FirstRanker.com
Firstranker's choice FirstRanker.com FirstRanker.com
Seat No.: Enrolment No.
--- Content provided by FirstRanker.com ---
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA - SEMESTER (4) - EXAMINATION - SUMMER 2018
Subject Code: 2840007 Date:25/05/2018
Subject Name: Management Control Systems
Time:02:30 PM To 05:30 PM Total Marks: 70
--- Content provided by FirstRanker.com ---
Instructions:
- Attempt all questions.
- Make suitable assumptions wherever necessary.
- Figures to the right indicate full marks.
Q. No. 06
--- Content provided by FirstRanker.com ---
Q.1 (a) One of the following is not an element of a control system
- A. Detector B. effector
- C. Silencer D. communication network
In BCG Matrix , ‘Dog’ implies to
- A. Harvest B. divest
- C. Hold D build
--- Content provided by FirstRanker.com ---
Accounting department in a company is a
- A. revenue centre B. profit centre
- C. Expense centre D. none of the above
Patent is an example of
--- Content provided by FirstRanker.com ---
- A. tangible asset B fictitious asset
- C. intangible asset D. none of the above
Value chain analysis highlights
- A. linkages with suppliers B. linkages with customers
- C. process linkages within D. all of the above
--- Content provided by FirstRanker.com ---
Customer focused key variables do not include
- A. backorders B. key account order
- C. cycle time D. customer retention
Q.1 (b) Explain the following terms : 04
- Goal congruence
- Revenue centre
- Assessor
- Investment centre
--- Content provided by FirstRanker.com ---
Q.1 (c) Discuss in brief about “ Stock Options’ as tool of motivating employees. 04
Q.2 (a) Discuss in brief about Balance Score Card as a tool of performance measurement . 07
--- Content provided by FirstRanker.com ---
FirstRanker.com Firstranker's choice FirstRanker.com FirstRanker.com
(b) “Internet has changed the very face of business to individual consumer sector .“ Discuss validity in light of Amazon . 07
OR
(b) Explain in brief elements of a control system with the support of a diagram and citing an example . 07
--- Content provided by FirstRanker.com ---
Q.3(a) Explain advantages of profit centres and difficulties with profit centres . 07
(b). “ The control of research and development centres present their own characteristic difficulties in relating results to inputs “ . Discuss . 07
OR
Q.3 (a). Explain different types of profitability measures . 07
(b). Distinguish between efficiency and effectiveness in the context of a strategic business unit . 07
--- Content provided by FirstRanker.com ---
Q.4(a). Discuss the advantages of EVA over ROI as a tool of measurement of business performance . 07
(b) “ Budget and forecasting are perceived as same but in reality they are different . Discuss 07
OR
Q.4(a).Explain benefits and limitations of strategic planning . 07
(b). If you are asked to implement performance measurement system in a company , explain step by step approach that you will follow . 07
--- Content provided by FirstRanker.com ---
Q.5 14
“ If I were to price these boxes any lower than $ 480 a thousand , “ said James Brunner , manager of Birchi Paper Company’s Thompson Division , “I’d be countermanding my order of last month for our salesmen to stop shaving their bids and to bid full-cost quotations . I’ve been trying for weeks to improve the ‘quality of our business , and if I turn around now and accept this job at $430 or $ 450 or something less than $480 , I’ll be tearing down this program I’ve been working so hard to build up . The division can’t very well show a profit by putting in bids that don’t even'cover a fair share of overhead costs , let alone give us a profit.”
Birch Paper Company was'a medium sized , partly integrated paper company , producing white and kraft papers and paperboard . A portion of its paperboard output was converted into corrugated boxes by the Thompson Division, which also printed and colored the outside surface of the boxes . Including Thompson , the company had four producing divisions and a timberland division , which supplied part of the company’s pulp requirements .
For several years , each division had been judged independently on the basis of its profit and return on investment . Top management had been working to gain effective results from a policy of decentralizing responsibility and authority for all decisions except those relating to overall company’s policy . The company’s top officials believed that in the past few years the concept of decentralization had been applied successfully and that the company’s profit and competitive position definitely had improved .
--- Content provided by FirstRanker.com ---
FirstRanker.com Firstranker's choice FirstRanker.com FirstRanker.com
The Northern Division had designed a special display box for one of its papers in conjunction with the Thompson Division , which was equipped to make the box . Thompson’s staft for package design and development spent several months perfecting the design , production methods , and materials to be used . Because of the unusual color and shape , these were far from standard . According to an agreement between the two divisions , the Thompson Division was reimbursed by the Northern Division for the cost of its design and development work .
When all the specifications were prepared , the Northern Division asked for bids on the box from the Thompson Division and from two outside companies . Each division manager was normally free to buy from whatever supplier he wished , and even on sales within the company , divisions were expected to meet the going market price if they wanted the business .
During this period , the profit margins of such converters as the Thompson Division were being squeezed . Thompson , as did many other similar converters , bought its paperboard , and its function was to print , cut , and shape it into boxes . Though it bought most of its materials from other Birch Divisions , most of its materials from other Birch divisions , most of Thompson sales were made to outside customers . If Thompson got the order from Northern , it probably would buy its linerboard and corrugating medium . About 70 percent of Thompson’s out-of-pocket cost of $400 for the order represented the cost of linerboard and corrugating medium . Though Southern had been running below capacity and excess inventory , it quoted the market price , which had not noticeably weakened as a result of the over supply . Its out-of-pocket costs on both liner and corrugating medium were about 60 per cent of the selling price .
The Northern Division received bids on the boxes(of $ 480 a thousand from Thompson Division , $430 a thousand from West Paper Company , and $432 a thousand from Eire Papers Ltd . Eire Papers offered to buy from'Birch the outside linerboard with the special printing already on it , but would supply its.own inside liner and corrugating medium . The outside liner would be supplied by the Southern Division at a price equivalent of $90 a thousand boxes , and it would be printed for $30 a thousand by the Thompson Division . Of the $30,about$25 would be out-of-pocket costs .
--- Content provided by FirstRanker.com ---
Since this situation appeared to-be a little unusual ,William Kenton , manager of the Northern Division , discussed the wide discrepancy of bids with Birch’s commercial vice president . He told the vice president :” We sell in a very competitive market , where higher costs cannot be passed on . How can we expected to show a decent profit and return on investment if we have to buy our supplies at more than 10 per cent over he going market .?”
Knowing that Mr.Brunner on occasion in the past few months had been unable to operate the Thompson Division at capacity , it seemed odd to the vice president that Mr.Brunner would add the full 20 per cent overhead and profit charge to his out-of-pocket costs . When he was asked about this , Mr. Brunner’s answer was the statement that appears at the beginning of the case .He went on to say that having done the developmental work on the box , and having received no profit on that , he felt entitled to good markup on the production of the box itself .
The vice president explored further the cost structures of the various divisions . He remembered a comment that the controller had a meeting the week before to the effect that costs which were variable for one division could be largely fixed for the company as a whole . He knew that in the absence of specific orders from top management Mr. Kenton would
FirstRanker.com Firstranker's choice FirstRanker.com FirstRanker.com
--- Content provided by FirstRanker.com ---
accept the lowest bid , which was that of the West Paper Company for $430 . However , it would be possible for top management to order the acceptance of another bid if the situation warranted such action . And though the volume represented by the transaction in question was less than 5 per cent of the volume of any of the divisions involved , other transactions would conceivably raise similar problems later .
Questions :
- Why bid should Northern Division accept that is in the best interests of Birch Paper Company ?
- Should Mr. Kenton accept this bid? Why or why not ?
- Should the vice president of Birch Paper Company take action ?
- In the controversy described , how, if at all , is the transfer price system dysfunctional ?Does this problem call for some change, or changes , in the transfer pricing policy of the overall firm ? If so , what specific changes do you suggest ?
--- Content provided by FirstRanker.com ---
OR
Q.S 14
Texas Instruments (TI) and Hewlett-Packard (HP) developed , manufactured , and sold high technology electric products . TI had three main lines of business in 1984 : components , which included semiconductor integrated circuits , semiconductor integrated circuits , semiconductor subassemblies, and electronic control devices: digital products , which included minicomputers , personal computers , scientific instruments , and calculators : and government electronics which included radar systems , missile guidance and control systems , and infrared surveillance systems . The three businesses generated 46 per cent , 19 per cent , and 24 per cent , respectively of TI sales in 1984 . HP operated in two main lines of business : computer products which included factory firstranker.computers , engineering workstations , data terminals , personal computers , and calculators : and electronic test and measurement systems , which included instruments that would’ measure and display electronic signals , volunteers , and oscilloscopes . These businesses generated 53 percent and 37 percent respectively of HP’s 1984 sales. Summary financial information for each company is presented in Exhibit 1.
Particulars | 1980 ($) 1981(8) 1982 ($) 1983(8) 1984(8)
--- Content provided by FirstRanker.com ---
TI HP TI HP |TI HP |TI HP |TI |HP
Assets 2414 12337 | 2311 | 2782 | 2631 | 347 |2713 | 4161 | 342 | 515
0 3 3
Equity 1165 | 1547 | 1260 | 1890 | 1361 |234 | 1203 | 2887 | 152 | 354
9 1 5
--- Content provided by FirstRanker.com ---
Sales 4075 | 3099 | 4206 | 3578 | 4327 | 425 | 4580 | 4710 | 574 | 604
4 2 4
Operating | 379 523 253 | 567 |236 |676 | (288 | 728 |526 | 860
Profit )
ROI 325 338 |20.1 [30.1 [173 |28.8 |na |252 |34.1 |242
--- Content provided by FirstRanker.com ---
% % % % % % % % %
Although TI and HP competed in similar industries , the strategies chosen by these two firms were very different . The Exhibit 2 summarizes five major concepts related to the content of strategy for both TI and HP . Perhaps the most significant distinction between TI and HP was
their generic business .
--- Content provided by FirstRanker.com ---
They pursued very different approaches .
TI preferred to pursue competitive advantage based on larger , more standard markets and a long-term , low cost position . HP , on the other hand , sought competitive advantage in selected smaller markets based on unique , high-value , high-featured products .
The functional strategies used to support those desired competitive advantages also differed .
TI | HP
--- Content provided by FirstRanker.com ---
Business Strategy
Competitive advantage for | Competitive advantage for selected small
large , standard markets based | market based on unique , high value / high
on long-run cost position features products .
Functional Strategy
--- Content provided by FirstRanker.com ---
Marketing High volume/low price High Value/high price
Rapid growth Controlled growth
Standard products Custom features
Manufacturing | Scale economies and learning | Delivery and quality driven
curve Limited vertical integration
--- Content provided by FirstRanker.com ---
Vertical integration Small, attractive locations
Large , low cost locations
R&D Process and product Products only
Cost driven Features and quality driven
Design to cost Design to performance
--- Content provided by FirstRanker.com ---
Financial Aggressive Conservative
Higher Debt NOebt
Tight ship Margin of safety (slack)
With regard to the product life cycle , TI fayoured early entry , followed by expansion and consolidation of its position , resulting in-a dominant market share when the product matured. HP, on the other hand , tended to create new markets but then exited (or introduced other new products )as cost-driven competitors entered and the market matured . It is not surprising that the two firms viewed prices and costs , the third area , differently . TI emphasized continual prize cuts.to parallel cost reduction in order to build volume and take advantage of shared experience and learning . HP, on the other hand ,put less emphasis on manufacturing cost reductions and held prices longer so that profit margins expanded during the initial periods .The early returns generated allowed early exit from the market with good returns on investment and provided funds for further product research and development .
A fourth concept that highlights their differences in strategy is the product process matrix , which matches the needs of its custom and low volume markets , while TI concentrated on more capital intensive and cost-effective production processes ( assembly lines and continuous flow operations ) to supply its more standard , high volume markets .
--- Content provided by FirstRanker.com ---
A fifth concept, portfolio analysis ,further highlights differences in the firms’ strategies . TI looked for a portfolio that included low-growth businesses with dominant market shares to provide cash for a select group of high growth businesses with lower market shares but with the prospect of becoming dominant , high growth businesses with lower market shares but
FirstRanker.com Firstranker's choice FirstRanker.com FirstRanker.com
with the prospect of becoming dominant , high growth businesses , and eventually “cash cows” . HO, on the other hand , wanted all high growth businesses with dominant market shares , and to reallocate major resources only to fund new businesses . In fact , the traditional solution to any profit problem at HP had been new products and new businesses .
Questions :
--- Content provided by FirstRanker.com ---
Given the difference between TI and HP , what would you expect would be differences between Tl ad HP :
a) In planning and control systems .
b) In strategic planning systems
¢) In budgeting systems
d) Inreporting systems
--- Content provided by FirstRanker.com ---
e) In performance evaluation systems : and
f) In incentive compensation systems .
L
--- Content provided by FirstRanker.com ---
This download link is referred from the post: GTU MBA Last 10 Years 2010-2020 Question Papers || Gujarat Technological University