Page 191 - DMGT514_MANAGEMENT_CONTROL_SYSTEMS

Financial Measures
Representative area at which
Non-Financial Measures
data gathered
A) Customer / Market level
i) Prices of company’s products
compared with competition
company’s products
ii) Third party quality ratings
ii) Prices of company’s traded
for all products in the industry
securities
i) No. of new products
i) Return on investment (ROI)
B) Total organizational level
introduced
ii) Residual income (RI)/EVA
ii) No. of new patents filed
iii) Return on sales
Cost and revenue
measurements for each
responsibility centre according
to measure of performance used
(that is cost, revenue, profit,
and return on investments) this
is known as responsibility i) Market share held by
accounting. Financial measures
includes flexible budget
variances)
C) Individual facility level i) Capacity utilization
(includes manufacturing plants, ii) Throughput time for
Management Control Systems
distribution sales, customer products
service centers, R & D center) iii) Percentage of times
promised delivery dates met
(schedule attainment)
Notes D) Individual Activity level i) Direct material variance and i) Time taken to set up
(e.g. activities in a warehouse direct labour variances machinery for new production
facility include receiving, ii) Manufacturing overhead run.
storing, dispatching, etc. variances ii) No. of accounts receivables
iii) Cost per activity level processed per hour
iii) Inventory level not to
exceed certain amounts
iv) Abiding by Plant
Maintenance schedules. Time
period for completion i.e.,
break even time is the time
from initial idea date to the
time when the cumulative
present value of cash inflows of
the project equals the present
value of total (to market) cash
outflows
E) By Product / Programme Cost and Revenues and
Investments across
responsibility centers as far as
they pertain to program or
product (compares to budgeted
/ target amounts). This is
sometimes referred to as
activity costing.

Self Assessment
Fill in the blanks:
1. ………………… means data have been shaped into a form that is meaningful and useful to
human being.
2. …………….. are a central component of management information and reporting system.
9.2 Performance Reports: Format and Essential Features
1. Tailored to the organization structure and controllability: The performance report system
should be structured to the organization structure of the enterprise the same way as
budgeting and accounting systems. There should be a separate performance report for
each responsibility centre, starting with those at the lowest level, which, in turn, feed into
summary reports for each higher level.
2. Designed to implement the exception principle in management: Performance report must
clearly distinguish between controllable and non-controllable items. Performance
measurement required that actual results be compared with plans, objectives and standards
so that differences (exceptions) call management attention to high, low and satisfactory
performance. The variances from plans signal the need for investigation and possible
action. The action may be corrective, commendatory or provisory. Both favourable and
unfavourable variances justify investigation. Unfavourable variances may signal danger
further investigation generally is necessary to pinpoint the precise cause.
3. Repetitive and relate to short-time spans: Performance should be repetitive, generally on
a monthly basis, although certain problems may suggest the need for weekly or even
daily reports that focus on a particular problem.

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