A-AS Level (CIE) Business Studies Paper-2: Specimen Questions with Answers 30 - 31 of 52

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Case Study-9

Alpha Limited manufactures air-conditioners of different sizes and types. For manufacturing air conditioners, most of the components are purchased from vendors; only some critical machinery work is undertaken by the company before the various components are used for assembly. The company has manual inventory control system. This system is not able to provide timely information to procure various components. In order to overcome this problem, the company wanted to install computerized inventory control system. For this purpose, the company hired an information system analyst. He studied the present inventory control system so that he could design job standardized forms in which relevant information about purchasing and usage of various components should be given for production department and accounting department. However, he was surprised to find that each department had a different view of what should go in the forms.

Question 30 (2 of 5 Based on Passage)

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Short Answer▾

Explain how budgetary control act as a tool of control.

Explanation

Budgetary control acts as a tool for control in the following ways:

  • Budgetary control, as a control device, is very exact, accurate, and precise. A budget provides standards against which control activities are undertaken. Thus, managers can keep a watch whether their efforts are proceeding in the right direction.
  • Budgetary control pinpoints any deviation between budgeted standards and actual achievement. This is communicated very quickly and managers can take suitable actions to overcome the deviations to achieve organizational objectives.
  • Budgetary control system also points out the reasons which may be responsible for deviation between budget and actual. Thus, it provides direction for necessary control actions.

Thus, with the constant help of the budgetary control system, attempts can be made to keep performance parallel with the estimated one.

Question 31 (3 of 5 Based on Passage)

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Short Answer▾

What do you mean by the following terms?

a. PERT

b. CPM

Explanation

PERT (Programme Evaluation and Review Technique) was developed by the special project office of the us Navy in 1958. Almost at the same time, engineers at DuPont Company, USA, also developed CPM (Critical Path Method) , Though there is some difference between PERT and CPM, both utilize the same principles. The basic difference between the two is that CPM assumes the duration of every activity to be constant, therefore, every activity is either critical or not. In PERT, uncertainty in the duration of activities is allowed and is measured by three parameters-most optimistic duration, most likely duration, and most pessimistic duration. “PERT/CPM is used to minimize total time, total cost, cost for a given total time, time for a given cost, or idle resources.”

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