Anderson Corp. has the following information:
Beginning Inventory (1/1) Ending Inventory (12/31)
Direct Materials Inventory $20,000 $30,000
Work in Process Inventory $16,000 $18,000
Finished Goods Inventory $25,000 $40,000
Additional information for the year is as follows:
Direct materials used $90,000
Direct labor incurred $75,000
Manufacturing overhead applied $95,000
Cost of goods manufactured $258,000
Compute the cost of goods sold.
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Terms in this set (20)
controlling
Control is considered as the end of management function.
Control is the process of ensuring that the plans are executed in accordance with the goals and objectives
The purpose of control is to achieve the desired results.
importance of control
Control is considered as an imperative management function for measuring and taking corrective actions to ensure organisational objectives are achieved.
Control as the process through which managers regulate the activities of individuals and units in order to ensure they are consistent with planned goals and objectives of the organisation.
Without a control system, managers will not be able to know where they are and how they are progressing.
Importance of Control
According to Jones and George (2011), control is important to an organisation in the following ways:
1. It helps managers measure how efficiently goods and services are being produced in an organisation.
2. It helps reduce the resistance to delegation, and in facilitating delegation.
3. It helps maintain the organisational culture.
4. It helps in the compilation of rules and
procedures by everyone.
5. It helps organisations change goals and objectives to adapt to the changing environment.
6. It ensures efficient use of resources.
The Control Process
The control process is a systematic process and involves four stages as follows:
1. Establishing the standards of performance.
2. Measuring performance.
3. Comparing performance standards.
4. Taking corrective
actions.
1. Establish the standard of performance
Within an organization's overall strategic plan, managers define goals for organizational departments in specific, operational terms that include standards of performance to compare with organizational activities.
Standards are expected to be met within a specific time period. For example, sales target set for a month, submitting medical invoices for
reimbursing insurance and soon.
2. Measuring performance
Once goals and standards of performance have been established, the performance is measured against the standards.
Measuring the performance standards helps in identifying the deviations and avoiding its recurrence by taking appropriate actions.
Measurement of performance usually takes place at periodic intervals " weekly, monthly, quarterly or
yearly.
3. Comparing performance standards.
In this stage the actual performance is compared against the standards and goals, to identify any deviations.
If the performance is consistent and in line with the standards, managers will feel happy as everything appears to be under control.
However, if performance falls short of the standards, then managers need to find the reason for such
deviation.
4. Taking corrective action
After deviations from goals and standards are identified, managers will determine what corrective actions to take and how to apply them.
a. Control actual performance: When a manager considers taking a corrective action he or she may:
i. Take immediate corrective action which means taking corrective measures immediately in order to get performance back on track,
ii.
Be well aware that basic corrective action helps in determining how and why performance has deviated and correcting the deviations, and
iii. Take actions that will depend on the cost/ benefit of doing so.
cont
Revise the standard: When the standard has been set too high, and the actual performance fails to meet the goal, managers can decide to revise it.
Therefore, the purpose of control is to take
suitable, corrective actions to improve performance.
types of control
Control systems as the "formal target setting, monitoring, evaluation and feedback systems that provide managers with information about how well the organisation's strategy and structure is working".
They state that effective control systems must be flexible to allow managers to respond to business opportunities and threats.
Feedforward Control
It is also known as 'preventive control'.
Feed-forward is the control mechanism that allows managers to anticipate problems before they arise.
As a result managers need to keep a close watch in order to identify problems and take corrective actions.
It focuses on inputs in the form of human and non-human resources used at work and tries to evaluate them and their potential of making an effective
output so that corrective measures are taken before the final product is produced.
cont
It is the feedback based on measuring an output. It involves taking corrective actions before a particular sequence of operation is completed.
For example, in the preventive maintenance of machinery, active anticipation and prevention of problems should be expected.
Managers consider this to be more effective, because
it does not allow deviations to occur and appropriate actions can be taken well in advance.
concurrent control
This is also known as 'real time control', focusing on the present rather than the future.
It involves regulating of ongoing activities that is a part of transformation process to ensure they confirm to the organisational standard.
Its aim is to take corrective actions while the programme is still
in operation before any major damage is done.
This type of control requires the manager to be conversant with the specific tasks undertaken to determine if they are in line with the desired product or service outcome.
Activities are continuously monitored in order to ensure that performance meets the prescribed standards. For example, quality control, production controls.
feedback control
It is based on
the measurement of the results of action.
It is usually done at the end of the production line of a specific task.
Control gives managers information about customers' reactions to goods and services so that corrective action can be taken if necessary.
Feedback gives managers information about the past or the present influences and the same phenomenon in the present or future.
cont
Feedback helps
managers to take action in the future which will be in line with the organisational objectives.
The underlying principle is the manager can take control of future events and not events that have already occurred.
Feedback helps to improve an organisation's performance, and serves as motivation for many people at the workplace
3 types of control
1. feedforward control
2. concurrent control
3. feedback
control
methods of control
personal growth, output control, control through incentives
personal growth
It is based on direct personal contact or supervision to ensure that individuals behave in a manner which is consistent with the organisational goals.
Supervisors observe and interpret subordinates' behaviour. This works
well when the leader is competent and charismatic.
It works best in small firms where people can be regulated through direct supervision.
output control
These are goals set for units or individuals to achieve.
The performance of the unit or individuals is monitored so that they can achieve the goals.
They will be appropriately rewarded when they achieve the goals.
control through incentives
Incentives are used to motivate the employees.
This is done by rewarding them appropriately for the desired behaviour.
Incentives are usually linked to their performance output. Incentives reinforce positive behaviour leading to increased output.
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