ASSIGNMENTMANAGEMENT CONTROL SYSTEM

Name : Ms. Priyanka Dilip Kadam

Course:2ND YEAR MMS-A

Roll no: 12

Subject In-charge: Prof. Sengupta

Institute: Aditya Institute of Management Studies and Research

University: University of Mumbai

Academic Year:2013-2015

Return on InvestmentReturn on investment, or ROI, is the most common profitability ratio. There are several ways to determine ROI, but the most frequently used method is to divide net profit by total assets. Return on investment isn't necessarily the same as profit. ROI deals with the money you invest in the company and the return you realize on that money based on the net profit of the business. Profit, on the other hand, measures the performance of the business. Don't confuse ROI with the return on the owner's equity. This is an entirely different item as well. Only in sole proprietorships does equity equal the total investment or assets of the business.You can use ROI in several different ways to gauge the profitability of your business. For instance, you can measure the performance of your pricing policies, inventory investment, capital equipment investment, and so forth.The return oninvestmentformula is:ROI= (Net Profit/ Cost ofInvestment)x100 Sensitivity AnalysisA technique used to determine how different values of an independent variable will impact a particular dependent variable under a given set of assumptions. This technique is used within specific boundaries that will depend on one or more input variables, such as the effect that changes in interest rates will have on a bond's price.Sensitivity analysis is a way to predict the outcome of a decision if a situation turns out to be different compared to the key prediction(s).Sensitivity analysis is very useful when attempting to determine the impact the actual outcome of a particular variable will have if it differs from what was previously assumed. By creating a given set of scenarios, the analyst can determine how changes in one variable(s) will impact the target variable.For example, an analyst might create a financial model that will value a company's equity (the dependent variable) given the amount of earnings per share (an independent variable) the company reports at the end of the year and the company's price-to-earnings multiple (another independent variable) at that time. The analyst can create a table of predicted price-to-earnings multiples and a corresponding value of the company's equity based on different values for each of the independent variables. Financial goalsFinancial goals are exactly what the term describes - goals you set that revolve around finance or money. Financial goals are targets, usually driven by specific future financial needs. Some financial goals you might set as an individual include saving for a comfortable retirement, saving to send your children to college, or managing your finances to enable a home purchase.Financial Goal Time FrameWhen setting a financial goal, you must determine the length of time it is going to take to reach your goal. Your goal can be considered a short-term, medium-term, or long-term goal. Below are some examples: Short-term goals are those that can be achieved in three months or less. As an example of this, you might want to save $100 to buy an MP3 player in three months. Medium-term goals are those that will take between three months to one year to achieve. For example, you might want to save money for six months so that you could take a trip during your spring break. Long-term goals take more than one year to accomplish. One of your long-term goals could be paying off your student loans early by paying an extra $200 per month.1.How to set your goalsBe specific, realistic, and write down your goals. Keep each goal simple and give it a timeframe and a dollar amount.Set some big goals - like buying a home in the next five years or saving for your retirement (this could be your biggest goal of all).Set some smaller goals to help you get there like saving for a deposit or paying off your credit cards.2.Saving and paying off debtFinancial goals are often about saving or paying off debt:If you have high-interest debt, like credit card or hire purchase, your main goal should be to pay that debt off first and as soon as possible. This could involve re-structuring your debt into lower-interest loans.Saving two to three months income for an emergency fund can help you and your family if anything unexpected happens. Its a good idea to have this fund in a savings account separate from your normal everyday bank account.If you have a mortgage and can afford to increase your repayments, your goal may be to save on interest by paying off your loan faster.The earlier you start saving for your retirement the better. Even a small amount saved every week or month can add up to a lot over time.3. Actions to achieve your goalsActions are the steps you take to reach your goals. Here are some examples:If your goal is to save for a house deposit, your action may be to open a savings account by next pay day and save $50 a week into this new account.If your goal is to save for your retirement (or to save for a deposit on your first home), your action might be to talk to your employer about joining KiwiSaver.If you pay your mortgage monthly, your goal could be to change to fortnightly repayments of at least half the amount you were paying each month. This will pay off your mortgage faster and save on interest.4.Review your goalsReview your progress every six months or once a year, on a specific date written in your diary or calendar. When you achieve a goal, celebrate! Then set yourself a new goal.New Year is a great time to think about your goals write those resolutions down!5.Using the goals worksheetSetting goals is easy with the goals worksheet. Use it to write down your short, medium and long-term financial goals, then save them to My Sorted to review later.With the worksheet you can also set actions to achieve your goals.6.Planning in a relationshipIf you are in a relationship and making a financial plan, it's important that you both get involved in the process.Find out more about planning in a relationship.7.Net worthKnowing your net worth the difference between what you own and what you owe is an important part of setting your financial goals and building your financial plan.Find out more about net worth. Responsibility BudgetA responsibility accounting budget is a report designed to track the controllable costs and revenues of a manager as well as chart their efficiency and effectiveness. In other words, a responsibility budget is a budget that companies make for the expenses and revenues that are controlled by a specific manager. Since not all costs can controlled by managers, it makes sense to make a budget specifically charting the expenses that managers can control.Many non-controllable costs or uncontrollable costs like insurance premiums or fixed asset purchases are out of a department manager's control and authority. Executives and people higher in the company decide financial decisions like these. Management is generally not held responsible for these types of expenses.The responsibility accounting budget is generally prepared by officers or upper level management to track the responsibilities of each department manager. Upper level management can use these responsibility budgets to track performance of managers as well as track goals for the future.The responsibility accounting budget is only one piece of the responsibility accounting performance report or RAPR where executives and upper level management track efficiency and profitability by department and person. The RAPR is also used to help explain changes in cost structure and profitability.For instance, if the manufacturing department just invested in new robotic assembly line equipment, the RAPR should show a decrease in the variable costs per product produced. Likewise, over labor hours and labor costs should be lower for this department as well. Management by objectivesAccording to George Odiome, MBO is "a process whereby superior and subordinate managers of an Organisation jointly define its common goals, define each individual's major areas of responsibility in terms Of results expected of him and use these measures as guides for operating the unit and assessing the contribution of each of its members."The core concept of MBO is planning, which means that an organization and its members are not merely reacting to events and problems but are instead being proactive. MBO requires that employees set measurable personal goals based upon the organizational goals. For example, a goal for a civil engineer may be to complete the infrastructure of a housing division within the next twelve months. The personal goal aligns with the organizational goal of completing the subdivision.MBO is a supervised and managed activity so that all of the individual goals can be coordinated to work towards the overall organizational goal. You can think of an individual, personal goal as one piece of a puzzle that must fit together with all of the other pieces to form the complete puzzle: the organizational goal. Goals are set down in writing annually and are continually monitored by managers to check progress. Rewards are based upon goal achievement.Management by objectives has become de facto practice for management in knowledge-based organizations such as software development companies. The employees are given sufficient responsibility and authority to achieve their individual objectives.Accomplishment of individual objectives eventually contributes to achieving organizational goals. Therefore, there should be a strong and robust process of assessing the objective achievements of each individual.This review process should take place periodically and sufficient feedback will make sure that the individual objectives are in par with the organizational goals.

Profit Centre And ControlProfit centres take the basic idea of cost centres somewhat further. In this case, a profit centre is run as a separate business within a business. The profit centre will buy services from other divisions and profit centres within the parent organisation, and then selling their output on to the final customer or to another part of the parent organisation.The profit Centre will have its own profit and loss account and bid for investment capital from the parent company. In recent years there has been a huge growth in the development of cost centres and profit centres within large Organizations. There are several reasons for the growth and most of these can be linked to personal motivation and more effective control.Profit centres take the idea of overhead allocating further; in this case each division of large business is run as an independent business, with it's own profit and loss account. An example of an organisation operating profit centres is Corus. Within Corus TIn PLate division operates as a profit centre. Corus Tin Plate buys service and goods from within the organisation and sells output to tougher divisions and to external customers.

Profit centres are often evaluated on the basis of different measures of profitability like1) Contribution Margin2) Direct Profit3) Controllable Profit4) EBIT Margin5) Net IncomeEach type of profitability measure is used by some companies and their relative importance varies from organization to organization.Advantages of Profit Centres: Allows decision-making and power to be delegated effectively. Improves speed and efficiency of decision making. Increased motivation- now working for a smaller, more local business. Allows more effective use of bonuses and other forms of financial motivation - all linked to profitability of profit centre.Disadvantages of profit Centres: Loss of overall central control of the company Profit centre could be working towards different and non-company agendas Increased opportunity for empire building by management.

Transfer PricingCommercial transactions between the different parts of the multinational groups may not be subject to the same market forces shaping relations between the two independent firms. One party transfers to another goods or services, for a price. That price is known as "transfer price". This may be arbitrary and dictated, with no relation to cost and added value, diverge from the market forces. Transfer price is, thus, a price which represents the value of good; or services between independently operating units of an organisation. But, the expression "transfer pricing" generally refers to prices of transactions between associated enterprises which may take place under conditions differing from those taking place between independent enterprises. It refers to the value attached to transfers of goods, services and technology between related entities. It also refers to the value attached to transfers between unrelated parties which are controlled by a common entity.Suppose a company A purchases goods for 100 rupees and sells it to its associated company B in another country for 200 rupees, who in turn sells in the open market for 400 rupees. Had A sold it direct, it would have made a profit of 300 rupees. But by routing it through B, it restricted it to 100 rupees, permitting B to appropriate the balance. The transaction between A and B is arranged and not governed by market forces. The profit of 200 rupees is, thereby, shifted to the country of B. The goods is transferred on a price (transfer price) which is arbitrary or dictated (200 hundred rupees), but not on the market price (400 rupees).Thus, the effect of transfer pricing is that the parent company or a specific subsidiary tends to produce insufficient taxable income or excessive loss on a transaction. For instance, profits accruing to the parent can be increased by setting high transfer prices to siphon profits from subsidiaries domiciled in high tax countries, and low transfer prices to move profits to subsidiaries located in low tax jurisdiction. As an example of this, a group which manufacture products in a high tax countries may decide to sell them at a low profit to its affiliate sales company based in a tax haven country. That company would in turn sell the product at an arm's length price and the resulting (inflated) profit would be subject to little or no tax in that country. The result is revenue loss and also a drain on foreign exchange reserves. R&D controlResearch and Development (R&D) is a key factor that contributes to the success of any business organization. But the outcome of R&D is highly uncertain. Organizations face three important dilemmas while planning and controlling the R&D activities. First, the integration of the objectives of the R&D function with those of the organization and linking customer preferences with the objectives of R&D. Lack of proper information from the marketing function, lack of proper integration of the other functions with R&D, and poor commercial viability of the R&D projects are factors that influence this integration. Second, the problem in planning and managing the R&D activities. A proper R&D plan has to be devised and each R&D project should be controlled by controlling the intermediate targets, time frames and budgets, and by creating appropriate performance measurement systems for the R&D function. Third, considering R&D as a strategic infrastructure that includes knowledge assets and competencies, and not merely as a function or collection of projects.National culture and organizational culture have a significant impact on R&D and innovation respectively. The R&D function is characterized by three structures: production structure - tasks, cooperation, and conflicts; control structure - autonomy, decision making, and leadership; and employee relationship - reward and appraisal systems. These structures are influenced by factors like the type of research undertaken - basic research, applied research, or development; and nature of the R&D processes - task uncertainty, task interdependence, and size. These structures are also influenced by the national culture. National culture is described through the following dimensions: power distance, uncertainty avoidance, masculinity/femininity, and individualism/collectivism. R&D personnel from national cultures that rank high on power distance and uncertainty avoidance tend to prefer less autonomy and strong leadership, accompanied by appropriate reward and appraisal systems. On the other hand, those from a national culture ranking low on power distance and uncertainty avoidance and high on femininity prefer greater autonomy and decision-making authority. They also prefer a leadership which is nurturing and not dominating. This seems to foster higher creativity and innovation.Instead of adopting formal controls, a more effective method of managing innovation would be through the organizational culture. Organizations successful in making the employees feel like family or imbuing a sense of belonging in the employees usually score higher on innovation as against organizations that use formal methods of control. To create goal directed communities, the top management sets the objectives for the employees but the means to achieve the objectives are decided by the employees themselves. To help enhance innovativeness, organizations should ensure balanced autonomy, a proper integration of technical skills and teamwork, and personalized recognition/reward systems. Scrap ControlDuck R.E.V. (2001) claims that cost reduction methods involve a periodic reappraisal of issues such as components used, design, possible substitution with cheaper materials, and production methods. Scrap control can also be used for cost reduction purposes. With regard to the control of labour costs, labour efficiency and labour productivity techniques are commonly used to assess the production levels attained. Labour productivity measurements result in output measured in physical units and calculated as output per man-hour, however only for productive labour. Quality is a vital component in business strategies of which the improvement is closely linked to the competitive environment (Adam et al., 2001). In this respect, the focus of firms on the customer as well as on the involvement of employees is positively related to quality improvement. Adam et al.s study shows that an increase in the involvement of employees in Mexico and the USA led to quality improvement in terms of decreased costs of internal failures, defective items and costs of quality.

Administrative Cost ControlCost control, also known as cost management or cost containment, is a broad set ofcost accountingmethods and management techniques with the common goal of improving business cost-efficiency by reducing costs, or at least restricting their rate of growth. Businesses use cost control methods to monitor, evaluate, and ultimately enhance the efficiency of specific areas, such as departments, divisions, or product lines, within their operations.During the 1990s cost control initiatives received paramount attention from corporate America. Often taking the form ofcorporate restructuring, divestmentof peripheral activities, masslayoffs,oroutsourcing,cost control strategies were seen as necessary to preserveor boostcorporate profits and to maintainor gaina competitive advantage. The objective was often to be the low-cost producer in a given industry, which would typically allow the company to take a greater profit per unit of sales than its competitors at a given price level.Some cost control proponents believe that such strategic cost-cutting must be planned carefully, as not all cost reduction techniques yield the same benefits. In a notable late 1990s example, chief executiveAlbertJ. Dunlap, nicknamed "Chainsaw Al" because of his penchant for deep cost cutting at the companies he headed, failed to restore the ailing small appliance makerSunbeam Corporationto profitability despite his drastic cost reduction tactics. Dunlap laid off thousands of workers and sold off business units, but made little contribution to Sunbeam's competitive position or share price in his two years as CEO. Consequently, in 1998 Sunbeam's board fired Dunlap, having lost confidence in his "one-trick" approach to management. AuditManagement Audit'is a systematic examination of decisions and actions of the management to analyse the performance. Management audit involves the review of managerial aspects like organizational objective, policies, procedures, structure, control and system in order to check the efficiency or performance of the management over the activities of the Company. Unlikefinancial audit,management audit mainly examine the non financial data toauditthe efficiency of the management. Somehowaudittries to search the answer of how well the management has been operating the business of the company? Is managerial style well suited for business operation? Management Audit focuses on results, evaluating the effectiveness and suitability of controls by challenging underlying rules, procedures and methods. Management Audit is an assessment of methods and policies of an organization's management in the administration and the use of resources, tactical and strategic planning, and employee and organizational improvement. Management Audit is generally conducted by the employee of the company or by theindependentconsultant and focused on the critical evaluation of management as a team rather than appraisal of individual.

Objectives of Management Audit Establish the current level of effectiveness Suggest Improvement Lay down standards for future performance Increased levels of service quality and performance Guidelines for organizational restructuring Introduction of management information systems to assist in meeting productivity and effectiveness goals Better use of resources due to program improvements

Efficiency AuditAn economy and efficiency audit, or simply efficiency audit, focuses on the resources and practices of a program or department, according to the Encyclopedia of Public Administration and Public Policy, which provides descriptions of typical audit activities. An economy and efficiency audit might analyze the procurement, maintenance and implementation of resources, such as equipment, to identify areas that require improvement. Alternately, it might examine the practices of a department or program to find inefficient or wasteful processes. LawsEnsuring adherence to laws and regulations is another important aspect of an economy and efficiency audit. For example, an auditor might analyze operations to ensure records were kept in accordance with state and federal regulations, or an auditor might inspect a property to determine whether the facility is operating according to work-safety guidelines. Internal AuditInternal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.[1] Internal auditing is a catalyst for improving an organization's governance, risk management and management controls by providing insight and recommendations based on analyses and assessments of data and business processes. With commitment to integrity and accountability, internal auditing provides value to governing bodies and senior management as an objective source of independent advice. Professionals called internal auditors are employed by organizations to perform the internal auditing activity.The scope of internal auditing within an organization is broad and may involve topics such as an organization's governance, risk management and management controls over: efficiency/effectiveness of operations (including safeguarding of assets), the reliability of financial and management reporting, and compliance with laws and regulations. Internal auditing may also involve conducting proactive fraud audits to identify potentially fraudulent acts; participating in fraud investigations under the direction of fraud investigation professionals, and conducting post investigation fraud audits to identify control breakdowns and establish financial loss.Internal auditors are not responsible for the execution of company activities; they advise management and the Board of Directors (or similar oversight body) regarding how to better execute their responsibilities. As a result of their broad scope of involvement, internal auditors may have a variety of higher educational and professional backgrounds.The Institute of Internal Auditors (IIA) is the recognized international standard setting body for the internal audit profession and awards the Certified Internal Auditor designation internationally through rigorous written examination. Other designations are available in certain countries.[2] In the United States the professional standards of the Institute of Internal Auditors have been codified in several states' statutes pertaining to the practice of internal auditing in government (New York State, Texas, and Florida being three examples). There are also a number of other international standard setting bodies.Internal auditors work for government agencies (federal, state and local); for publicly traded companies; and for non-profit companies across all industries. Internal auditing departments are led by a Chief Audit Executive ("CAE") who generally reports to the Audit Committee of the Board of Directors, with administrative reporting to the Chief Executive Officer (In the United States this reporting relationship is required by law for publicly traded companies). Government Cost AuditCost Audit represents the verification of cost accounts and check on the adherence to cost accounting plan. Cost Audit ascertain the accuracy of cost accounting records to ensure that they are in conformity with Cost Accounting principles, plans, procedures and objective.[1] Cost Audit comprises following;1. Verification of the cost accounting records such as the accuracy of the cost accounts, cost reports, cost statements, cost data and costing technique and2. Examination of these records to ensure that they adhere to the cost accounting principles, plans, procedures and objective.Objectives of Cost Audit1. Prospective Objective: Under which cost audit aims to identify the undue wastage or losses and ensure that costing system determines the correct and realistic cost of production.2. Constructive Objectives: Cost audit provides useful information to the management regarding regulating production, economical method of operation, reducing cost of operation and reformulating Cost accounting plans .Types of Cost Audit1. Cost Audit on behalf of the management:2. Cost audit on behalf of a customer3. Cost Audit on behalf of Government4. Cost Audit by trade association Management AuditA systematic assessment of methods and policies of an organization's management in the administration and the use of resources, tactical and strategic planning, and employee and organizational improvement.The objectives of a management audit are to (1) establish the current level of effectiveness, (2) suggest improvements, and (3) lay down standards for future performance. Management auditors (employees of the company or independent consultants) do not appraise individual performance, but may critically evaluate the senior executives as a management team. See also performance audit.Simply defined, the managementauditis a comprehensive and thorough examination of an organization or one of its components. The audit is implemented to identify problems or significant weaknesses in the organization or corporation, thus providingmanagementwith a tool to address and repair the problem area.The audit is not a new or recent idea. History tells us of the presence of auditors in Pharaoh's Egypt and the classical periods of Greek and Roman history. As businesses developed and grew over the centuries of recorded history, the need for controls became increasingly important. Financialauditingbecame a standard in American businesses and, following the lead of New York State, certification for accountants was enacted as legislation in many states. The financial audit is now fully integrated into business practices. The internal audit follows the spirit of financial auditing and surpasses it to examine operational matters as well. Another natural extension is operational auditing. Whileinternal auditingis conducted by employees within the organization, anoperational auditis generally completed by an internal task force or external analysts. Financial Reporting to ManagementA financial statement (or financial report) is a formal record of the financial activities of a business, person, or other entity.Relevant financial information is presented in a structured manner and in a form easy to understand. They typically include basic financial statements, accompanied by a management discussion and analysis:1. A balance sheet, also referred to as a statement of financial position, reports on a company's assets, liabilities, and ownership equity at a given point in time.2. An income statement, also known as a statement of comprehensive income, statement of revenue & expense, P&L or profit and loss report, reports on a company's income, expenses, and profits over a period of time. A profit and loss statement provides information on the operation of the enterprise. These include sales and the various expenses incurred during the stated period.3. A statement of cash flows reports on a company's cash flow activities, particularly its operating, investing and financing activities.For large corporations, these statements may be complex and may include an extensive set of footnotes to the financial statements and management discussion and analysis. The notes typically describe each item on the balance sheet, income statement and cash flow statement in further detail. Notes to financial statements are considered an integral part of the financial statements.Management discussion and analysisManagement discussion and analysis or MD&A is an integrated part of a company's annual financial statements. The purpose of the MD&A is to provide a narrative explanation, through the eyes of management, of how an entity has performed in the past, its financial condition, and its future prospects. In so doing, the MD&A attempt to provide investors with complete, fair, and balanced information to help them decide whether to invest or continue to invest in an entity.The section contains a description of the year gone by and some of the key factors that influenced the business of the company in that year, as well as a fair and unbiased overview of the company's past, present, and future.MD&A typically describes the corporation's liquidity position, capital resources, results of its operations, underlying causes of material changes in financial statement items (such as asset impairment and restructuring charges), events of unusual or infrequent nature (such as mergers and acquisitions or share buybacks), positive and negative trends, effects of inflation, domestic and international market risks, and significant uncertainties. MCS in Public Sector Units Service Organisation and Propriety1. Pricing The selling price of work is set in a traditional way in many professional firms. If the profession is one in which members are accustomed to keeping track of their time, fees generally are related to professional time spent on the engagement. The hourly billing rate typically is based on the compensation of the grade of the professional (rather than the compensation of the specific person), plus a loading for overhead costs and profit. In other professions, such as investment banking, the fee typically is based on the monetary size of the security issue.

2. Profit Centers and Transfer Pricing Support units, such as maintenance, information processing, transportation, telecommunication, printing, and procurement of material and services, charge consuming units for their services.

3. Strategic Planning and Budgeting In general, formal strategic planning systems are not as well developed in professional organizations as in manufacturing companies of similar size. Part of the explanation is that professional organizations have no great need for such systems. In manufacturing companies, many program decisions involve commitments to procure plant and equipment; they have a predictable effect on both capacity and costs for several future years, and, once made, they are essentially irreversible. In a professional organization, the principal assets are people; although the organization tries to avoid short-run fluctuations in personnel levels, changes in the size and composition of the staff are easier to make and are more easily reversed than changes in the capacity of a physical plant.

4. Control of Operations Much attention is, or should be, given to scheduling the time of professionals. The billed time ratio, which is the ratio of hours billed to total professional hours available, is watched closely. If, to use otherwise idle time or for marketing or public service reasons, some engagements are billed at lower than normal rates, the resulting price variance warrants close attention. 5. Performance Measurement and Appraisal As noted above in regard to teachers, at the extremes the performance of professionals is easy to judge. Appraisal of the large percentage of professionals who are within the extremes is much more difficult. For some professions, objective measures of performance are sometime available: The recommendations of an investment analyst can be compared with actual market behavior of the securities; the accuracy of a surgeons diagnosis can be verified by an examination of the tissue that was removed; and the doctors skill can be measured by the success ratio of operations. These measures are, of course, subject to appropriate qualifications, and in most circumstances the assessment of performance is finally a matter of human judgment by superiors, peers, self, sub ordinates, and clients.

Financial Service Organizations Financial service organizations include commercial bank and thrift institutions, insurance companies, and securities firms. These companies are in business primarily to manage money. Some act as intermediaries; that is, they obtain money from depositors and lend it to individuals or companies. Others act as risk shifters; they obtain money in the form of premiums, invest these premiums, and accept the risk of the occurrence of specific events, such as death or damages to property. Still others are traders; they buy and sell securities ,either for their own account or for customers.

Healthcare Organizations Because of the shift in the product mix an because of the increase in the quality an cost of new equipment , the strategic planning in hospitals is important. The annual budget preparation processes is conventional. Huge quantities of information are available quickly for the control of operating activities. Financial performance is analyzed by comparing actual revenues, an expenses with budgets, identifying important variances, an taking appropriate actions on them.

MCS Interface with Management Information Service and Cost and Management Accounting Direct costs pertain to the acquisition expenses or the cost of buying the system, and cover all of the following activities: Researching possible products to buy, which is essentially a labor cost but may also include materials cost, such as purchase of third-party research reports or consultant fees. Designing the system and all the necessary components to ensure that they work well together. Naturally, this cost component will be higher if a move to a totally different system platform is being considered. Sourcing the products, which means getting the best possible deal from all possible vendors through solicited bids or market research With the Internet, it's even easy to get price quotations from sources outside the country, to get a good spectrum of pricing options. Purchasing the product(s), which includes the selling price of the hardware, software, and other materials as negotiated with the chosen suppliers. Include all applicable taxes that might be incurred. Delivering the system, which includes any shipping or transportation charges that might be incurred to get the product into its final installation location. Installing the system. Bear in mind that installation also incurs costs in utilities and other environmentalnot just labor costs. If the installation of the system will result in downtime for an existing system, relevant outage costs must be included. Any lost end-user productivity hours during this activity should also be factored in. Developing or customizing the application(s) to be used. Training users on the new system. Deploying the system, including transitioning existing business processes and complete integration with other existing computing resources and applications. Include here the costs to promote the use of the new system among end users. Indirect costs address the issues of maintaining availability of the system to end users and keeping the system running, which includes the following: Operations management, including every aspect of maintaining normal operations, such as activation and shutdown, job control, output management, and backup and recovery. Systems management, such as problem management, change management, performance management, and other areas. Maintenance of hardware and software components, including preventive maintenance, corrective maintenance, and general housekeeping. Ongoing license fees, especially for software and applications. Upgrade costs over time that may be required. User support, including ongoing training, help desk facilities, and problem-resolution costs. Remember to include any costs to get assistance from third-parties, such as maintenance agreements and other service subscriptions. Environmental factors affecting the system's external requirements for proper operation, such as air conditioning, power supply, housing, and floor space. Other factors that don't fall into any of the above categories, depending on the type of system deployed and the prevailing circumstances. All these cost factors seem fairly obvious, but quantifying each cost is difficult or impractical in today's world, because few organizations have an accounting practice that's mature enough to identify and break down all these types of expenses in sufficient detail.

Management control system integrated with strategic management

Management control system is an integrated technique for collecting and using information to motivate employee behavior and to evaluate performance. Management control systems use many techniques such as 1. Activity-based costing Activity-based costing (ABC) is a costing methodology that identifies activities in an organization and assigns the cost of each activity with resources to all products and services according to the actual consumption by each. This model assigns more indirect costs (overhead) into direct costs compared to conventional costing.

2. Balanced scorecard The balanced scorecard (BSC) is a strategy performance management tool - a semi-standard structured report, supported by design methods and automation tools, that can be used by managers to keep track of the execution of activities by the staff within their control and to monitor the consequences arising from these actions.

3. Benchmarking and Bench trending Benchmarking is the process of comparing one's business processes and performance metrics to industry bests or best practices from other companies. Dimensions typically measured are quality, time and cost. In the process of best practice benchmarking, management identifies the best firms in their industry, or in another industry where similar processes exist, and compares the results and processes of those studied (the "targets") to one's own results and processes. In this way, they learn how well the targets perform and, more importantly, the business processes that explain why these firms are successful. Benchmarking is used to measure performance using a specific indicator (cost per unit of measure, productivity per unit of measure, cycle time of x per unit of measure or defects per unit of measure) resulting in a metric of performance that is then compared to others

4. Budgeting A budget is a quantitative expression of a plan for a defined period of time. It may include planned sales volumes and revenues, resource quantities, costs and expenses, assets, liabilities and cash flows. It expresses strategic plans of business units, organizations, activities or events in measurable terms.

5. Capital budgeting Capital budgeting, or investment appraisal, is the planning process used to determine whether an organization's long term investments such as new machinery, replacement machinery, new plants, new products, and research development projects are worth the funding of cash through the firm's capitalization structure (debt, equity or retained earnings). It is the process of allocating resources for major capital, or investment, expenditures. One of the primary goals of capital budgeting investments is to increase the value of the firm to the shareholders. Many formal methods are used in capital budgeting, including the techniques such as Accounting rate of return Payback period Net present value Profitability index Internal rate of return Modified internal rate of return Equivalent annual cost Real options valuation6. Program management techniques Program management or programmed management is the process of managing several related projects, often with the intention of improving an organization's performance. In practice and in its aims it is often closely related to systems engineering and industrial engineering.

7. Target costing Target costing is a pricing method used by firms. It is defined as "a cost management tool for reducing the overall cost of a product over its entire life-cycle with the help of production, engineering, research and design". A target cost is the maximum amount of cost that can be incurred on a product and with it the firm can still earn the required profit margin from that product at a particular selling price. In the traditional cost-plus pricing method, materials, labor and overhead costs are measured and a desired profit is added to determine the selling price.

8. Total quality management (TQM) Total quality management (TQM) consists of organization-wide efforts to install and make permanent a climate in which an organization continuously improves its ability to deliver highquality products and services to customers. While there is no widely agreed-upon approach, TQM efforts typically draw heavily on the previously developed tools and techniques of quality control.