Planning Planning is the selecting and relating of facts and the making and using of facts and the

making and using of assumptions regarding the future in the visualization and formulation of proposed activities believed necessary to achieve desired results. George Terry

Organization George Terry defines organizing as The establishing of effective authority relationship among selected work persons and work place in order, for the group to work together efficiently. depreciation Over a period of time the values of all materials will decrease. That value is called as depreciation.

working capital Working capital = current assets current liabilities

profitability
The state or condition of yielding a financial profit or gain. It is often measured by price to earnings ratio.

Motion study
Method for establishing employee productivity standards in which (1) a complex task is broken into small, simple steps, (2) the sequence of movements taken by the employee in performing those steps is carefully observed to detect and eliminate redundant or wasteful motion, and (3) precise time taken for each correct movement is measured. From these measurements production and delivery times and prices can be computed and incentive schemes can be devised.

Planning process Plans are classified in 11 types 1. 2. 3. 4. 5. 6. 7. 8. Objectives Policies Rules Procedures Programmes Schedules Budgets Methods

9. Strategies and tactics 10. Standards 11. Fore Casting Objective: Objectives are plans for the future that will serve to provide direction for subsequent activity. Policies: It is a guide to action or decision of manager. They contribute broad boundaries, permitting initiative of manager to the extent of interpreting the particular policy Rules: Rules are related procedure as they guide action but there is no time sequence attached to them. Procedure: Procedure is another kind of plan as it involves selections and establishment of logical series of task with in the frame work of predetermined policies and objectives. Programmes: Programmes Integrate policies procedure etc required for affecting a certain course of action. Planning Process Steps Involved in Planning 1. 2. 3. 4. 5. 6. 7. 8. Crystallizing the opportunities or problems Securing and analyzing necessary information Establishing planning premises and constraints Ascertaining alternative courses of action or plans Evaluation and selection of optimum plan Determining derivative plans Fixing time of Introduction Arranging future evaluation of effectiveness of plans

Three kinds of Business planning 1. Plans for current operations 2. Plans for survival 3. Plans for growth Organization for planning 1. 2. 3. 4. 5. 6. Planning Board or committee Marketing plan Financial plan Manufacturing plan Research and development plan Personnel plan Or Depreciation and types of it

depreciation refers to two aspects of the same concept:

1. the decrease in value of assets (fair value depreciation), and

2. the allocation of the cost of assets to periods in which the assets are used
There are several methods for calculating depreciation

Straight-line depreciation It is the simplest and most often used method. In this method, the company estimates the salvage value(scrap value) of the asset at the end of the period during which it will be used to generate revenues (useful life). (The salvage value is an estimate of the value of the asset at the time it will be sold or disposed of; it may be zero or even negative. Salvage value is also known as scrap value or residual value.) The company will then charge the same amount to depreciation each year over that period, until the value shown for the asset has reduced from the original cost to the salvage value.

Declining Balance Method When using the double-declining-balance method, the salvage value is not considered in determining the annual depreciation, but the book value of the asset being depreciated is never brought below its salvage value, regardless of the method used. Depreciation ceases when either the salvage value or the end of the asset's useful life is reached. Since double-declining-balance depreciation does not always depreciate an asset fully by its end of life, some methods also compute a straight-line depreciation each year, and apply the greater of the two. This has the effect of converting from declining-balance depreciation to straight-line depreciation at a midpoint in the asset's life. With the declining balance method, one can find the depreciation rate that would allow exactly for full depreciation by the end of the period Sum-of-years-digits method Sum-of-years-digits is a depreciation method that results in a more accelerated write-off than the straight line method, and typically also more accelerated than the declining balance method. Under this method the annual depreciation is determined by multiplying the depreciable cost by a schedule of fractions. depreciable cost = original cost salvage value book value = original cost accumulated depreciation

Organisation as a process and structure

Types of Organization: Organization is defined as the Management function of assigning duties, grouping tasks, establishing authority, and allocating resources to carry out a specific plan. Benefits of organization a) Organizing helps to classify the special tasks and performance expectation for each person. b) Organizing produces appropriate authority structure with accountability to support planning and control through out the organization. c) Organizing creates channel for communication that support decision making and control. Organization structure is defined as:The set of formalized task assigned to Individual and work units Types of organization It is classified 6 types 1. 2. 3. 4. 5. 6. Line organization Functional organization Committee organization Project organization Matrix organization Line and staff organization

Line Organization

General Manager

Production Manager

Finance Manager

Marketing Manager

Supervisor

Chief Accountant

Sales Manager

Foreman

Accountants

Sales Supervisors

Work men

Accounts Assistant

Sales man

Line Organization

The line of authority consists of an uninterrupted series of authority steps and forms a hierarchical arrangement. The line of authority not only becomes the avenue command to operating personnel, but also provides the channel for communication, co ordination and accountability in enterprise. Merits of Line Organisation: 1. 2. 3. 4. It is a simple, easy to establish and can easily be understood by all It facilitates unity of command It ensures discipline in the enterprise It facilitate prompt decision making

Demerits 1. With growth it makes the superiors too over loaded with works leads to in effectiveness 2. This type of organization does not foster specialization. 3. Poor communication from bottom upward result in poor decision making at the top. Line and Staff Organization

In line and staff organization the line authority remains the same as it does in the line organization. Authority flow stops to bottom. The main difference is that specialists are attached to line managers. The staff officers do not have any power of command in organization as they are employed to provide expert advice to the live officers.
Board of Directors

Managing Director

Planning

Finance

Personal

R&D

Legal Advisor

Production Control

Production Manager

Quality Control

Supervisor

Foreman

Work man

Merits: 1. It is Based upon planned specialization 2. Unity of command is preserved 3. More flexible as compared o the line organization Demerits If the pattern of authority is not clearly defined there is a bound to be conflict between line and staff authority. Functional Organization: To eliminate the draw back of line organization, functional types of organization emerged. The activities are divided in to production, marketing, finance, purchase, HRD, etc. Each department will come under the control and supervision of specials in that function is called functional manager.

Board of Directors

Managing Directors

Productio n Manager Productio n Dept

Finance Manager Finance Dept

Marketing Manager Marketing Dept

HRD Manager HRD Dept

Purchase Manager Purchase Dept

Committee Organization This is prevalent in both private and public sector. A committee is a body of person entrusted with the task of discharging some management function of investigating the reporting function collectively called as a group.

Adhoc temporary committee is appointed to investigate any matter or problem and to suggested remedial measures and to give report to higher authorities. Project Organization It I oriented towards the completion of a big project or small No. of big project, under. This team of specialist from different area is created for each project. Such a team is separated from and independent of functional department. The activities of the project team are coordinated by the project managers who obtain the advice and assistance of experts both inside and outside organization. Matrix Organization:
Division X

Production

Engineering

Personnel

Finance

Production Manager 1

Prod Group

Engg Group

Per Group

Fin Group

Prod

Engg

Per

Fin

Group of two Group The division X is composed project each with specific objectives and period of Group Group completion. The division has four function of department, production Engineering finance and personal which provide functional support to the project.

Work measurement techniques

Work Measurement Definition Work measurement is the application of techniques designed to establish the time for a qualified worker to carry out a specified job at a defined level of performance. The Purpose of Work Measurement Method study is the principal technique for reducing the work involved, primarily by eliminating unnecessary movement on the part of material or operatives and by substituting good methods for poor ones. Work measurement is concerned with investigating, reducing and subsequently eliminating ineffective time, that is time during which no effective work is being performed, whatever the cause.

Work measurement, as the name suggests, provides management with a means of measuring the time taken in the performance of an operation or series of operations in such a way that ineffective time is shown up and can be separated from effective time. In this way its existence, nature and extent become known where previously they were concealed within the total. The Uses of Work Measurement Revealing existing causes of ineffective time through study, important though it is, is perhaps less important in the long term than the setting of sound time standards, since these will continue to apply as long as the work to which they refer continues to be done. They will also show up any ineffective time or additional work which may occur once they have been established. In the process of setting standards it may be necessary to use work measurement: a. To compare the efficiency of alternative methods. Other conditions being equal, the method which takes the least time will be the best method. b. To balance the work of members of teams, in association with multiple activity charts, so that, as nearly as possible, each member has a task taking an equal time to perform. c. To determine, in association with man and machine multiple activity charts, the number of machines an operative can run.The time standards, once set, may then be used: d. To provide information on which the planning and scheduling of production can be based, including the plant and labour requirements for carrying out the programme of work and the utilisation of available capacity. e. To provide information on which estimates for tenders, selling prices and delivery promises can be based. f. To set standards of machine utilisation and labour performance which can be used for any of the above purposes and as a basis for incentive schemes. g. To provide information for labour-cost control and to enable standard costs to be fixed and maintained. It is thus clear that work measurement provides the basic information necessary for all the activities of organising and controlling the work of an enterprise in which the time element plays a part. Its uses in connection with these activities will be more clearly seen when we have shown how the standard time is obtained. Techniques of work measurement

The following are the principal techniques by which work measurement is carried out: 1. Time study 2. Activity sampling 3. Predetermined motion time systems 4. Synthesis from standard data 5. Estimating 6. Analytical estimating 7. Comparative estimating Of these techniques we shall concern ourselves primarily with time study, since it is the basic technique of work measurement. Some of the other techniques either derive from it or are variants of it. 1. Time Study Time Study consists of recording times and rates of work for elements of a specified job carried out under specified conditions to obtain the time necessary to carry out a job at a defined level of performance. In this technique the job to be studied is timed with a stopwatch, rated, and the Basic Time calculated. 1.1 Requirements for Effective Time Study The requirements for effective time study are: a. Co-operation and goodwill b. Defined job c. Defined method d. Correct normal equipment e. Quality standard and checks f. Experienced qualified motivated worker g. Method of timing h. Method of assessing relative performance i. Elemental breakdown j. Definition of break points k. Recording media

2. Activity Sampling Activity sampling is a technique in which a large number of instantaneous observations are made over a period of time of a group of machines, processes or workers. Each observation records what is happening at that instant and the percentage of observations recorded for a particular activity or delay is a measure of the percentage of time during which the activity or delay occurs. The advantages of this method are that 1. It is capable of measuring many activities that are impractical or too costly to be measured by time study. 2. One observer can collect data concerning the simultaneous activities of a group. 3. Activity sampling can be interrupted at any time without effect. The disadvantages are that 1. It is quicker and cheaper to use time study on jobs of short duration. 2. It does not provide elemental detail. The type of information provided by an activity sampling study is: a. The proportion of the working day during which workers or machines are producing. b. The proportion of the working day used up by delays. The reason for each delay must be recorded. c. The relative activity of different workers and machines.

3. Predetermined Motion Time Systems A predetermined motion time system is a work measurement technique whereby times established for basic human motions (classified according to the nature of the motion and the conditions under which it is made) are used to build up the time for a job at a defined level of performance. The systems are based on the assumption that all manual tasks can be analysed into basic motions of the body or body members. They were compiled as a result of a very large number of studies of each movement, generally by a frame-by-frame

analysis of films of a wide range of subjects, men and women, performing a wide variety of tasks. The first generation of PMT systems, MTM1, were very finely detailed, involving much analysis and producing extremely accurate results. This attention to detail was both a strength and a weakness, and for many potential applications the quantity of detailed analysis was not necessary, and prohibitively time -consuming. In these cases "second generation" techniques, such as Simplified PMTS, Master Standard Data, Primary Standard Data and MTM2, could be used with advantage, and no great loss of accuracy. For even speedier application, where some detail could be sacrificed then a "third generation" technique such as Basic Work Data or MTM3 could be used. 4. Synthesis Synthesis is a work measurement technique for building up the time for a job at a defined level of performance by totaling element times obtained previously from time studies on other jobs containing the elements concerned, or from synthetic data. Synthetic data is the name given to tables and formulae derived from the analysis of accumulated work measurement data, arranged in a form suitable for building up standard times, machine process times, etc by synthesis. Synthetic times are increasingly being used as a substitute for individual time studies in the case of jobs made up of elements which have recurred a sufficient number of times in jobs previously studied to make it possible to compile accurate representative times for them. 5. Estimating The technique of estimating is the least refined of all those available to the work measurement practitioner. It consists of an estimate of total job duration (or in common practice, the job price or cost). This estimate is made by a craftsman or person familiar with the craft. It normally embraces the total components of the job, including work content, preparation and disposal time, any contingencies etc, all estimated in one gross amount. 6. Analytical estimating This technique introduces work measurement concepts into estimating. In analytical estimating the estimator is trained in elemental breakdown, and in the concept of standard performance. The estimate is prepared by first breaking the work content of the job into elements, and then utilising the experience of the estimator (normally a craftsman) the time for each element of work is estimated -

at standard performance. These estimated basic minutes are totalled to give a total job time, in basic minutes. An allowance for relaxation and any necessary contingency is then made, as in conventional time study, to give the standard time. 7. Comparative estimating
This technique has been developed to permit speedy and reliable assessment of the duration of variable and infrequent jobs, by estimating them within chosen time bands. Limits are set within which the job under consideration will fall, rather than in terms of precise capital standard or capital allowed minute values. It is applied by comparing the job to be estimated with jobs of similar work content, and using these similar jobs as "bench marks" to locate the new job in its relevant time band known as Work Group.

Time value of money

manufacture costs and working capital

Manufacturing cost is the sum of costs of all resources consumed in the process of making a product.

Manufacturing costs consist of four basic types:

Raw materials (also called direct materials): What a manufacturer buys from other companies to use in the production of its own products. For example, General Motors buys tires from Goodyear (or other tire manufacturers) that then become part of GMs cars.

Direct labor: The employees who work on the production line. Variable overhead: Indirect production costs that increase or decrease as the quantity produced increases or decreases. An example is the cost of electricity that runs the production equipment: You pay for the electricity for the whole plant, not machine by machine, so you cant attach this cost to one particular part of the process. But if you increase or decrease the use of those machines, the electricity cost increases or decreases accordingly. (In contrast, the monthly utility bill for a companys office and sales space probably is fixed for all practical purposes.)

Fixed overhead: Indirect production costs that do not increase or decrease as the quantity produced increases or decreases. These fixed costs remain the same over a fairly broad range of production output levels. Three significant fixed manufacturing costs are:

Salaries for certain production employees who dont work directly on the production line, such as a vice president, safety inspectors, security guards, accountants, and shipping and receiving workers.

Depreciation of production buildings, equipment, and other manufacturing fixed assets.

Occupancy costs, such as building insurance, property taxes, and heating and lighting charges.

The figure below presents an annual income statement for a manufacturer and includes information about its manufacturing costs for the year. The cost of goods sold expense depends directly on the product cost from the summary of manufacturing costs that appears below the income statement. A business may manufacture 100 or 1,000 different products, or even more, and the business must prepare a summary of manufacturing costs for each product. To keep our example easy to follow (but still realistic), the figure presents a scenario for a one-product manufacturer. This example illustrates the fundamental accounting problems and methods of all manufacturers.

Example for determining the product cost of a manufacturer.

The information in the manufacturing costs summary below the income statement (see the figure above) is highly confidential and for management eyes only. Competitors would love to know this information. A company may enjoy a significant cost advantage over its competitors and definitely does not want its cost data to get into their hands.

Indirect materials: These are inventories that are used in the manufacturing process but whose cost is insignificant. For example, in manufacturing a car, the nuts, screws and bolts would be indirect materials. Cleaning materials that are consumed in producing a completed, clean car would also be indirect materials. Indirect materials are recorded separately from direct materials, and actually fall under the category of overheads.

Indirect labor: This is the cost of personnel not directly involved in manufacturing the product, but whose cost forms part of the factory expenses. Included in this are wages and salaries to factory supervisors, cleaners and security guards. Indirect labor is recorded separately from direct labor, and, just like indirect materials, falls under the category of overheads. Work in progress: These are inventories that have started the manufacturing process but that are not yet finished goods. An example of this would be a car without an engine or fitted windows.

'Working Capital' A measure of both a company's efficiency and its short-term financial health. The working capital ratio is calculated as: Sources of working capital are (1) net income, (2) long-term loans, (3) sale of capital assets, and (4) injection of funds by stockholders. Ample working capital allows management to take advantage of unexpected opportunities, and to qualify for bank loans and favorable trade credit terms. In the normal trade cycle of acompany, working capital equals working assets. Also called net current assets. Current assets and current liabilities include three accounts which are of special importance. These accounts represent the areas of the business where managers have the most direct impact:

accounts receivable (current asset) inventory (current assets), and accounts payable (current liability)

The current portion of debt (payable within 12 months) is critical, because it represents a short-term claim to current assets and is often secured by long term assets. Common types of short-term debt are bank loans and lines of credit. An increase in working capital indicates that the business has either increased current assets (that it has increased its receivables, or other current assets) or has decreased current liabilitiesfor example has paid off some short-term creditors, or a combination of both. Current Assets Current Liabilities excluding deferred tax assets/liabilities, excess cash, surplus assets and/or deposit balances. Cash balance items often attract a one-for-one, purchase-price adjustment.