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Illustrations of control applications
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priyanka1987
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priyanka1987
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Exclamation Illustrations of control applications - October 4th, 2007

Hey again a good article... do read it!!!


Illustrations of control applications

The essentials and principles of any control system provide the foundation for developing one’s own style of applying them in personal life (controlling one’s weight) or in managerial life. The number of broad applications by managers is almost as extensive as the entire topic of management be it quality control, inventory control, financial control, marketing control, budgetary control, and so forth. With the limited space of this article we may not be able to give illustrations of all types of control. We offer three short examples: two in accounting control and one popular general purpose technique, management by objectives.

Standard costs are predetermined costs developed from past experience, motion and time study, expected future manufacturing costs, or some combination of these. They contrast with actual costs, which are the amounts actually incurred in the manufacturing process.

In standard costing, the unit cost of particular product would be computed as follows:

1.Calculate standard labor costs: From a motion and time study it is found that the normal labor time required to produce one unit is four; the expected hourly wage cost for those workers responsible for its production is known to be $3.50. Thus, the standard labor cost is $14.00 (4 hours at $3.50 per hour).
2.Calculate Standard material Cost: From a study of materials flow and handling, it is estimated that no more than ten pounds of raw materials should be used in the production of one unit; the expected cost of raw materials, given reasonably efficient purchasing, is $ 0.80 per pound. Thus, the standard material cost is $8.00 (10 pounds at $ 0.80 per pound).
3.Calculate Standard overhead costs: The Unit overhead cost depends upon the expected (budgeted) production. A relationship is determined between expected overhead cost and some indicator of activity (usually a relation between overhead and labor costs). Thus, assuming that expected overhead is to be 80% of expected labor costs (as shown by the budget), the standard overhead is $11.20 (80% of $14.00)
4.Add the Three Amounts: In this example, the standard unit cost of a hypothetical product is:

Standard labor cost $14.00
Standard material cost $ 8.00
Standard overhead $11.20
Standard unit cost $33.20

As products are completed, the inventory of finished goods is charged with the standard costs of completely manufactured units. From the manager’s point of view, the chief benefit of standard costing is the analysis of reasons for the difference between actual costs and standard costs.

The analysis of manufacturing cost variances (accounts that accumulate differences between actual and standard costs) is based on reports flowing routinely to management. As an example, assume that the actual labor cost for the preceding example is $16.00; the labor cost variance would be $2.00. There are two sources of the variance:

1.departure from the standard time and
2.departure from the standard wage cost

If the actual labor time is five hours (instead of the standard four) and the actual wage cost is $4.00 (instead of $3.50), management must determine the causes of the variation. Was a new man on the job? Is the standard time too tight? Did the supervisor use a higher paid person on the paid person on the job than was supposed to be used? Material cost variances and overhead cost variances raise the same types of questions.

To summarize these steps in terms of the four essentials of any control system: The first three steps satisfy the first essential setting a predetermined standard. The recording of the actual cost during operations is the second essential. The third essential, comparing standard costs and actual costs, results in “cost variances,” i.e. comparisons. Finally the manger must seek to explain the variances and to make corrections as needed.



Take care

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Warm Regards,

Priyanka
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Re: Illustrations of control applications
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Rose Marry
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Re: Illustrations of control applications - April 11th, 2016

Quote:
Originally Posted by priyanka1987 View Post
Hey again a good article... do read it!!!


Illustrations of control applications

The essentials and principles of any control system provide the foundation for developing one’s own style of applying them in personal life (controlling one’s weight) or in managerial life. The number of broad applications by managers is almost as extensive as the entire topic of management be it quality control, inventory control, financial control, marketing control, budgetary control, and so forth. With the limited space of this article we may not be able to give illustrations of all types of control. We offer three short examples: two in accounting control and one popular general purpose technique, management by objectives.

Standard costs are predetermined costs developed from past experience, motion and time study, expected future manufacturing costs, or some combination of these. They contrast with actual costs, which are the amounts actually incurred in the manufacturing process.

In standard costing, the unit cost of particular product would be computed as follows:

1.Calculate standard labor costs: From a motion and time study it is found that the normal labor time required to produce one unit is four; the expected hourly wage cost for those workers responsible for its production is known to be $3.50. Thus, the standard labor cost is $14.00 (4 hours at $3.50 per hour).
2.Calculate Standard material Cost: From a study of materials flow and handling, it is estimated that no more than ten pounds of raw materials should be used in the production of one unit; the expected cost of raw materials, given reasonably efficient purchasing, is $ 0.80 per pound. Thus, the standard material cost is $8.00 (10 pounds at $ 0.80 per pound).
3.Calculate Standard overhead costs: The Unit overhead cost depends upon the expected (budgeted) production. A relationship is determined between expected overhead cost and some indicator of activity (usually a relation between overhead and labor costs). Thus, assuming that expected overhead is to be 80% of expected labor costs (as shown by the budget), the standard overhead is $11.20 (80% of $14.00)
4.Add the Three Amounts: In this example, the standard unit cost of a hypothetical product is:

Standard labor cost $14.00
Standard material cost $ 8.00
Standard overhead $11.20
Standard unit cost $33.20

As products are completed, the inventory of finished goods is charged with the standard costs of completely manufactured units. From the manager’s point of view, the chief benefit of standard costing is the analysis of reasons for the difference between actual costs and standard costs.

The analysis of manufacturing cost variances (accounts that accumulate differences between actual and standard costs) is based on reports flowing routinely to management. As an example, assume that the actual labor cost for the preceding example is $16.00; the labor cost variance would be $2.00. There are two sources of the variance:

1.departure from the standard time and
2.departure from the standard wage cost

If the actual labor time is five hours (instead of the standard four) and the actual wage cost is $4.00 (instead of $3.50), management must determine the causes of the variation. Was a new man on the job? Is the standard time too tight? Did the supervisor use a higher paid person on the paid person on the job than was supposed to be used? Material cost variances and overhead cost variances raise the same types of questions.

To summarize these steps in terms of the four essentials of any control system: The first three steps satisfy the first essential setting a predetermined standard. The recording of the actual cost during operations is the second essential. The third essential, comparing standard costs and actual costs, results in “cost variances,” i.e. comparisons. Finally the manger must seek to explain the variances and to make corrections as needed.



Take care

Njoy

Warm Regards,

Priyanka
Hey dear,

Please check attachment for Real-Time Control Systems with Delays.
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File Type: pdf Real-Time Control Systems with Delays.pdf (1,013.8 KB, 0 views)
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