Higher National Diploma (HND)

Business Decision Making

Submitted For BINDU SHAIJU

Submitted By Md Shahadat Hossain ID: LSMS100607-01

Submission Date: 22ND November, 2010

Table of contents
Introduction ........................................................... 02

Task 1 Sources for the collection of data...................................... 02

Task 2 Techniques to analyse data............................................... 05

Task 3 Produce information for decision making..............................10

Task 4 Making decision................................................................13 Conclusion........................................................................15 Reference.........................................................................16

Introduction
Decision should appropriate every time in business. Good decision with effective use of information is the way to achieve success of business. Business decision making helps to learn verity of sources and methods. Now a days developed technology makes it easier to us.

Task 1
Scenario 1 a) We may use secondary sources to collect the data. Because by secondary sources, data can be more accurate and quicker. b) For any business customers opinion is very important to know about current products condition and customers satisfaction. So know about these we need to ask some question to the group of people for survey. Survey sample is like, Name: Very satisfied Customer satisfaction Service Quality Cleaning Decoration Age: Sex:

o o o o o

Somewhat Either Somewhat Dissatisfied satisfied satisfied dissatisfied nor dissatisfied o o o o o o o o o o o o o o o o o o o o

Additional comments...................................................................

c) Mean servicing calculation:

f 1 100 101 200 201 300 301 400 401 500 501 600 1 5 6 21 14 3 50.5 150.5 250.5 350.5 450.5 550.5

fx 50.5 752.5 1503.0 7360.5 6307.0 1651.5

fx = 17625 n = 50 Mean servicing cost = fx/n = 17625/50 = 352.5 Median: f 1 100 101 200 201 300 301 400 401 500 501 600 1 5 6 21 14 3 CF 1 6 12 33 47 50

Median, n/2 = 50/2 = 25

Median = LM + CM (n/2 FM-1): fM

3

= 301 + 100(25-12) 21 = 301 + 1300/21 = 301 + 61.9 = 363

Where, CM = median class range LM = lower limit of the median class FM-1 = cumulative frequency of class before median class n fM = total of observations = frequency of median class

Mode: Mode = L + C [d1: d1+d2] = 301 + 100 [21-6: (21-6) + (21-14)] = 301 + 100 [15: (15+7)] = 301 + 100 [15: 22] = 301 + 1000.9 = 301 + 90 = 391 Where, C = modal class range L = lower limit of modal class

d1= difference between the largest frequency and the frequency before it d2= difference between the largest frequency and the frequency after it Task 2 Scenario-2 (a) 8, 5, 6.5, 4, 7.9 x 8 5 6.5 4 7.9 x = 31.4 x - x = 7.12 (x - x)2 = 12.47 There are two types of Measures of Dispersion, (1) (2) Mean Deviation Standard Deviation x 8-6.28 5-6.28 6.5-6.28 4-6.28 7.9-6.28 1.62 0.22 2.28 2.62 x-x 1.72 1.28 0.05 5.20 (x-x)2 2.96 1.64

(1)

Mean Deviation

(x - x)/n = 7.12/5 = 1.42 (2) Standard Deviation

(x - x)2/n = 12.47/5
5

= 2.49 = 1.58 Scenario-3 (a) Class Intervals Frequency 340 and under 370 370 and under 400 400 and under 430 430 and under 460 460 and under 490 Frequency 9 17 18 12 4 Cumulative 9 26 44 56 60 ......... Q1 ..........Q2 ...........Q3

Sum of all the frequencies = 60 Q1 = 601/4 = 15 Q2 = 601/2 = 30 Q3 = 603/4 = 45

Upper quartiles Q3 = 430 + 30 (45-44)/12 = 430 + 30/12 = 430 + 2.5 = 432.5

Lower quartiles Q1 = 370 + 30 (15-9)/17 = 370 + 306/7 = 370 + 10.6 = 370 + 10.6 = 380.6

(b) Q3 is known as 75th percentiles, so Q3 = 432.5 Scenario-4 Scenario-4 (a) Month n 1 2 3 4 5 6 x y = 18 = 68 Output 000 of units x 4 3 5 1 3 2 Cost 000s y 14 11 16 6 11 10 xy 56 33 80 6 33 20 x2 16 9 25 1 9 4 y2 196 121 256 36 121 100

xy = 228 x2 = 64 (x)2 = 324 y2 = 830 (y)2 = 4624 Correlation coefficient r = = [(6830) 4624] = 1368 1224 [384 324] [4980 4624] = 144 60356 = 144 21360 = 144 146 = 0.98 The value of r is always between -1 and +1.
7

nxy - xy [nx2 (x)2] [ny2 (y)2] (1868) [(664) 324]

(6228)

Therefore, there is perfect positive correlation between the output and cost in MPL production factory. Scenario-5 (a) Spreadsheet departments, October 000 2,532 6,431 895 9,858 Column Chart data of Budgeted sales figures of Three

Novel Soft Weld Total (b)

November 000 3,826 5,001 432 9,259

December 000 2,124 6,189 596 8,909

Total 000 8,482 17,621 1,923 28,026

Sales Figures
7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 October November December Novel Soft Weld

Line Chart

Sales Figures
7,000 6,000 5,000 '000 4,000 3,000 2,000 1,000 0 October November December Novel Soft Weld

Bar Chart

Sales Figures
December

November

Weld Soft

October 0

Novel

2,000

4,000

6,000

8,000

It can be seen that Soft Department has the largest amount of sales figures for the last quarter of the year among the other departments. Bu the total amount of all three departments fell gradually through the last 3 months.

Task (3) (a) Network Diagram

(b) The critical path is defined as the longest path of the Network Diagram; A+D+H+I+J+K = 1+2+0.5+0.5+1+1 = 6

(c) To illustrate the plan for this installation, we can use the Gantt chart. Gantt chart 1 A B C D E F G Obtain estimates for buildings and electrical works Arrange computer link with head office Appoint new staff Building alterations Test computer link Train new staff Internal re-wiring
10

Weeks 4 5

H I J K

Install internal computer links Install new computer Test new computer Test system

d) This is a formal business report of installation a new computer system. To: Board of Directors From: ITS Department

Status: Operational Date: 24 November 2010

Introduction This report details an approximates plan of installing a new computer system in one of the branch offices by IT department during 6 weeks period. The following procedures will be adopted: Task A: First of all, we have to start obtaining estimates for buildings and electrical works in one week. Task B: Within four weeks, we would be able to arrange computer link with head office. Task C: Appointing new staff for the system will be proceed at the same time as Task A. Task D: After preceding Task A, we can precede building alterations which will take 2 weeks time. Task E: Computer link will be tested as soon as Task B and C are carried out. Task F: New staff will be trained in 2 weeks time after they are appointed. Task G: Internal re-wiring will be proceeding as soon as Task D is carried out which will take 3 weeks period. Task H: Installing internal computer links will be done at the same time as Task G.
11

Task I: Within less than a week, new computer will be installed. Task J: Testing new computer will be accomplished after Task F, G and I in week 5. Task K: On last week, the new computer system will be tested. Conclusions, The project of installing a new computer system will not take long term period to be accomplished as most of the Tasks will be carried out at the same time. So, we strongly recommend that this should be done as soon as possible.

e) All the business organisations require information for following

purposes;

Planning Decision making Controlling Recording transactions and Performance measurement

In order to fulfil those purposes, good quality information is needed. There are three types of information. They are Strategic, Tactical and Operational information. Strategic information is used for planning the organisations long term objectives and goals and the senior managers are involved. It is both quantitative and qualitative but the future cannot be predicted. Tactical information is short and medium term planning in which productivity measurements are included. It is generated internally and external component are limited. It based on quantitative measures and prepared regularly. Operational information is used to ensure specific tasks properly within a factory or office. It is relevant to day-to-day plans which involve all managers. It is largely quantitative and task-specific. In Management Information System (MIS), the installation of new IT will be identified as Operational decision.

12

Task 4 1(a) The advantage of IRR 1: It gives the attention to the cash flows. 2: It gives a clear percentage return on investment.

The disadvantage of IRR 1: It is more difficult to calculate than the other methods. 2: It only gives an approximate rate of return. 3: IT is difficult to determine which two suitable discount rates to adopt. Payback, Investment 40,000 Year 1 Year 2 Year 3 Year 4 7,000 25,000 8,000 5,000 40,000 7,000 33,000 8,000 0

33,000 25,000 8,000 8,000

As this result, payback occurs at the end of Year 3 1(b) Internal Rate of Return IRR = [L% + NPVL (H-L) NPVL NPVH] Where, L = lower discount rate L = low H = highest discount rate H = high NPVL = The NPV results for the lower discount rate

13

NPVH

= The NPV results for the highest discount rate

IRR

= [5% + (-366 (6-5)) (-366-469)] = [5% + (-366) (-835)] = 5% + (-0.44) = 4.56%

2. Economic Order Quantity: EOQ = 2DCo/Ch Where, D = Annual Demand Co = Ordering cost per cycle Ch = Holding cost per item

D = 10 items 12 = 120 units per year Co = 50 per unit Ch = 16 per unit

EOQ = 2DCo/Ch = 212050/16 = 12,000/16 = 750 = 27.4 units

Number of orders per year = Demand per year EOQ = 1012 27.4 = 120 27.4 = 4.4
14

Cycle length = Number of days in a year Number of orders per year = 365 4.4 = 82.9 days

3. A The average rising trend line = 22.75 18.75 7 = 4/7 = 0.57 = 0.6

Year 3

Quarter 2nd 3rd 4th 1st 2nd 3rd 4th

Trend Line 22.8 23.4 24 24.6 25.2 25.8 26.4

Year 24

Quarter Trend Forecast 1st 2nd 3rd 4th 24.6 25.2 25.8 26.4

Line Average Seasonal Variation - 0.1 + 12.4 + 1.1 - 13.4

Forecast of Achieve Sale 24.5 37.6 26.9 13

Conclusion
In an easy term we can say that business decision making gives us the opportunity to take the right decision by analysing various data. So the decision comes from it becomes more practical and reasonable. This brings more success in business.

15

Reference
Harvard Business Review on Decision Making, By Harvard Business School Press. 1 april 2001 Business decision making BPP learning media LTD 2007 Survey sample, Retrieved from, http://www.google.co.uk/images?um=1&hl=en&biw=1366&bih= 600&tbs=isch:1&sa=1&q=survey+sample&aq=1&aqi=g6gm3&aql=&oq=survey+SA&gs_rfai= Network chart, Retrieved from, http://www.conceptdraw.com/products/img/ScreenShots/cd5/ne twork/RegionalCableHeadend.gif Business decision, Retrieved from, http://tutor2u.net/business/organisation/decisionmaking.htm

16