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CMA Foundation · Fundamentals of Business Economics and Management · Organisation Structure, Responsibility, Accountability and Delegation of Authority

Sharma Textiles Ltd. has branch managers who may approve purchases up to ₹50,000 only; anything above must go to the head office. The company's board now raises the limit to ₹5,00,000 for branch managers. What is the effect of this change?

The change leads to greater decentralisation. By raising the purchase approval limit from ₹50,000 to ₹5,00,000, the company lets branch managers decide on larger matters themselves, pushing decision authority down the hierarchy. Accountability for those decisions continues to rest with the branch managers.

  1. AGreater centralisation
  2. BGreater decentralisationCorrect
  3. CNo change in the degree of authority dispersal
  4. DComplete abolition of accountability

Explanation

Raising the approval limit gives branch managers wider discretion over purchases, so decision authority moves down the hierarchy. This is greater decentralisation. Accountability for the decisions still remains with the managers, so the last option is wrong.

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