Management Control Systems Assignment Help

Management Control Systems Assignment Help

Management Control Systems Assignment Help

Question One

Part A

I)  Participatory Budgeting System

Participative budgeting process is a process in which the people who are impacted by the budget are involve in defining the budget. Participatory budgeting is considered to be better as it involves greater participation of employees and stakeholders (Shah, 2007). Employees work hard to meet the targets as per the defined budget.

Management Control Systems Assignment Help

Advantages:

The major advantage of participatory budgeting system is that it provides all the managers at different levels to utilize their initial estimates, such as cost or budget sales (Langfield-Smith.et al. 2013, 429).  The main focus of this system is to encourage the improvement in communication and co-ordination between the different managers in the company and provide incentives (Langfield-Smith.et al. 2013, 429).

Participatory Budgeting System allows a better understanding of the budget through communication and consulting. Better communication and consulting among different stakeholders helps in creating better performance. In this system people are consulted and as a result they understand their responsibility in relating to their set targets, and thus they tend to work harder in order to obtain their budget goals (Langfield-Smith.et al. 2013, 429).

Responsibility-Accounting System

Responsibility accounting system is a program which collects all the data and generates information for the senior management to assess the performance of the managers in terms of managing the expenses and controlling the cost of operations (Drury, 2013).

Responsibility Accounting System

Advantages:

Responsibility- Accounting System is advantageous as it supports “goal-congruent” behaviour by the managers in the decentralized organization, such that responsibility centres and organizational units can designate the “revenue centre, cost centre, investment centre or profit centres” (Langfield-Smith.et al. 2013, 580). 

Another advantage of the Responsibility- Accounting System is that it benefits Human Resource (HR) in a way that they can effectively monitor the progress of revenues and experience in relation to the performance of the managers in each of the responsibility’s centres (Responsibility Accounting 2017).

II) Participatory Budgeting System

Disadvantages

The major disadvantage of participatory budget system is that it is time-consuming and costly to implement as it involves delays and indecisiveness due to involvement of excessive participation (Langfield-Smith.et al. 2013, 429). 

In participatory budgeting system, the employees tend to ‘pad’ the budget and are likely to be inaccurate in their projections of revenue and costs. As a result there are chances that the budget defined will not be accurate (Langfield-Smith.et al. 2013, 429).

Responsibility-Accounting System

Disadvantages

Responsibility- Accounting System may lead to conflict between “individual interest” and “organization interest” which will lead to a negative impact on the organization in the implementation of their policy (Limitation Responsibility Accounting. 2017).

Responsibility- Accounting System isdifficult to implement in regards to representing the authority and responsibility to be assign by the company (Limitations Responsibility Accounting. 2017).

Part B

Participatory Budgeting System (PBS)

In PBS, all the managers, including subordinate managers have the opportunity to give their opinion and feedback with respect to budgeting (Langfield-Smith.et al. 2013, 429). The approach encourages effective flow of communication between all levels of management and is based on a "two way communication process" (Langfield-Smith.et al. 2013).

The main objective of the BMS, is to adopt an approach that will create effectiveness in the level of communication between the company and its subsidiary being ‘SuperClean,’ In this scenario the Participatory Budgeting System will be an ideal approach for their organization (Langfield-Smith.et al. 2013). In this case, if Participatory Budgeting System is followed, the managers of SuperClean, being a subsidiary can provide effective communication in relation to their existing system and focus on providing BMS of the main features and benefits of the traditional system so that BMS will reconsider about implementing the considered systems, the participatory budgeting System (Langfield-Smith.et al. 2013).

Responsibility-Accounting System (RAS)

RAS focus on designating each of the units in an organization's responsibility centers, so that the managers in these responsibility centers are responsible for their own performances (Langfield-Smith.et al. 2013, 559). RAS encourage "accountability" to the company through the variance and reports produced by the managers in each of the responsibility centers. These reports present effectiveness and efficiency of their performances, so that it is in accordance to the expectations of the senior management (Responsibility Accounting. 2017).

By using the RAS, set goals can be communicated to each of the responsibility managers and the performances and results can be effectively monitored. Reports and variances by each of the responsibility centers can be communicated to the senior management and measures can be adapted to the particular responsibility centers if required (Limitation Responsibility Accounting. 2017).

For implementing RAS, an organization like BMS and its subsidiary SuperClean managers can benefit through the levels of performance and responsibility of each of the responsibility centers, in accordance to their areas of expertise, for the purpose of achieving "accountability" to the company (Responsibility Accounting. 2017).  For example, the upper management BMS, can effectively monitor the flow of resources and information performed by their subsidiary, and how these activities circulate around the organization (Responsibility Accounting. 2017). 

Question 2

A) The “Manufacturing plants in the Manufacturing Divisions “ are “Cost Centres” because these Manufacturing plants focus on producing products, such as “Semiconductors” and are responsible in achieving budget cost and reaching targets, therefore are classified under the responsibility of a “Cost Centres” (Langfield-Smith.et al. 2013, 560).  Manufacturing Divisions are cost centres as all the operational cost for manufacturing is done at the plant level.

The main responsibility of Cost Centre is to looks after the administrative side of production, such as the processing or production lines, and focuses on the running costs of the production department (Langfield-Smith.et al. 2013, 560).

B)

I) By Decentralising the decisions of the Marketing and Manufacturing, Hi Tech can look at evaluating the Marketing and Manufacturing managers in order to the negotiate prices for the company’s products, such as “Semiconductors” in the following manner:

Evaluating the Marketing Division

Hi Tech can focus on evaluating the Managers of the Marketing Division on the basis of their selling patterns in relation to the different types of Semiconductors, such asequalizers, amplifiers ICs, audio ICs.  It is also necessary to examine how the prices of these products affect consumer’s tastes and trends, so that it help determine the bases of their target product.

Other areas which can be used by Hi Tech for evaluating the performances of Marketing Division is the capacity of the individuals in negotiating appropriate prices for their Semiconductor’s products. Also the management can also consider the success of the promotion and advertising strategies in attracting the target audience (Langfield-Smith.et al. 2013, 561).

Evaluating the Manufacturing Division

Hi Tech can evaluate the managers of the Manufacturing Division on the basis of meeting the production targets and maintaining the product quality. Another important evaluation criterion is management of operational cost. It is important that the managers should be able to control the labour and indirect costs so as to minimise the cost of production (Langfield-Smith.et al. 2013, 561).

II)

Advantages of Decentralisation

1. In a decentralised environment, managers of particular divisions, for example, ‘Marketing Division’ can perform their activities effectively and accurately in the area of their expertise and can evaluate the performance of their team closely.

2. The managers in a decentralised environment can take decisions effectively in their area of expertise.

3. Delegation of decision to lower-level managers allows top-level management time to effectively handle other strategic decisions (Langfield-Smith.et al. 2013, 559).

Disadvantages of Decentralisation

1. In a decentralised environment, the managers concentrate solely on their own goals and decisions, and tend to lose focus from the company’s goal as a whole;

2. Duplications can occur which are irrelevant;

3. As a result of decentralisation duplication in work occurs which result in addition expenses for the organisation leading to increased operational cost.(Langfield-Smith.et al. 2013, 561).

Decentralising the marketing and manufacturing divisions would allow HiTech to effectively control and focus on improving the performance of these departments. The managers in these divisions have the sole powers to operate successfully. For example, decentralising marketing division would mean that, HiTech, will be benefited by understanding how the Marketing Division operates in regards to their selling patterns of semiconductor products; the different techniques adopted in regards to promotion and advertisement. Understanding of these aspects would allow the organisation to design effective strategies to attract target audience.

With respect to Manufacturing Division, Hi Tech would be able to understand the gaps in manufacturing process and production lines and other associated costs. This would be helpful in determining company’s target budget (Langfield-Smith.et al. 2013, 561).

In the scenario, if HiTech decides to implement the “Decentralisation” strategy it would help in improving the performance of the marketing and manufacturing divisions as these divisions would be able to focus upon their areas and identify the improvement area. However this strategy could result in non alignment of organisational objectives and departments.

Considering the overall scenario, HiTech should go for “Decentralisation” strategy as it would help the company in meeting the organisational objective of growth and performing activities as per the budget. HiTech should ensure that all the managers in each division should consider making their decisive matters not only to benefit of their own division, but also in accordance with the company’s strategy and budget goals (Langfield-Smith.et al. 2013, 461).

Reference

Drury, C.M., 2013. Management and cost accounting. Springer.

Langfield-Smith, K., Helen Thorne, David Alan Smith, and Ronald W. Hilton. 2013. Management Accounting. 6th ed. NSW, McGraw-Hill. Accessed 10th March, 2017.
Limitations Responsibility Accounting. 2017.  Accessed 10th March, 2017, last retrieved fromhttp://www.accountingnotes.net/responsibility-accounting/responsibility-accounting-meaning-steps-and-limitations/4818
Responsibility Accounting. 2017. Accessed 10th March, 2017,http://study.com/academy/lesson/responsibility-accounting-benefits-limitations.html
Shah, A. ed., 2007. Participatory budgeting. World Bank Publications.