Management Information - 100 Marks

Q-1) What is feedback?

Q-2) What are effective features of effective feedback?
Q-3) What is divisionalisation?
Q-4) What is decentralization?
Q-5) What are the factors that affect decentralization?
Q-6) What are the advantages of decentralization?
Q-7) What are the disadvantages of decentralization?
Q-8) What is responsibility accounting?
Q-9) What the types of responsibility center?
Q-10) What is cost centre? [ND10]
Q-11) What is revenue centre? [ND10]
Q-12) What is profit centre? [ND10]
Q-13) What is Investment centre?
Q-14) What is ideally indicted by ROI? [ND10]
Q-15) A company has to investment centres, X and Y, which show result for the year as follows:

X Y
Profit 60,000 30,000
Capital employed 400,000 120,000
ROI 15% 25%

Comment on the performance of the investment centres.

[ND10]
Q-16) What are the general requirements for effective performance measures?
Q-17) What are the potential problems with inappropriate performance measures?
Q-18) Following are the information picked up from the books of ABC Ltd.:
(i) The closing balance of inventory of the company is Tk. 300,000 as on 31 December
2009 which is Tk. 30,000 more than opening balance of the year.
(ii) The total turnover for the year ended 31 December 2008 was Tk. 450,000, while the
cost of sales was Tk. 270,000.
(iii) The year-end receivable was Tk. 200,000 with a corresponding closing balance of last
year Tk. 180,000.
Calculate rate of inventory turnover and receivable collection period.
[ND10]
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Chapter # 8: Performance Management

on. The degree of decentralization depends on

Q-1) What is feedback? how much freedom managers are given to
make decisions.
The term ‘feedback’ is used to describe both
the process of reporting back control
information to management and the control Q-5) What are the factors that affect
information itself. decentralization?
In a business organization, it is information
produced from within the organization with the (i) Management style
purpose of helping management and other (ii) Size of the organization
employees with control decisions. (iii) The extent of activity diversification
(iv) Effectiveness of communications
(v) The ability of management
Q-2) What are effective features of (vi) The speed of technological
effective feedback? advancement
(vii) The geography of locations and the
(i) Report should be clear and extent of local knowledge needed
comprehensive,
(ii) The exception principle should be
applied so that significant differences Q-6) What are the advantages of
between the target and the actual decentralization?
results are highlighted for
investigation. (i) Senior managers are free from detailed
(iii) The controllable costs and revenues involvement in day to day operations
should be separately identified. and can devote more time to strategic
(iv) Reports should be produced on a issues.
regular basis to ensure that continual (ii) The quality of decisions is likely to
control is exercised. improve.
(v) Reports should be made available to (iii) The increased responsibility should
mangers in a timely fashion. motivate managers in decentralized
(vi) Information should be sufficiently organizations.
accurate for the purpose intended. (iv) Decisions should be taken more quickly
(vii) Irrelevant detail should be excluded in response to changing conditions.
from the report. (v) Decentralized operations provide
(viii) Reports should be communicated to valuable training grounds for future
the manager who has responsibility senior managers.
and authority to act on the
information.
Q-7) What are the disadvantages of
decentralization?
Q-3) What is divisionalisation?
(i) It can be difficult to coordinate the
Divisionalization involves splitting the company activities of the organization.
into divisions, for example according to the (ii) The organization might effectively
location or according to the product or service divide into a number of self-interested
provided. Divisional managers are the given segments, leading to lack of goal
authority to make decisions concerning the congruence in decisions making
activities of their divisions. process.
(iii) Senior managers lose control over day
to day activities.
Q-4) What is decentralization? (iv) Evaluating performance of managers
and their area of responsibility
Divisional structure will lead to decentralization becomes difficult
of the decision making process. Divisional (v) there may be duplication of some roles
managers may have the freedom to set selling
price, choose suppliers, output decision and so
Management Information 3
Chapter # 8: Performance Management
Q-8) What is responsibility accounting? (ii) Revenue centre
(iii) Profit centre
Responsibility accounting is the term used to (iv) Investment centre
describe decentralization of authority, with the
performance of the decentralized units or
responsibility centres measured in terms of Q-10) What is cost centre? [ND10]
accounting results. Q-11) What is revenue centre? [ND10]
Q-12) What is profit centre? [ND10]

Q-9) What the types of responsibility Q-13) What is Investment centre?

center?

Within a system of responsibility accounting Q-14) What is ideally indicted by ROI?

there are four main types of responsibility [ND10]
centres:
(i) Cost centre

Q-15) A company has to investment centres, X and Y, which show result for the year as follows:

X Y
Profit 60,000 30,000
Capital employed 400,000 120,000
ROI 15% 25%

Comment on the performance of the investment centres.

[ND10]
Q-16) What are the general requirements for Q-17) What are the potential problems with
effective performance measures? inappropriate performance measures?

Q-18) Following are the information picked up from the books of ABC Ltd.:
(i) The closing balance of inventory of the company is Tk. 300,000 as on 31 December
2009 which is Tk. 30,000 more than opening balance of the year.
(ii) The total turnover for the year ended 31 December 2008 was Tk. 450,000, while the
cost of sales was Tk. 270,000.
(iii) The year-end receivable was Tk. 200,000 with a corresponding closing balance of last
year Tk. 180,000.
Calculate rate of inventory turnover and receivable collection period.
[ND10]
Q-19)

Cost of sales
Rate of inventory turnover =
Average inventory

Average receivable
Receivable collection period (in days) = X 365
Annual sales revenue

Average payable
Receivable payment period (in days) = X 365
Annual purchase