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Question 18 of 26

Q.Piyush is the Production Manager of a shoe company called 'Comforty'. He has 1000 workers working under him in his department. Piyush booked a special order for 300 pairs of gents shoes at an estimated cost price of ₹ 500 per pair plus 20% profit margin. The order is to be completed within 10 days. After completion of the order, Piyush found out that the production cost of one pair of shoes was ₹ 600. He tried to find out the reason, but he couldn't. He reported it to the Chief Executive Officer. The Chief Executive Officer appointed Abhay to find out the cause. Abhay was not only a specialized Cost Accountant, but also a qualified Human Resource Manager. After two days, Abhay reported that the set targets could be completed with the help of only 800 workers, which revealed that there was overmanning in the organization. The organization was not utilizing the human resources optimally, which had led to higher labour cost. The above case highlights one of the points of importance of an important function of management.

(i) Identify the function of management.
(ii) State any two points of importance of the function of management identified in part (i), except the one discussed in the above case.
Tripura TbseCBSE Class XII Board 2024Subjective· 3mImportance★★★★★
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The case highlights Controlling as the function of management, because it involves comparing actual performance (₹600 cost) against a standard (₹500 estimated cost) and investigating the variance (overmanning). The importance of controlling includes achieving organisational goals, making efficient use of resources, improving employee motivation, and ensuring order compliance — beyond the specific issue of labour cost overrun.

Why This Is About Controlling — The Concept

Standard Costing is a control technique. You set a benchmark (standard cost = ₹500 per pair + 20% profit margin), then compare actual results (₹600 per pair) to that benchmark. The difference is a variance. Here, the variance is adverse (costs are higher than planned).

Piyush couldn’t explain the variance, so the CEO appointed Abhay, who traced it to overmanning — using 1000 workers when only 800 were needed. That’s a labour efficiency variance in action. The entire process — setting standards, measuring actuals, comparing, investigating, and taking corrective action — is the essence of Controlling.

Watch out

A common mistake is to confuse Controlling with Planning. Planning sets the target (₹500 cost, 10-day deadline). Controlling checks whether the target was met and why it wasn’t. Here, the investigation after the fact is the controlling step.


Step-by-Step Reasoning

1. Identify the function of management

The case describes:

  • A standard was set (estimated cost ₹500/pair + 20% profit).
  • Actual cost was ₹600/pair — a deviation.
  • A specialist (Abhay) was appointed to find the cause.
  • The cause was identified (overmanning → higher labour cost).

This sequence — setting standards, measuring performance, comparing, analysing deviations, and taking corrective action — is the textbook definition of Controlling.

Note

The controlling process, in sequence: Setting Performance Standards → Measurement of Actual Performance → Comparison with Standards → Analysing Deviations → Taking Corrective Action.

2. State two points of importance of Controlling (other than the one in the case)

The case already highlights one importance: ensuring optimum use of resources (here, human resources — overmanning was wasteful). So we need two other points.

Tip

In exam questions, always read the case carefully to see which importance is already used. Then pick different ones from your textbook list.

Point 1: Achieving organisational goals …

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