UGC NET COMMERCE July 2018 Q32
0. 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 |
CODES
| (a) | (b) | (c) | (d) | |
| 1 | (ii) | (i) | (iv) | (iii) |
| 2 | (ii) | (i) | (iii) | (iv) |
| 3 | (i) | (ii) | (iv) | (iii) |
| 4 | (iv) | (i) | (iii) | (ii) |
- Option : A
- Explanation : Types of Critical Point Standards: Every objective, every goal of the many planning programs, every activity of these programs, every policy, every procedure, and every budget can become a standard against which actual or expected performance might be measured. In practice, however, standards tend to be of the following types:
∎ Physical Standards: Physical standards are non-monetary measurements and are common at the operating level, where materials are used, labour is employed, services are rendered, and goods are produced. They may reflect quantities, such as labour-hours per unit of output, pounds of fuel per horsepower per hour, ton-miles of freight traffic carried, units of production per machine-hour, or feet of wire per ton of copper. Physical standards may also reflect quality, such as hardness of bearings, closeness of tolerances, rate of climb of an airplane, durability of a fabric, or fastness of a colour.
∎ Cost Standards: Cost standards are monetary measurements and, like physical standards, are common at the operating level. They attach monetary values to specific aspects of operations. Illustrative of cost standards are such widely used measures as direct and indirect costs per unit produced, labour cost per unit or per hour, material cost per unit, machine-hour costs, cost per seat-mile, selling cost per dollar or unit of sales, and cost per foot of oil well drilled.
∎ Capital Standards: There are a variety of capital standards, all arising from the application of monetary measurements to physical items. They have to do with the capital invested in the firm rather than with operating costs and are therefore primarily related to the balance sheet rather than to the income statement. Perhaps the most widely used standard for new investment, as well as for overall control, is return on investment. The typical balance sheet will disclose other capital standards, such as the ratios of current assets to current liabilities, debt to net worth, fixed investment to total investment, cash and receivables to payables, and bonds to stocks, as well as the size and turnover of inventories.
∎ Revenue Standards: These arise from attaching monetary values to sales. They may vary from such standards as revenue per bus passenger mile and dollars per ton of steel shapes sold to cover sale per customer, rules per capital in a given market area.
∎ Programme Standards: A manager may be assigned to install a variable budget programme, a programme for formally following the development of new products, or a programme for improving the quality of a sales force, while, some subjective judgement may have to be applied in appraising programme performance, timing and other factors can be used as objective standards.
∎ Intangible Standards: More difficult to set are standards not expressed in either physical or monetary measurement. What standard can a manager use for determining the competence of the divisional purchasing agent or Personnel Director, what can be used for determining whether the public relations program is successful? Are foremen loyal to the company’s objectives? Is the office boy alert? Such questions show how difficult it is to establish standards for a goal that cannot be given clear quantitative or qualitative measurement. Many intangible standards exist in business because research into what constitutes desired performance has not been done above the level of the shop, the district sales office, the shopping room, or the accounting department. Perhaps a more important reason is that human relationships, count in performance, as they do above the basic operating levels, it is very hard to measure what is good.
‘Effective’ or ‘Efficient’ Tests, surveys and sampling techniques developed by psychologists and sociometrists have made it possible to probe human attitudes and drives, but many managerial controls over interpersonal relationships must continue to be based upon intangible standards considered judgment, trial and error, and even on occasion sheer hunch.
∎ Goals for Standards: However, with the present tendency for better-managed enterprise to establish an entire network of verifiable qualitative or quantitative goals at every level of management, the use of intangible standards, while still important, is diminishing in complex programme operations as well as in the performance of managers themselves, modern managers are finding that through research and thinking it is possible to define goals it is likely to take the form of standards. For example, if the program of district sales office is spelled out to include such elements as training salesmen in accordance with a plan with specific characteristics, the very fact of the plan and its characteristics, furnish standards which tend to become objective and, therefore, ‘Tangible’.
