• What is controlling
• Importance of Controlling
• Value of Control
• Basic Planning tools and techniques
• Techniques for assessing the environment
• Environmental Scanning
• Techniques for allocating resources
• Gantt Charts
• Load Charts
• PERT network analysis with example
• Breakeven Analysis with example
• Linear Programming with example
• Contemporary planning techniques
What is Controlling
It is the process of monitoring, comparing and
correcting work performance.
It is implemented via planning, supervising and
improving alternative strategies for management.
As a management tool and management function as
well as a factor affecting competitiveness, the role
of controlling has become more and more
Importance of Control
Planning can be done.
Organizational structure created to facilitate
efficient achievement of goals.
Employees motivated through effective leadership.
But there’s no assurance that activities are going as
planned and that the goals employees and managers
are working toward are, in fact, being attained.
Control is important, therefore, because it’s the only
way that managers know whether organizational
goals are being met and, if not, the reasons why.
Value of Control
The value of the control function can be seen in
three specific areas:
Protecting the workplace
Basic Planning Tools & Techniques
Techniques for assessing the environment.
Techniques for allocating resources.
Contemporary planning techniques.
Techniques for assessing the environment
“What happens in India in today’s environment may
have an impact on an American accounting firm in
◦ Environmental scanning
The screening of large amounts of information to
anticipate and interpret changes in the environment
Gathering information about competitors that allows
managers to anticipate competitors’ actions rather than
merely react to them
Wal-Mart Environmental Scan
Threats Strengths Significant
Strategy To handle
Low pay Largest
Expansion into other
Group , etc
Predictions of outcome
Forecasting that applies a set of mathematical rules to a series
of past data to predict outcomes
Forecasting that uses the judgment and opinions of
knowledgeable individuals to predict outcomes
Today, many organizations collaborate on forecasts using an
approach known as CPFR, which stands for Collaborative
Planning, Forecasting and Replenishment.
The search for the best practices among competitors
or non-competitors that lead to their superior
Steps in Benchmarking
Form a benchmarking planning team
(Identify what is to be benchmarked)
(Data collection methods)
Gather internal and external data
Analyze data to identify performance gaps
Prepare and implement action plan.
Techniques for allocating resources
An organization’s assets—including financial, physical,
human, intangible, and structural/cultural- that are used to
develop, manufacture, and deliver products to its customers
A numerical plan for allocating resources to specific
Collaborate and communicate.
Goals should drive budgets.
Budgets should not determine goals.
Coordinate budgeting throughout the organization.
Use budgeting/planning software when appropriate.
Remember that budgets are tools.
Remember that profits result from smart management, not
because you budgeted for them.
How to improve Budgeting
Detailing what activities have to be done, the order
in which they are to be completed, who is to do
each, and when they are to be completed.
PERT Network analysis
The Gantt chart was developed during the early
1900s by Henry Gantt, an associate of Frederick
Taylor, the scientific management expert.
The idea behind a Gantt chart is simple. It’s essentially a
bar graph with time on the horizontal axis and the
activities to be scheduled on the vertical axis.
The bars show output, both planned and actual, over a
period of time.
Load chart is a modified Gantt chart. Instead of listing
activities on the vertical axis, load charts list either entire
departments or specific resources.
This arrangement allows managers to plan and control
capacity utilization. In other words, load charts schedule
capacity by work areas.
A flowchart diagram showing the sequence of
activities needed to complete a project and the time
or cost associated with each
Why PERT Network
Plan a large project
Many number of activities to be scheduled
Dependent of each other
The implementation of a cost reduction program
Development of a new product
End points that represent the completion of major activities in a PERT
The time or resources needed to progress from one event to another in a
The amount of time an individual activity can be delayed without delaying
the whole project
The longest sequence of activities in a PERT network
How to construct PERT Network
Activity Predecessor Activity
1 Starting Point
4 Finish Point Event
How to draw network diagram
Event Description Expected Time
A Approve design and get
B Dig subterranean garage 6 A
C Erect frame and siding 14 B
D Construct floor 6 C
E Install windows 3 C
F Put on roof 3 C
G Install internal wiring 5 D,E,F
H Install elevator 5 G
I Put in floor covering and
J Put in doors and interior
K Turn over to building
S A B C
10 6 14
A-B-C-D-I-J-K (44 weeks)
A-B-C-D-G-H-J-K (50 Weeks) – Critical Path
A-B-C-E-G-H-J-K (47 weeks)
A-B-C-F-G-H-J-K (47 weeks)
End points that represent the completion of major activities in a PERT network
The time or resources needed to progress from one event to another in a PERT
The amount of time an individual activity can be delayed without delaying the
The longest sequence of activities in a PERT network
1. Identify every significant activity that must be achieved for a project to be
completed. The accomplishment of each activity results in a set of events or
2. Determine the order in which these events must be completed.
3. Diagram the flow of activities from start to finish, identifying each activity
and its relationship to all other activities. Use circles to indicate events and
arrows to represent activities. This results in a flowchart diagram called a
4. Compute a time estimate for completing each activity. This is done with a
weighted average that uses an optimistic time estimate (to) of how long the
activity would take under ideal conditions, a most likely estimate (tm) of the
time the activity normally should take, and a pessimistic estimate (tp) that
represents the time that an activity should take under the worst possible
conditions. The formula for calculating the expected time (te) is then
te = to + 4tm + tp
Steps in developing a PERT Network
A technique for identifying the point at which total
revenue is just sufficient to cover total costs.
BE =(TFC/(P – VC))
P the unit price of the product being sold
VC variable cost per unit
TFC total fixed costs
It’s valuable to managers because it points out the
relationship between revenues, costs, and profits.
Example of Break Even Analysis
Colin is the managerial accountant in charge of Company A, which sells water
bottles. He previously determined that the fixed costs of Company A consist of
property taxes, a lease, and executive salaries, which add up to $100,000.
The variable cost associated with producing one water bottle is $2 per unit. The
water bottle is sold at a premium price of $12. To determine the break even point
of Company A’s premium water bottle:
Break even quantity = $100,000 / ($12 – $2) = 10,000
Therefore, given the fixed costs, variable costs, and selling price of the water
bottles, Company A would need to sell 10,000 units of water bottles to break
A mathematical technique that solves resource allocation
Given that the bags of potpourri and the wax candles are
manufactured in the same facility, how many of each product should
she produce to maximize profits?
Number of hours
required (per unit)
capacity (in hours)
Manufacturing 2 4 1200
Assembly 2 2 900
Profit per unit $10 $18
The production capacity numbers act as constraints on
2P + 4S ≤1,200
2P + 2S ≤ 900
Or, P ≥ 0 ; S ≥ 0 ; because neither fragrance product can
be produced in a volume less than zero.
We know that total manufacturing capacity is 1,200 hours,
First constraint: (Line BE)
If only potpourri bags are to be manufactured then 600 (1200/2) bags can
If only scented candles , are to be manufactured then 300 (1200/4) bags
can be produced.
Second Constraint: (Line DF)
If only potpourri bags are to be produced then 450 (900/2) can be
If only scented candles are to be produced then 450 (900/2) can be
The constraints imposed by these capacity limits establish
At point A, profits would be 0 (no production of either potpourri bags
or scented candles).
At point B, the profit would be $5,400
300 scented candles × $18 profit = $5,400
At point D, profits would be $4,500
450 potpourri bags × $10 profit = $4,500
At point C, however, profits would be $5,700
(150 scented candles × $18 profit) + (300 potpourri bags × $10 profit)
Hence, Point C provides the maximum profits within the
Contemporary planning techniques
Today’s managers face the challenges of planning in an
environment that’s both dynamic and complex.
Two planning techniques appropriate for this type of
environment are project management and scenarios.
Both techniques emphasize flexibility, something that’s
important to making planning more effective and
A one-time-only set of activities that has a definite
beginning and ending point in time.
The task of getting a project’s activities done on time,
within budget, and according to specifications.
A consistent view of what the future is likely to be.
Developing scenarios also can be described as
contingency planning; that is, if this event happens, then
we need to take these actions.
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