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