Management Control System

Coca Cola Goes Small in India The coca-cola company is the number one seller of soft drinks in the world. Every day an average of more than 1 Billion servings of Coca-Cola, Diet Coke, Sprite, Fanta and other products of Coca-Cola are enjoyed around the world. The company has the world’s largest production and distribution system for soft drinks and sells more than twice as many soft drinks as its nearest competitor. Coca-Cola products are sold in more than 200 countries around the globe.For several reasons, the company believes it will continue to grow internationally. One reasons is that disposable income is rising Another reason is that outside the United States and Europe, the world is getting younger. In addition, reaching world markets is becoming easier as political barriers fall and transportation difficulties are overcome. Still another reason is that the sharing of ideas, cultures and news around the world creates market opportunities.Part of the company mission for C oca-Cola to maintain the world’s powerful trademark and effectively utilize the world’s most effective and pervasive distribution system. In June 1999 Coca-Cola India introduced a 200-milliliter Coke bottle in Delhi, India, in a campaign to market Coke to its poorest customers. This strategy was successful for Coca-Cola in other countries such as Russia. The bottle sells for Rs. 12, making affordable to almost everyone. In 2001, Coca-Cola enjoyed 25% growth in India including an 18% increase in unit case sales of Coca-Cola.Because of the variability of bottling machinery, it is likely that every 200 milliliter bottle of Coca-Cola does not contain exactly 200 milliliters of fluid. Some bottles may contain more fluid and other less. Because 200 milliliters fills are somewhat unusual, a production engineer wants to test some of the bottles from the first production runs to determine how closely they are to the 200 milliliter specification. Suppose the following data are t he field measurements from a random sample of 50 bottles.Consider the measures of central tendency, variation, skewness. Based on this analysis, explain how the bottling process working? 200. 1 200. 1 199. 7 200. 1 200. 4 199. 6 200. 1 200. 3 200. 2 200. 2199. 9 200. 9 200. 4 199. 4 199. 8 200. 4 200. 8 200. 5 200. 5 199. 5200. 2 200. 1 200. 3 199. 6 199. 9 200. 4 199. 9 199. 9 200. 2 200. 6200. 2 200. 3 199. 8 199. 2 200. 2 200. 6 200. 0 201. 1 199. 7 200. 3200. 0 200. 5 199. 3 200. 2 199. 6 200. 6 199. 9 199. 7 200. 9 199. 8 Management Control System Management Control System Assignment â€Å"Budgeting Preparation† * Budget Preparation Budget preparation is a summary of company's plans that sets specific targets for sales, production, distribution and financing activities. It generally culminates in a cash budget, a budgeted income statement, and a budgeted balance sheet. In short, this budget represents a comprehensive expression of management's plans for future and how these plans are to be accomplished. It usually consists of a number of separate but interdependent budgets. One budget may be necessary before the other can be initiated.More one budget estimate effects other budget estimates because the figures of one budget is usually used in the preparation of other budget. This is the reason why these budgets are called interdependent budgets. * Gudeline of Budget Preparation Operating Budgets An operating budget is a statement that presents the financial plan for each responsibility centre during the budget period and reflects operating activities involving revenues and expenses. The most common types of operating budgets are  expense,  revenue, and  profit budgets Expense BudgetAn expense budget is an operating budget that documents expected expenses during the budget period. Three different kinds of expenses normally are evaluated in the expense budget -fixed,  variable  and  discretionary  (Discretionary expenses – costs that depend on managerial judgment because they cannot be determined with certainty, for example:  legal fees, accounting fees  and  R&D expenses). Revenue Budget A revenue budget identifies the revenues required by the organization. It is a budget that  projects future sales. Profit Budget A profit budget combines both expense and revenue budgets into one statement to show  gross and net profits. Feature article about  Production ManagementProfit budgets are used to make  final resource allocation, check on the adequacy of expense budgets relative to anticipated revenues, control activities across units, and assign responsibility to managers for their shares of the organization's financial performance. Financial Budgets Financial Budgets outline how an organization is going to acquire its cash and how it intends to use the cash. Three important financial budgets are the  cash budget,  capital expenditure budget  and the balance sheet budget. Cash budget Cash budgets are forecasts of how much cash the organization has on hand and how much it will need to meet  expenses.The cash budget helps managers determine whether they will have adequate amounts of cash to handle required disbursements when necessary, when there will be excess cash that needs to be invested, and when cash flows deviate from budgeted amounts. Capital Expenditure Budget Capital Expenditure Budgets ,  Investment in property,  buildings and  major equipment  are called capital expenditure. Such capital expenditure budgets allow management to forecast capital requirements, to on top of important capital projects, and to ensure the adequate cash is available to meet these expenditures as they come due.The balance sheet budget The balance sheet budget plans the amount of  assets  and liabilities  for the end of the time period under considerations. A balance sheet budget is also known as a  pro forma (projected) balance sheet. Analysis of the balance sheet budget may suggest problems or opportunities that will require managers to alter some of the other budgets * Budgeting Process * Behavioral Aspects Actually, an effective budget preparation process blends the two approaches. Budgetees prepare the first draft of the budget for their area of responsibility, they do so within guideliness established at higher level.Senior managers review and critique these proposed budgets. Research has shown that budget preparation where the process in which the budgetee is both involved and has influence over the setting of budget amounts and it has positive effects on managerial motivation for two reasons : 1. There is likely to be greater acceptance of budget goals if they are perceived as being under managers’ personal control, rather than being imposed externally. This will leads to higher personal commitment to achieve the goals. 2. Participative budgeting result in effective information exchanges.The approved budget amounts benefit from the expertise and personal knowledge of the budgetees, where the budgetees have a clearer understanding of their jobs through interactions with superior during the review and approval phase. The budget department has a particularly difficult in behavioral problem. It must analyze the budgets in details, and it must be certain that the budget are prepared properlu and that the information is accurate. To accomplis h the tasks, the budget department sometimes must act in ways that line managers perceive as threatening or hostile.To perform, their function effectively, the members of the budget department must have a reputation for impartiality and fairness. If they do not have this reputation, it becomes difficult, if not impossible, for them to perform the task necessary to maintaining the effective budgetary control system. Citation Anthony, R. N. , ; Govindarajan, V. (2007). Behavioral Aspects. In Management Control System (pp. 391-393). New York: McGraw-Hill. How to Prepare Budget. (n. d. ). Retrieved November 02, 2012, from CWA – Communication Workers of America: