Category: Commerce Notes PPT

Decision-making is the most fundamental function of management professionals. Every manager has to take decisions related to his or her field of work. Therefore, this is an all-pervasive function of basic management. There are various methods for the process of decision-making. The Quantitative Technique of decision-making helps in making these methods more convenient and efficient.  

Almost every function of a typical manager will require him or her to make decisions on a routine basis. These decisions mostly depend on the nature as well as the scope of his or her work. Also, it depends on the authority and the powers of the manager.

A decision is a judgment of a course of actions that are always aiming to achieve a specific result. For every task a person wants to achieve, decision forms the foundation of it.

The manager often chooses the best option from a range of alternatives for every task that he or she has to complete within a given time. Every decision has many consequences. Therefore, choosing the right decision is very important. 

It can be said that the entire decision-making involves selecting a course of action from various alternatives. This is a very curial function that all the managers have to carry out routinely.

What are the Quantitative Techniques of Decision Making?

While making a decision there are several Techniques that a manager of a company or an organization can employ. The quantitative Techniques help the manager to take decisions objectively and in an efficient way. Such Techniques rely on a scientific and statistical approach to make a good decision. The six important quantitative Techniques of decision making are as follows. 

1. Linear Programming

This Technique helps in maximizing an object that is under limited resources. The main objective can be either optimization of a utility or minimizing of a disutility. In simple words, one can say that it helps in utilizing a resource or a constraint to its maximum potential. 

  

Usually, all managers use this Technique only under conditions that involve certainty. Therefore, this might not be very useful to the manager when circumstances are uncertain or unpredictable. 

2. Probability Decision Theory 

Probability decision theory is a Technique that lies in the case, where the probability of an outcome can only be predicted. In simple words, one cannot always predict the exact outcome of any course of action. 

The managers use this approach to determine the probabilities of an outcome using the available information, firstly. The managers can also rely on their subjective judgment for this purpose. Next, they use this data of probabilities to make their decisions. They often use the decision tree or the pay-of matrices for this purpose. 

3. The Game Theory

Often, the managers use certain quantitative Techniques only while making decisions pertaining to their business rivals. The game theory approach is one such kind of Technique. 

This Technique stimulates the rivalries or conflicts between businesses as a game. The main aim of the managers of a company under this Technique is to find ways of gaining at the expense of their rivals. In order to do this, they can use two people or 3 people or even ‘n’ number of people games. 

4. Queuing Theory

Each and every business often suffers waiting for periods or queues pertaining to their personnel, equipment, resources, or services. For example, sometimes a manufacturing company may gather a stock of unsold goods due to irregular demands. This theory aims to solve such types of problems. 

The main aim of this theory is to minimize such waiting periods and also reduce the investments in such expenses. For example, the departmental stores often have to find a balance between the unsold stock and the purchasing of fresh goods. The managers in such examples can employ the queuing theory to minimize their expenses. 

5. Stimulation

The stimulation Technique observes several outcomes under hypothetical or artificial settings. The managers try to understand how their decisions will work out under diverse circumstances.

Then they finalize accordingly on the decision that is likely to be the most beneficial to them. Understanding the outcomes under such stimulated environments instead of natural settings reduces the risk drastically.

6. Network Techniques

All the complex activities often require concentrated efforts by the personnel in order to avoid the waste of time, energy, and also money. This Technique basically aims to solve by creating strong network structures for the work.

7. Mathematical Programming

Other than calculus, several other techniques can be used to solve decision-making issues. Mathematical programming is one such technique that can be used when several factors affect the choice of strategies. For example, if the aim is to reduce the total cost, no constraint can affect our choice of strategies. If there are constraints, they might limit the funds which can be spent on the inventory, the space for inventory set up, or the highest number of orders that can be placed by the buyer or purchasing department.

In this case, it can become an issue in constrained minimization. However, mathematical programming can be a solution for it.

The constraints form an environment where decision-makers can minimize or maximize the goals to be achieved.

Constraint minimization and maximization is the best feature of mathematical programming. It is one of the most suitable frameworks for analyzing business problems.

8. Cost Analysis or Break-Even Analysis

All managers want to make profits. The objective of cost analysis or break-even analysis is to determine the break-even points or the optimum levels on which the profits are maximum. In decision-making, managers must pay attention to profit-making opportunities of alternative courses of action. This requires that the cost of these alternatives must be assessed properly. A significant cost analysis is made between fixed and variable costs.

A cost can be classified as fixed or variable in terms of the frequency of changes occurring in them at a particular period. However, in the long run, all costs are variable.

Fixed costs are those which remain constant irrespective of the production or sales. For instance, a manager’s salary will not change irrespective of the goods produced or sold out. On-road tax on a vehicle doesn’t change with its annual mileage covered. Whereas, variable costs change with time. It highly depends on factors like the number of goods produced, sales in the financial year, or any similar factor. Some of its examples include sales commission concerning sales occurred, petrol prices in relation with distance traveled, labour wages based on hours worked, etc.

From a decision-making point of view, it is significant to know whether the cost will vary or not as a result of the decision.

The total cost can be determined by adding the variable cost to the fixed cost of various levels of activity (for example, the number of items produced).

9. Cost-Benefit Analysis

It is a mathematical Technique for quantitative decision-making. This Technique is used to calculate the economic costs and the social advantages linked with a particular course of action. In this Technique, efforts are made to calculate the costs and benefits, not only for those that can be expressed in rupees but also the less effectively calculated outcomes of the decision.

Usually, this technique is used for making decisions on public projects in which social benefits, social costs, and actual out of the pocket costs are considered. Here, the cost analysis is associated with the economy of the entire society besides considering the benefits of individuals or a particular group. The goal of this analysis is to get maximum profits for society. 

There are two most crucial quantitative Techniques under this approach. These include the Critical Path Method and the Programme Evaluation and the Review Technique. These techniques are effective because they segregate the work efficiently under the networks. They also drastically reduce time and money. 

Characteristics of Quantitative Techniques

• The quality of the solution can be improved by quantitative Techniques but it is not necessary that the solution is perfect. These Techniques help in finding the solution to the problem.

• The quantitative Techniques are related to the optimization theory. One can find the best solution to the given situation.

• Models are used in quantitative Techniques. By doing mathematical analysis and experiments, a good decision can be made.

• To perform quantitative Techniques, a group of people having different skills is required so that they can estimate the pros and cons of the solution to the problem. Executives must show a willingness to participate in the decision-making.

• The complexity of the situation gets reduced when managers use quantitative Techniques to find an easy solution. They can even innovate solutions to the most complicated and costly functions.

For a prolonged time, cancelling the old Bill and drawing up a fresh Bill is called the Renewal of Bill. Drawee is requested to pay interest for the extended duration, which can be charged in cash or added to the sum of the new Bill.

Bill of Exchange implies a Bill drawn up by a person directing another person to pay another person the amount of money mentioned. For instance, X orders Y to pay 50,000 for 90 days after the date, and Y accepts this order by signing his name, then it will be an Exchange Bill.

Characteristics of Bill of Exchange

• A Bill of Exchange in writing is necessary to have in a Bill.

• To make a payment, it must include a confirmation order and not just the request

• No condition should be present in the order

Types of Bill of Exchange

• Demand Bill- When it is submitted, this Bill is payable. The Bill does not have a set payment date but once presented, the Bill needs to be cleared.

• Accommodation Bill- A Bill is regarded as an accommodation Bill that is supported, drawn, approved without any condition.

Renewal of Bill of Exchange

The extension of the Bill of Exchange is an act of revocation of the old Bill before its maturity for an extended period in return for a new Bill, including interest. At the request of the drawee, it is done by the drawer. The drawee may often not be able to pay the balance of the Bill on the due date. He will ask the drawer to cancel the old Bill and for an extended period to draw up a fresh Bill. In some cases, the acceptor of the Bill will find it difficult to repay the balance of the Bill on the due date. 

Therefore, in such a case, the acceptor may order the holder of the Bill to replace the old one with a new one, which would then allow the acceptor of the Bill to repay with some time extension. If such a proposal is agreed by the holder of the Bill, the old Bill is cancelled and the new Bill is drawn, which is then authorized by the drawee. This process of cancellation of the old Bill and its replacement with the new Bill is also called the Renewal of the Exchange Bill.

Learning Objective of Renewal of Bill of Exchange

If the original Bill is cancelled and a fresh Bill is drawn on the acceptor side, one should make journal entries in the drawer and acceptor books; so that it becomes easy for future redressal of payments. If the receiver of a Bill finds himself unable to pay the Bill on the due date, he will ask the drawer of the Bill to cancel the original Bill before it is due and draw on it a new Bill for an extended period. This is called renewing a Bill of Exchange. The acceptor has to pay interest for the extension of time. Therefore, the current Bill not only contains the cost of the original Bill, but also interest, etc.

Advantages of Renewal of Bill of Exchange

Bills of Exchange: The Basics

The following are the basic components of a Bill of Exchange:

• A written Bill of Exchange is required.

• The vendor who creates the Bill is known as the “Drawer,” and the individual on whom the Bill is drawn is known as the “Drawee.

• A Bill of Exchange must carry a specific amount and must only be in terms of money, not commodities or services.

• The payment order should be unconditional.

A Bill of Exchange’s Dishonour

Dishonour of a Bill of Exchange occurs when the acceptor of a Bill of Exchange fails to pay the Bill on the due date of maturity or refuses to pay. A payee may obtain a certificate from a Notary Officer appointed by the government for this purpose as proof of Bill Dishonour. In this case, the notary charges a fee known as “Noting Charges.”

Parties to a Bill of Exchange

Drawer- A debtor or borrower is referred to as a drawer. The individual who promises to pay a debt to someone else.

Drawee- Is a creditor or a lender. The individual whose name is on the Bill.

Payee-  The individual to whom money is to be paid or the person who is to be paid.

Students can download the Rights of Unpaid Seller Against Buyer – Introduction, Unpaid Seller, Buyer Against the Seller PDF from the website. Anyone can download the Rights of Unpaid Seller Against Buyer – Introduction, Unpaid Seller, Buyer Against the Seller PDF for free from the website easily. Students should study the topic well to get good marks in their exams. They can make use of the Rights of Unpaid Seller Against Buyer – Introduction, Unpaid Seller, Buyer Against the Seller PDF to study the topic as well as for revisions. 

The place where we can find buyers and sellers is nothing but the market. To make the selling of goods ethical and fair practices, a new act called the sales of goods act came into force on 1st July of 1930. The sales of goods act consist of all the contracts and agreements between the sellers. Also, it specifies the phenomenon of reciprocal promises. But the reciprocal promises were first initiated in the Indian contract act 1872 itself.

 

Generally, the seller has to provide goods to his customer, and this buyer needs to pay the exact amount for which he received the goods. If it is done normally, there is no need for the laws. So if any malpractices or mistakes may take place, the act specified certain rights of the unpaid seller against the buyer. We will see those rights in detail.

 

Unpaid Seller

 If a seller, who is unable to get the payment even after delivering the goods and also if the seller fails to receive either money or instrumental benefit in return of his goods due to misleading of the buyer is known as an unpaid seller. So to make proper Justice to the unpaid seller, the sales of goods act provided two kinds of Rights. They are-

Rights of the Seller against the Buyer

• Suit for Price: It is the first and foremost right of an unpaid seller against the buyer. It is used whenever the seller has delivered all his goals to the buyer, and the buyer refuses to pay the amount then he can make use of his right and file a case against the buyer by suing for price. The sales of goods act clearly to explain that the seller has to receive the payment from the buyer after delivering the goods.

• Suit for Damages: This right is beneficial to the seller when the buyer refuses to take the goods, and it causes certain damage to the goods then the seller can file against the buyer for the damage of goods because of his non-acceptance. For instance, food products, dairy products will get damaged if the buyer refuses to take them, once the order has been placed.

• Suit for Interest: Generally, the buyer and seller will make a contract or agreement to provide goods at one particular time, and the payment will be made after being sure. Of time with interest rate. This contract is made with the acceptance of both parties. But if the buyer refuses to pay interest or less rate of interest during the time of payment, then the seller has a right to sue for the interest for goods that he has delivered earlier.

• Rejection of Contract: If the buyer refuses to continue the contract or if he rejects the contract in the middle itself without any prior notice and genuine reason, the seller has the right to sue for the contradiction of the contract before the due date. It is also available in the Indian contract act due to the name of anticipatory breach of contract. Breach of contract means quitting either of the parties from the contract without any reason or any information.

Significance of the Rights of Buyers and Sellers

These are the various rights of an unpaid seller again as to the buyer. Besides these rights, the sales of goods act also specify certain remedies of the buyer against the seller. Because every time there is an equal chance of misleading the contract by both sellers as well as buyers. So to protect the buyer also, the ACT provides specific remedies of the buyer against the seller. Let’s try to understand those remedies in detail.

 

Remedies of the Buyer Against the Seller

• Sue for Damage: The buyer also has the option to sue for damage or can sue for non-delivered goods in the specified time by the seller. Because without goods, the buyer fails to perform his required activity at that time.

• Performance-Based Suit: If the seller refuses to deliver the goods or he may breach the contract before the due date, then the buyer can take help from the court to file a case against the seller.

• Suit for Warranty: If the seller promises to provide the goods with a specific warranty and fails to do it or refuses to do it while delivering the goods, then the buyer can sue for the warranty as well as can reduce the amount to be paid for the goods.

• Repudiation of Contract: It is common for both the seller as well as the buyer. Similar to the seller, the buyer also can have an equal chance to file against the seller if he refuses to continue the contract or he breaches the contract in the middle or before the due date.

• Sue for the Interest: The buyer has the right to claim for the interest for damaged goods or for the delay in delivering the goods against the seller.

Hence we can understand the rights of an unpaid seller against the buyer and also the remedies of the buyer against the seller.

Sales are a crucial aspect when it comes to businesses or organizations. The sales can range from dozens to thousands per day depending on the size of the business or the organization. Hence, it makes sense for maintaining a separate Sales Book and a Sales Return Book.

Sales are a very significant part of all organizations. To understand the concept of Sales in detail let’s have a look at Sales Book and Sales Return Book.

Sales Book:  A Sales Book is a Subsidiary Book and hence; Sales Book does not contain a Trade Discount and other details given in the invoice. 

Sales Return Book: Sometimes goods sold might be defective or of low quality, hence; the customer may return them.  In such cases, goods that are sold and are returned by the customer or buyer are given goods recorded in the Sales Return Book

What Are Sales Books?

The Sales Book is regarded as the subsidiary book which is also called a book of original entry. The Sales Book or the sales day book consists of the records of the all-credit sales of goods or products. On the other hand, a cash book contains the records of the all-cash sales of the goods.

 

The entries of the Sales Book are made using the net amount of the invoice. Hence, the Sales Book does not have a trade discount. The other such details are found in the invoice.

 

Each month the total in the Sales Book is noted on the credit side of the sales a/c, which is the ledger a/c. However, the individual accounts of the consumers are posted daily. Furthermore, if the volume of the transaction entries is too huge, the entries in the sales a/c are posted even weekly or fortnightly. 

 

The seller also prepares the invoices in either two or more copies. This invoice consists of the details of the terms of the payments, sales, etc. The Performa of the Sales Book is shown below:

 

 

What Are Sales Return Books?

It often happens that the goods that are sold tend to be defective or of lower quality and therefore, the customer would return them. Hence, the Sales Return Book is used to record the goods sold which are returned by the customers. However, the sales returns book is used to record only the goods which were earlier sold on a credit basis.

 

A credit note is made to prepare each return of the goods and is prepared in duplicate. The credit note consists of the name of the customer, the details of the goods that they have returned, and the reason for the return. Every credit note has a date and is numbered serially. The credit note is regarded as the source document for the entries in the Sales Return Book.

 

The customer who bought the goods can also prepare a debit note. This is made when the goods are sent back to the seller and hence, is sent to him. The Performa of the Sales Return Book is as follows:

 

Solved Example

Example:

Record the transactions as follows in the books of M/s. Z and Co. Also, the ledger determines the ledger accounts.

 

Solution:

In the books of M/s. Z and Co. the entries given below will look like this.

Sales Return Book

 

The entries, when recorded in the books of the individual traders will look as given below.

MNC Ltd. A/c

 

D Ltd. A/c   

 

X Ltd. A/c      

 

Sales Return A/c 

There are certain prerequisites for starting up a Business. The first and foremost step is drafting a proper Business plan which includes both the long run as well as the short-run expenses. Calculating your cost beforehand helps you figure out your profit and the number of units that are to be produced. The short-run average cost determines the cost of fixed and variable short-run factors which in turn helps in estimating the average production.  It includes variable cost, marginal cost, fixed cost and total cost. The factors which have to be bought every time you want to increase the production quantity are variable costs as they vary with the number of goods produced. On the other hand, there are certain requirements for the production process like land, labour etc, which are to be maintained compulsory irrespective of the profit and loss. It not only gives you an idea about the total cost of production but also helps in working out the average cost of manufacturing a single unit. All these costs can also be graphically depicted on the short-run average cost curve. 

 

Let us now understand every aspect of the short-run average cost definition one by one through this blog. 

 

Short-Run Average Cost Vs Long-Run Average Cost:

In the production process, the manufacturer has to buy many goods like raw materials, pay wages to the labour and salaries to the employees, rent to the landowner etc, all these costs are incurred to produce a good. So, an estimate is made before starting the production process on the cost that would incur in the production process. If the estimate is done for a short period that does not consider the change in the number of goods, it is called short-run average cost. We can derive it by dividing the entire cost by the total number of goods that we want to produce. If the same estimate is calculated for long term production, then it is a long-run average cost.

 

Types of Costs For Production

Before discussing the average cost curve in the short-run, we must know about the various types of costs that are needed to be considered before starting production. 

1. Fixed Cost 

It comprises all those costs that do not change with the amount of produce. For example, if you are planning to set up a pizza manufacturing unit, the cost of the land and equipment (like an oven) will not be affected even if you were to increase the production, i.e. it will remain ‘fixed’. 

2. Variable Cost 

It includes those expenses that are bound to change with the number of products manufactured. Labour, raw materials, electricity, etc. are all examples of variable costs. 

 

3. Total Cost  

It is obtained by adding the fixed cost and the variable cost.

 

4. Marginal Cost 

It refers to the cost of production that would be required to manufacture one additional unit of a product. It is calculated using the following formula-

 

[MC = frac{triangle{TC}}{triangle{Q}}]

 

Here, the numerator represents the change in the total cost, and the denominator denotes the change in output. It will be further discussed in the short-run average cost curve.

 

Calculation of Short-Run Average Total Cost

Let us now have a look at the various short-run average cost functions. 

1. Short-run average variable cost – It is the variable cost of production per unit product. The formula for short-run average variable cost can be written as – 

AVC = TVC / Q

Where AVC is the average variable cost and TVC is the total variable cost.

2. Short-run average fixed cost – It is defined as the fixed cost for production per unit of output. It is calculated as – 

AFC = TFC / Q

Where AFC is the average fixed cost and TFC is the total fixed cost.

3. Short-run average total cost – It refers to the total cost of production per unit product. The formula for the short-run average total cost is as follows- 

ATC = TC / Q

Where ATC is the average total cost, TC is the total cost. 

The short-run average total cost can also be calculated as the sum of short-run average variable cost and average fixed cost.

ATC = AVC + AFC

All these functions are important for plotting the cost curves in the short-run. 

 

The Short-Run Average Cost Curve

After having talked about the short-run average cost definition and a thorough understanding of its components, we will now discuss the average cost curve in the short-run. 

 

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On the X-axis is the cost of production (in rupees) and on the Y-axis is the quantity of output. 

 

The graph of the average fixed cost goes on decreasing because it is a fixed number and as we keep dividing it by the increasing number of products, it keeps getting smaller. The marginal cost curve goes down and up because of the law of diminishing marginal returns. It goes down at first due to the additional output produced by the workers as they specialize, but eventually, it starts rising because the resources become limited after a certain period. 

 

The short-run average total cost curve and the short-run average variable cost curve also go down first, intersect the curve of marginal cost at their minimum, and then goon rising to form a U-shape. This graph could also be used to calculate total costs by finding out the area under a particular curve. 

 

Did You Know?

In 1998, Alan Blinder, former vice president of the American Economics Association, conducted a survey in which 200 US firms were shown different cost curves and asked to specify which one of those curves represented the US economy the best. He found that about 88.4% of firms reported cost curves with constant or marginal cost. 

The staffing process helps to select the right person with appropriate skills, qualifications and experience to recruit them to different positions and jobs in an organisation. Staffing means the process of filling and keeping various roles in an organisation filled. In management, it means the process of recruiting the right person at the right place to increase the efficiency of the organisation. An enterprise with an efficient workforce cannot function properly, so staffing helps an enterprise to acquire a workforce. It includes taking up different people to perform various functions in different departments. It is an important process to run an organization or a business. This is the first and major step in human resource management. Refer to the official website of or download the app for an elaborate and easy explanation.

Steps in Staffing Process

Staffing is a complicated process, and it involves various steps, It starts with workforce planning, and ends with the proper recruitment of the employees. It also checks the performance of the employees effectively. For successful staffing in an organisation, a manager has to perform various steps of staffing that are as follows:

1. Planning the Manpower Requirements: The very first steps of staffing are to evaluate the manpower requirement of an organisation to match the job and positions available in the organisation. It also helps in determining the skills and qualifications required for a specific job in the organisation.

2. Recruitment of Employees: Once the requirement is evaluated, the next step involves the searching of prospective persons that are eligible for the job and inviting applicants to apply for the positions. In this process, the employer advertises about the openings in the organisation through various media, which makes it easy for the applicants to get to know about the job vacancy and the required skills.

3. Selection of Employees: The selection process helps in screening the employees and identifying the deserving candidate who will be suitable for a specified job. Therefore, it can be said that the main objective of selection is to identify the right employee for the right job.

4. Orientation and Placement: Once the right candidates are selected, the organization makes the employees familiar with the working units and working environments through various orientation programs. Then, the placement is done by putting the right candidate at the right place which helps in the proper functioning of the organisation.

5. Training and Development: Once the placement is done, the next step involves the training and development of employees. Training is an integral part of the staffing process, and it helps the employees to develop their skills and knowledge.

6. Remuneration to Employees: It is the compensation given to the employees in monetary terms in exchange for the work they do for the organization. It is given according to work done by the employees.

7. Performance Evaluation: It is an assessment done to evaluate the attitude, behavior, and performance of an employee. These steps of staffing also help in determining the success of the whole recruitment process. It gives the management a clear picture of the success rate of the entire recruitment procedure. This step includes elements like appraisal, promotion, and transfer. The performance of the employee is assessed comparatively to the other employees and also to his own previous performance. Based on these criteria, the employee gets a hike on his pay or a promotion. Sometimes, employees are transferred to another location of the same company and are generally attached with a level up in his position or given certain benefits. 

8. Promotion of Employees: Promotion in simple words means the shifting of an employee to a higher post demanding a more significant responsibility. It not only makes the employee responsible but also keeps him motivated to do his work efficiently. With the promotion, the monetary benefits that the employee receives are also increased, which makes him more efficient to complete the work on time.

9. Transfer of Employees: As promotion is shifting of the employee to a higher post, transfer refers to the shifting of employees to a different unit or department being in the same position, This is done to develop new skills and knowledge of the employee.

Staffing Process Flow Chart

Staffing is a complicated process, so before starting with the staffing process, the manager has to prepare a flowchart to make the whole process easier and effective. He/She should plan and act according to the staffing process flowchart to make the process a success. The flowchart saves a lot of time and makes it easy to complete the selection and recruitment process.

Benefits of Staffing Process

Every organization needs to have efficient and competent employees to achieve its goals and objectives. The staffing function helps in acquiring such employees for an organization. It not only acquires the employees but also helps in their training and development. The most important feature of methods of staffing in management is that it allows the timely recruitment of the right person in the right place for the efficient working of the organization.

• It helps in knowing the organizational requirements and achieving them by recruiting the exact person to do the job.

• It helps in recruiting the correct ones, so it helps in improving the quality of human resources, when these people are trained properly, they can function more efficiently. On a whole, it improves the productivity of the organization. 

• When the employees are trained according to the job requirement, they can work efficiently, this will improve their morale and give them job satisfaction

• Training the staff about how to behave with superiors, subordinates, and colleagues helps in building a harmonious working environment at the workplace