Management: Chapter 14 Managerial Control
activity-based accounting
budgeting that focuses on categories of activities done by employees, such as processing sales orders, purchasing supplies, etc
Cost accounting approach
budgeting that involves estimating and monitoring different categories of costs, such as salaries, benefits, supplies, and fixed costs
Principle of exception
we often concentrate on the exceptions (deviations) to the standards, those events that don't match the standard
Clan control
control that utilizes the culture of organizations to set limits on behaviors
Concurrent controls
controls that help us direct and monitor performance as plans are carried out
Feedback controls
controls that use the results of the activities to determine if we carried out our plan effectively
Bureaucratic control systems
- measure the progress towards performance goals using rules, standards, regulations, hierarchy, and legitimate authority to guide performance - includes budgets, statistical reports, and performance appraisals
1. estimate the income 2. identify and estimate current and future expenses 3. track expenditures against the budget 4. monitor the budget for deviations 5. correct any deviations from the budget
Budgeting process
Financial statements and financial ratios
Financial controls come in two forms..
1. set standards 2. measure performance 3. compare performance to standards and determine deviations 4. take corrective action if needed
The Control Process
Trust and respect
What are the foundational values of clan controls?
Budget
a plan that estimates the potential income the organization will receive and the expenses the organization will incur
Liquidity ratios
indicate a company's ability to pay short term debts
Profitability ratio
indicate an ability to generate a financial return on sales or investment, such as the return on investment ratio
Budgetary control
involves controlling the flow of money into, within, and out of the organization
Feedforward controls
rules, policies, and procedures designed to make sure things go as planned; these prevent deviations before they happen
Leverage ratios
show funds supplied by creditors and shareholders, such as the debt-equity ratio
Standards
targets that establish a desired performance level, motivates performance, and serves as the benchmark against which performance is assessed
transfer price
the internal charge by one organizational unit for a product or service provided by another organizational unit
Control
the process of ensuring that work activities are directed toward the achievement of organizational goals