adequate for making decision about
resources allocation, which a principles purpose of repairing programme.
(3) Considerable uncertainty about the future exists, but organization has the flexibility
to adjust to change the circumstances. In relatively stable organization. A program
may be unnecessary; the future is sufficiently like the past so that the program would
be only an exercise in extrapolation. If the future is so uncertain that reasonably
reliable estimates can not be made, preparation of formal programme is a waste of
time.
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Budgeting :
Budgeting is formal financial plan for each year, know as short rang plan, is
techniques of expressing revenues, expenses, physical target like production and sales, profit,
asset and liabilities usually for periods of one future year.
Budget has functions of motivating manager, coordinating activities, communicating
to persons within an organization, providing standards for judging actual performance and
acting as a control tool.

Executing :
After the budget preparation, budgeting is used as tool for coordinating the action of
individual and department within the organization. In fact within the execution phase, task
control is done to ensure the action and performance match with the and desire result. Which
performing the manager’s goals is to achieve budgeted targets, however compliance to
budget is not necessary if the plans given in the budget are found as not the best way of
achieving the objectives. Adherence to budget is not necessary good, and departure from it is
not necessary bad.

Evaluation :
The management control process ends with evaluation phase in which performance of
manager is evaluated. Since it is an after event exercise, the evaluation does effect what has
happened, however evaluation phase act like a powerful stimulus as employees know that
their performance will be subsequently evaluated. Also on the basis performance evaluation,
the future budget and plans are revised.

Conclusion:
The management control process is behavioral, manifesting itself in interaction
among manager and between manager and their sub-ordinates. Because managers differ from
another in technical ability, leadership style, interpersonal skill, experience, approach to
decision making, affinity for member, and in many other ways, the details of the management
control process vary from company to company and among the responsibility centre within
company. The difference relate mainly to the way the control system is used.
Programming, budgeting, executing and evaluation are not needed in small, relatively
stable organization, and it is not worthwhile in organization that cannot make reliable
estimates about the future or in organization whose top management does prepare to manage
in this fashion.

Q. 8(a)Describe the factor which impact on service organization.

Introduction:
For several reasons, management control in service industries is somewhat different
from management control in service industries is somewhat different from management
control in manufacturing companies. Some factors that have an impact on most service
industries discussed as follows. These factors apply also to the management control of legal,
research and development, and other service departments in companies generally.
Factors which impact on services organizations
 Absence of Inventory Buffer
 Difficulty in controlling quality
 Labor intensive
 Multiunit organization
 Historical development
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Absence of inventory buffer

Goods can be held in inventory, which is a buffer that dampens the impact on
production activity of fluctuations in sales volume. Services can be stored. The airplane seat,
hotel room, hospital operating room, or the hours of lawyers, physicians, scientist, and other
professionals that are used today are gone forever. Thus, although, a manufacturing company
can earn revenue in the future from products that are hand today, a service company cannot
do so. It must try to minimize its unused capacity.
Moreover, the cost of many services organizations is essentially fixed in the shorts
run. In short, a hotel cannot reduce its costs substantially by closing off its rooms. Accounting
firms, law firms, and other professional organizations are reluctant to lay off professional
personal in times of low sales volume because of the effect on morale and the costs of
rehiring and training.
A key variable in most service organization, therefore, is the extent to which current
capacity is matched with demand. Service organization attempts this matching in two ways.
First they try to stimulate demand in off –peak periods by marketing efforts and price
concessions. Cruise lines and resort hotels offer low rates off seasons. Second, if feasible,
service organization adjusts the size of workforce to anticipated demand, if feasible, by such
measures as scheduling training activities in slack periods and compensating for long hours in
busy periods with time off later. The loss from unsold services is so important that occupancy
rates and similar indications of success in selling available services are normally key variable
in service organizations.

Difficulty in Controlling Quality

A manufacturing company can inspect its products before they are shipped to
consumer, and their quality can be measured visually or with instruments(tolerances ,purity,
weight, color, and so on).A service company cannot judge product quality until the moment
the service is rendered, and then the judgment are often subjective. Restaurants management
can examine the food in the kitchen, but customer satisfaction depends to a considerable
extent on the way it is served. The quality of education is so difficult to measure that few
educational organizations have a formal quality control system.

Labor Intensive
Manufacturing companies add equipment and automate production lines, thereby
replacing labor and reducing costs. Most service companies are labor intensive and cannot do
this. Hospitals do add expensive equipment, but mostly to provide better treatment, and this
increase costs. A law firm expands by adding partners and new support personnel.

Multi-Unit Organizations
Some services organization operate many units in various locations, each unit
relatively small. These organizations are fast-food restaurant chains, auto rental companies,
gasoline services stations, and many others. Some of the units are owned; others operate
under a franchise. The similarity of the separate units provides a common basis for analyzing
budgets and evaluating performance not available to the manufacturing company. The
information for each unit can be compared with system wide or regional averages, and high
performance and low performers can be identified. However, because units differ in the mix
of services they provide, in the resources that they use, and in other ways, care must be taken
in making such companies.
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Historical Development
Cost accounting started in manufacturing companies because of the need to value
work in process and finished goods inventories for financial statement purposes. These
systems provided raw data that were easily adapted for use in setting selling prices and for
other management purposes. Standard cost systems, separation of fixed and variable costs
and analysis of variances were built on the foundation of cost accounting system, separation
of fixed and variable costs and analysis of variances were built on the foundation of cost
accounting systems. Until a few decades ago, most texts on cost accounting dealt only with
practices in manufacturing companies.
Many service organizations (with the notable exception of railroads and both cost
data. Their use of product costs and other regulated industries) is not having a similar impetus
to develop cost data. Their use of product cost and other management accounting data is
fairly recent –mostly since World War II. Nowadays, their management control systems are
rapidly becoming as well as those developed as those in manufacturing companies.