11. LO.1 (Management control systems) A few years after graduation, Oram and fou
ID: 2484617 • Letter: 1
Question
11. LO.1 (Management control systems) A few years after graduation, Oram and four of his friends from college organized an engineering consulting business called 5Q. All five individuals had earned degrees in engineering fields and were anxious to pool their expertise and work together in a successful business venture. Even though the business was very successful in attracting clients, the business failed within two years of its founding because the entrepreneurs were unable to control their costs. Discuss how the adoption of management controls could have improved the odds that the business would have been successful.
Explanation / Answer
Contol is one of the managerial function which has to be followed as it helps to check deviations from standards and take corrective actions so that the goals are achieved.The management controls to control the cost are;
First you need to establish standard that should be followed than you should measure actual results and compare with the standard and analyse deviations than correct deviations by taking corrective measures. The deviations can be favorable or unfavorable, unfavorable deviations should be corrected. Than once when deviations are identified the right action should be taken and discuss it with the people who can set it right.
There are various management control techinques like Activity Based Costing,Budgeting,capital Budgeting,Target costing, Total Quality Management, Contineous Improvement, Target costing, program management technique. So if these control techniques are followed according to the need of the business than it helps in controlling cost.
Now cost could controlled by identifying various cost and than analyse whether it is reasonable or not. If the cost could be cut down by using the above techinques than use those techinques and cut down the cost.
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