Question

“In a manufacturing organisation, an increase of 5 percent in the labour cost may be more troublesome than a 15 percent increase in postal charges”. The above is an example of

• A. Critical point control
• B. Taking corrective action
• C. Analysing deviation by management by exception technique
• D. Feedback

Hint:

\[ \mathrm{Management\ by\ Exception} \] focuses on: \[ \mathrm{Important\ Deviations} \] rather than every small variation.

Answer 1

The Correct Option is C

Step 1: Understanding the Concept:
Controlling involves comparing actual results with standards and analyzing the deviations.
Since a manager cannot monitor every single activity, they use selective control techniques.
Two major techniques are Critical Point Control (focusing on key areas) and Management by Exception (focusing on significant deviations).
Step 2: Detailed Explanation:
The statement discusses prioritizing a smaller percentage increase in a major cost over a larger percentage increase in a minor cost.
1. Management by Exception (MBE): This principle suggests that only significant deviations which go beyond the permissible limit should be brought to the notice of management.
2. In the given example, a 5% increase in labour cost is significantly more expensive for a manufacturing company than a 15% increase in postal charges, because the absolute value of labour costs is huge.
3. By focusing on the more impactful (though numerically smaller in %) deviation, the management is using "Management by Exception."
4. This helps in saving the time and energy of managers, allowing them to focus on critical issues.
5. Critical point control focuses on areas that are vital to the success of the firm. While related, the logic of "exceptions based on impact" is the core of MBE.
Step 3: Final Answer:
The prioritisation of significant deviations over minor ones is a hallmark of Management by Exception.
Therefore, option (C) is correct.