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Assignment Solutions, Case study Answer sheets <br>Project Report and Thesis contact<br>aravind.banakar@gmail.com<br>www.mbacasestudyanswers.com<br>ARAVIND – 09901366442 – 09902787224<br><br>Management Control Systems<br><br>Case Study (20 Marks)<br><br>Methodology : Jimmy Carter, who introduced ZBB for resources allocation and control in government explains, "In ZBB, the budget is broken into units called DPs which are prepared by managers at each level. These packages include an analysis of purpose, cost, measures of performance and benefits, alternative courses of action and consequences of not performing the activity. Then all packages are to be ranked in order of priority. After several discussions between department heads and the chief executive, the rankings are finalized, and packages upto the level of affordability are approved and funded." In more specific terms the ZBB methodology as well as the sequential stages in its introduction may be outlined as follows: • Defining the Decision Units (DUs)<br>within the firm: A DU is a tangible activity or group of activities for which a single manager is responsible for successful performance. The DU concept is akin to that of the responsibility center. A traditional cost center, a group of people or even a project<br>may be a DU. • Defining objectives of each DU : In clear and specific terms and in conformity with the enterprise, objectives and goals. • Identifying activities in the form of DPs: The term D P focuses on the analysis of each activity in the manufacturing process according to the incident of the relevant cost and the importance of that activity in the overall cost structure of the organization. Thus, in essence DPs not only refer to the costs but also the benefits of an activity of process. • Ranking of alternative DPs in the order of decreasing benefit to the organization, using cost-benefit analysis technique. This problem can be reduced by concentrating on marginal priority packages. This is because ultimately all the packages presented for funding would generally fall into three categories: (1) those with a high priority and high probability of funding; (2) those with a marginal priority and which may be funded or not funded depending on the resources available, and (3) those with a low priority and low probability of funding. • Forwarding the ranked DPs to the next higher organizational units, for review, merger with other comparable DPs and for re-ranking (as the DPs are consolidated and re-ranked, the perspective and objectives are broadened). The consolidation and re-ranking should preferably be done by a committee comprising all managers whose DPs are being considered and a chairman selected from the next higher organizational level. • Finalization of the budget proposal as well as preparation of budgets for each DU have to be finally approved by the top management. Before according approval, the top management is guided, on the one hand, by the principle of allocating resources to the OPs showing higher benefit to cost ratios, and the question of affordability, on the other.<br><br>Answer the following question.<br><br>Q1. Explain the stages in specific terms of ZBB Methodology.<br><br>Assignment Solutions, Case study Answer sheets <br>Project Report and Thesis contact<br>aravind.banakar@gmail.com<br>www.mbacasestudyanswers.com<br>ARAVIND – 09901366442 – 09902787224<br><br><br>
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Management Control SystemsDr. Aravind Banakar9901366442 – 9902787224
Management Control Systems Case Study (20 Marks) Methodology : Jimmy Carter, who introduced ZBB for resources allocation and control in government explains, "In ZBB, the budget is broken into units called DPs which are prepared by managers at each level. These packages include an analysis of purpose, cost, measures of performance and benefits, alternative courses of action and consequences of not performing the activity. Then all packages are to be ranked in order of priority. After several discussions between department heads and the chief executive, the rankings are finalized, and packages up to the level of affordability are approved and funded
In more specific terms the ZBB methodology as well as the sequential stages in its introduction may be outlined as follows: • Defining the Decision Units (DUs)within the firm: A DU is a tangible activity or group of activities for which a single manager is responsible for successful performance. The DU concept is akin to that of the responsibility center. A traditional cost center, a group of people or even a project may be a DU. • Defining objectives of each DU : In clear and specific terms and in conformity with the enterprise, objectives and goals. • Identifying activities in the form of DPs: The term D P focuses on the analysis of each activity in the manufacturing process according to the incident of the relevant cost and the importance of that activity in the overall cost structure of the organization. Thus, in essence DPs not only refer to the costs but also the benefits of an activity of process.
• Ranking of alternative DPs in the order of decreasing benefit to the organization, using cost-benefit analysis technique. This problem can be reduced by concentrating on marginal priority packages. This is because ultimately all the packages presented for funding would generally fall into three categories: (1) those with a high priority and high probability of funding; (2) those with a marginal priority and which may be funded or not funded depending on the resources available, and (3) those with a low priority and low probability of funding. • Forwarding the ranked DPs to the next higher organizational units, for review, merger with other comparable DPs and for re-ranking (as the DPs are consolidated and re-ranked, the perspective and objectives are broadened). The consolidation and re-ranking should preferably be done by a committee comprising all managers whose DPs are being considered and a chairman selected from the next higher organizational level.
• Finalization of the budget proposal as well as preparation of budgets for each DU have to be finally approved by the top management. Before according approval, the top management is guided, on the one hand, by the principle of allocating resources to the OPs showing higher benefit to cost ratios, and the question of affordability, on the other. Answer the following question. Q1. Explain the stages in specific terms of ZBB Methodology.
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