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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.
1. 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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