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Statistic-Based Method for Budgetary Control Limits Setting—Renewed Approach in the Context of Industry 4.0

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Towards Industry 4.0 — Current Challenges in Information Systems

Part of the book series: Studies in Computational Intelligence ((SCI,volume 887))

Abstract

The chapter presents the issue of budget variance analysis (BVA), as one of the most important processes in Management Control (MC). Based on the current state of knowledge, shortcomings in methods for setting the budgetary control limits (BCL) were indicated. In short, BCL enables focusing on a significant budget variances. In business practice, BCL setting is mostly based on intuition and individual judgment of managers rather than on numerical calculation using IT systems. In the era of Industry 4.0 this kind of solutions are far from being enough to make right decisions in the right way. Therefore, the main research objective of the presented work was to develop effective and applicable method for BLC setting, which works in an objective manner. We decided to renew the idea of Shewhart’s control charts implementation in the BCL setting. Design science research (DSR) method was used to reach the research objective, starting with problem definition, through developing a new method for BCL setting, ending with its test and evaluation.

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Notes

  1. 1.

    There are two competing streams in MCS concepts, differing mainly in the level of process formalization. In one stream procedures play important role in management control. Budgeting, with all the relevant components like: methods, responsibilities, roles and procedures is enshrined in budgeting manual and formally implemented in management information system. In the second stream called ‘beyond budgeting approach’ main role is played by informal relation and governing through a few, but clearly set values without all the procedures and instructions (cf. [27]).

  2. 2.

    We assume that there is no linear correlation between quality of BVA outputs and effectiveness of decision-makers, as we have to take into account different factors influencing managers at the very moment of decision making.

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Acknowledgements

The project is financed by the Ministry of Science and Higher Education in Poland under the programme “Regional Initiative of Excellence” 2019–2022 project number 015/RID/2018/19 total funding amount 10,721,040.00 PLN.

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Authors and Affiliations

  1. Faculty of Management, Wroclaw University of Economics and Business, Wroclaw, Poland

    Zdzisław Kes & Krzysztof Nowosielski

Authors
  1. Zdzisław Kes
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  2. Krzysztof Nowosielski
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Correspondence to Krzysztof Nowosielski .

Editor information

Editors and Affiliations

  1. Department of Process Management, Center for Intelligent Management Systems, Wroclaw University of Economics and Business, Wrocław, Poland

    Marcin Hernes

  2. Department of Information Systems, Center for Intelligent Management Systems, Wroclaw University of Economics and Business, Wrocław, Poland

    Artur Rot

  3. Department of Business Informatics, Czestochowa University of Technology, Częstochowa, Poland

    Dorota Jelonek

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Kes, Z., Nowosielski, K. (2020). Statistic-Based Method for Budgetary Control Limits Setting—Renewed Approach in the Context of Industry 4.0. In: Hernes, M., Rot, A., Jelonek, D. (eds) Towards Industry 4.0 — Current Challenges in Information Systems. Studies in Computational Intelligence, vol 887. Springer, Cham. https://doi.org/10.1007/978-3-030-40417-8_2

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