Match the items of List - II with List - I ; and choose the correct code : List - I (Critical Control Standards) List - II (Critical Points(a) Physical standards (i) Material cost per unit (b) Cost standards (ii) Labour hours per unit of output (c) Revenue standards (iii) Timing of production (d) Program standards (iv) Average sales per customer
(a) - (ii), (b) - (i), (c) - (iv), (d) - (iii)
Understanding Critical Control Standards and Critical Points
In management control, identifying critical points and setting appropriate standards for them is essential for effective monitoring and corrective action. Control standards are benchmarks against which performance is measured. Critical points are key areas where performance must meet standards for the overall plan to succeed.
Let's analyze the different types of critical control standards mentioned in List I and match them with the corresponding critical points in List II.
- Physical standards: These standards relate to non-monetary measurements. They might involve quantity, quality, or time. Examples include units of production per hour, labour hours per unit, material usage per unit, or quality defect rates.
- Cost standards: These standards are expressed in monetary terms and relate to the cost of operations. Examples include material cost per unit, labour cost per hour, overhead cost per unit, or total cost of production.
- Revenue standards: These standards are related to income or sales generated. They can measure sales volume, sales revenue per customer, revenue growth rate, or market share.
- Program standards: These standards apply to the timing, sequence, or completion of steps in a program or plan. They are often used in project management or production scheduling. Examples include milestone completion dates, production lead times, or overall project duration.
Now, let's match the items from List I with the examples in List II:
| List I (Critical Control Standards) | List II (Critical Points) | Explanation |
|---|---|---|
| (a) Physical standards | (ii) Labour hours per unit of output | Labour hours per unit is a non-monetary measure of the physical input (labour time) required to produce one unit of output. This aligns with the definition of physical standards. |
| (b) Cost standards | (i) Material cost per unit | Material cost per unit is a monetary measure of the cost associated with the material used to produce one unit. This aligns with the definition of cost standards. |
| (c) Revenue standards | (iv) Average sales per customer | Average sales per customer is a measure related to the income generated from each customer, representing a revenue-based metric. This aligns with the definition of revenue standards. |
| (d) Program standards | (iii) Timing of production | Timing of production relates to the scheduling and sequence of activities within the production plan or program. This aligns with the definition of program standards. |
Based on the analysis, the correct matching is:
- (a) - (ii)
- (b) - (i)
- (c) - (iv)
- (d) - (iii)
Revision Table: Critical Control Standards
| Standard Type | Focus | Example Critical Point |
|---|---|---|
| Physical | Non-monetary measurements (quantity, quality, time) | Labour hours per unit of output |
| Cost | Monetary cost of operations | Material cost per unit |
| Revenue | Income and sales generation | Average sales per customer |
| Program | Timing, sequence, and completion of plans/programs | Timing of production |
Additional Information on Management Control Standards
Setting standards is a key step in the control process. Standards should be specific, measurable, achievable, relevant, and time-bound (SMART) where possible. Critical point control is based on the principle of exceptions, meaning managers only need to focus intensely on those areas where performance deviates significantly from the established critical standards. This saves management time and effort by not requiring detailed monitoring of every single activity.
Other types of standards might also be used depending on the nature of the business and the activities being controlled, such as capital standards (relating to investments) or intangible standards (relating to human relations or morale, though harder to measure).
Important Questions from Production Function - Teaching
In the short‐run production function, which one of the following is CORRECT?
If an estimated Cobb-Douglas production function is Q = 10 K 0.6 L0.8 , what type of returns to scale does this production function indicate?
Which of the following are NOT properties of Cobb‐Douglas production function?
A. Cobb‐Douglas production function is a homogeneous production function
B. Curves representing average and marginal productivity of inputs are not downward sloping
C. Marginal productivity of labour and capital in Cobb‐Douglas production function are functions of the capital‐labour ratio
D. Iso‐quants of Cobb‐Douglas production functions are positively sloped
Choose the correct answer from the options given below:
Given the production function Q = 10 L 0.8 K0.2 , the marginal product of labour (MP L) and capital (MP k) respectively are given by
A. MP L= 8(K/L) 0.2
B. MP L= 8(L/K) 0.2
C. MP K= 2(L/K) 0.8
D. MP K= 2(K/L) 0.2
Choose the correct answer
For the production function, Q = AL α Kβ
A. The coefficient A shows managerial efficiency
B. If α + β > 1, then the production function exhibits increasing returns to scale
C. Marginal rate of technical substitution of L for K is given by βk/αL
D. The marginal product of capital is given by βQ/K
