CONTROLLING
CONTROL TECHNIQUES TOOLS
Control Techniques
Traditional Modern
Budgeting & Budgetary ROI Control
control PERT
Cost control MIS
Production Planning & Management Audit
Control
Inventory control
Break even analysis
Profit and losscontrol
Statistical data analysis
Budgeting
• Used for preparing budgets and other
procedures for planning,coordintion and control
of business enterprise.
• Budget is pre determined statement of
management policy during a given period.
Types of Budgets
Sales Budget :
• Estimate of expected sales during a budget
period.
• Potential sales figures in value as well as in
quantity.
• Prepared by sales manager.
Selling and Distribution Cost Budget :
• Forecast the cost of selling & distributing the
products.
• Expenses will vary with expected sales figures.
Production Budget :
• Forcast of production for budget period.
• Prepared for units produced and cost incurred on
material labour and factory OH.
• Considerations - What & When to be produced ?
Cost of Production Budget :
• Total amount to be spend on producing the units
stipulated in the production budget.
• Include material cost, labour cost and overheads.
Material Budget :
• Determining the quantity of raw materials
required for production.
• Material cost = (Material required for production
+ stock of materials required in hand - opening
stock)*rate per unit.
Direct Labour Budget :
• Useful for anticipating labour time required for
production and also the finance required for
labour.
• Two budgets may be prepared for direct and
indirect labour.
I. Direct labour - Labour required for
manufacturing.
II. Indirect labour - Which cannot be specific with
production.
• Labour cost = Rates of pay including all
allowances * labour time.
Manufacturing Overhead Cost Budget :
• Estimation of cost which arises from indirect
material, indirect labour, overheads and factory
expenses.
• Fixed work OH remain constant irrespective of
output.
• Variable work OH calculated by multiplying rate
per unit by budgeted output.
• Semi variable cost increases with the increase in
output.
Cash Budget :
• Estimate of cash receipts and disbursements
during a future period of time.
• Cash forcast include all possible sources of cash
inflows and ouflows, so that consolidated cash
position is determined.
Zero- Base Budgeting (ZBB)
• Every year is taken as new year.
• Zero is taken as a base.
• Future activities are decided according to the
present situation.
• A manager is to justify why he wants to spend.
Budgetary Control
"Budgetary Control is a system of controlling costs
which includes the preparation of budgets,
coordinating the departments and establishing
responsibilities, comparing actual performance
with budgeted and acting upon results to achieve
maximum profitablility"
Advantages of Budgetary Control
• Maximisation of profit
• Coordination
• Specific Aims
• Tools for measuring performance
• Economy in spending
• Determining weaknesses
• Corrective action
• Consciousness among the employees
• Reduces cost
• Introduction of incentive schemes of remuneration.
Cost Control
Is a control of all the costs of an enterprise in order
to acheive cost effectiveness in business operations.
Merits
• Discovering efficient and inefficient operations.
• Provide information for submitting tenders or
quoting prices.
• Pinpointing factors leading to losses.
• Reasons for variations in profit.
• Keeping a check on inventories.
• Basis for planning future production policies.
PRODUCTION PLANNING & CONTROL
• Production planning is the function of looking
ahead,anticipating difficulties to be faced and likely
remedial steps to remove them.
• Production control guides amd direct flow of
production.
Techniques
Routing -exact path
Scheduling -time & date
Despatching (implementation) -ordering work to
be done
Follow up and expediting
Inspection - quality test
Inventory Control
• Control of materials that it ensures maximum
return on working capital.
• Main purpose - adequate supply of correct
material at lowest total cost.
• Exercised at - purchasing, storing & issuing of
materials.
• Exercised by establishing parameters - saftey
level, maximum level, re-ordering level & danger
level.