Chapter 6 Flashcards
What is sub-systems?
Within a system there will usually be sub-systems. For example, if a company is a system, then the finance department is a sub-system. Within the finance department will be a sub-sub-system such as the management accounting system, and so on.
What is closed systems?
There are systems that accept no input from the environment, are self-contained and cannot respond to change. These do not exist in business
What is open systems?
These are systems which accept inputs from their environment and provide output to the environment. They react to their environment, e.g. a company
What is objective? (in terms of characteristics of systems)
A system must have an objective to function correctly. For example, a company’s objective might be to maximise shareholder wealth. The objective allows the system to be monitored or controlled.
Wha tis feedback control?
It is defined as the measurement of differences between planned outputs and actual outputs achieved, and the modification of subsequent action and / or plants to achieve future required results. This is the more common type of control system.
What is feedforward control?
it is defined as the forecasting of differences between actual and planned outcomes and the implementation of actions before the event to prevent such differences. E.g. budgeting system: A cash budget might predict that an overdraft will be required in a particular month.
Differentiate between primary, secondary, negative and positive feedbacks.
- Primary feedback - could be reported to line management in the form of control reports, comparing actual and budgeted results. If the variances are small or can be corrected easily, then the information may not be fed back to anyone higher in the organisation.
- Secondary feedback - is where feedback is sent to a higher level in an organisation and can lead to a plan being reviewed and possible changed; for example, the revision of a budget after a large variances were discovered due to price changes over time.
- Negative feedback - is feedback taken to reverse a deviation from standard. This could be by amending the inputs or process so that the system reverts to a steady state; for example, a machine may need to be reset over time to its original settings.
- Positive feedback - is feedback taken to reinforce a deviation from standard. The inputs or process would not be altered.
Differentiate between open loop system and closed loop systems.
- Open loop systems - are where there is scope within the control mechanism for outside involvement; for example, a manager might decide what action should be taken from, say, three options
- Closed loop systems - are where the control action is automatic, for example, the thermostat on a central heating system
Feedback reported to a high level in an organisation that can lead to the revision of a plan is called…?
Secondary feedback
Systems that accept no input from the environment, are self-contained and cannot respond to change are called…?
Closed system
The type of organisational structure where employees have two or more managers is called…?
Matrix
Differentiate between Management control and Management control systems.
Management control is defined as the process of guiding organisations into viable patterns of activity in a changing environment.
Management control systems are defined as the processes by which managers attempt to ensure that their organisation adapts successfully to its changing environment.
What is a management accounting control systems?
it is an information system that helps managers to make planning and control decisions.
Performance measures for investment centres are:?
ROI; Residual income (RI) and Economic value added (EVA)
ROI for an investment centre is similar to the ROCE for an organisation as a whole. Write down the formula.
ROI = (PBIT / operations management capital employed) x 100
What is residual income? Write down formula
RI is a measure of the profitability of an investment centre after deducting a notional or imputed interest cost. This interest cost is a notional charge for the cost of the capital invested in a division.
RI = Accounting profit - notional interest on capital
Differentiate between Traditional and Modern manufacturing
Traditional manufacturing:
- standardisation of product
- long production runs
- acceptable level of quality
- slow product environment
Modern manufacturing:
- globalisation
- competition
- JIT and TQM
- intelligent machines
What are the conditions for successful JIT adoption?
- Stable high volume of demand
- Co-ordination of daily production programmes of supplier and consumer
- Co-operation of supplier who has to be reliable on both delivery and quality
- Suitable factory layout
- Reliable transport system
What are the operational requirements of JIT?
- High quality and reliability. JIT relies on getting things right first time, and preventing scrap or re-working.
- Speed of throughput. Throughput in a manufacturing operation must be fast, so that customer orders can be met by production rather than out of inventory.
- Flexibility. In order to respond immediately to customer orders, production must be flexible, and in small batch sizes. The ideal batch size is 1.
- Lower cost. Lower inventory, faster throughput and better quality will drive down costs.
What is TQM and what it’s philosophy aimed at?
TQM is total quality management and it’s business philosophy is aimed at:
- minimising errors (ideally to zero) as the cost of getting things right first time is always less than the costs of correction; and
- maximising customer satisfaction such that every customer’s expectations are met or exceeded.
To achieve philosophy of TQM a firm should have an appropriately installed quality culture and very good systems that are documented and adhered by all staff. What are it’s fundamental features?
- Prevention of errors before they occur
- Continual improvement
- Real participation by all
- Commitment of senior management
What are the costs of quality for TQM?
- Prevention costs
- Appraisal costs
- Internal failure costs - These are the costs arising within the organisation when the predetermined specifications are not met. They include the cost of reworking or rectifying the product, the net cost of scrap and etc.
- External failure costs - costs of inadequate quality that are incurred once the product has been sold. They include dealing with customer complaints, warranty claims costs of repairing or replacing returned faulty goods.
Modern manufacturing generally includes: (select all that apply)
A Intelligent machines
B Short production runs
C JIT
D TQM
All
Features of JIT system include: (Select all that apply)
A Fluctuating demand
B Low volumes
C Reliable transport system
D A flexible workforce
C and D
