Costing and Profitability Analysis Relationship between Cost of Production and Sales Volume: The cost of production and volume of sales are the inter-dependent determinants of profit. The analysis of cost behavior in relation to the changing volume of sales and its impact on profit is very important to determine the break even level of a firm. The level at which total revenue equals total costs, is said to be the break even level where there is no-profit or no-loss. Sales beyond break-even volume bring in profits. Generally production is preceded by the process of demand forecasting, to decide on the volume of production, the produce of which will be absorbed by the market. Pricing and promotions come at a later stage. Costing is done to predict the costs of production and resultant profits at various levels of activity. Download this comprehensive power-point presentation on Break-Even Analysis. Cost Volume Profit or CVP Analysis: CVP analysis or Cost-Volume-Profit analysis helps a firm to study the interrelationship between these three factors and their effect on clean profit. The process also includes an analysis about the external factors that affect the volume of production, such as market demand, competitor threat and internal factors such as availability of infrastructure, capital and labor force. This CVP analysis is a boon to the managers to locate the bottlenecks that hinder the productivity and find a way out, by adjusting either the levels of activity or controlling the cost.   Picture Courtesy : The Power of Break-Even Analysis Pricing: Pricing is the most important factor that makes your product competitive. The costs of production can be classified into fixed costs, variable costs and semi variable costs. Fixed costs remain constant and tend to be unaffected by the changes in volume of output; whereas variable costs vary directly with the volume of output and semi-variable as the name implies are partly fixed and partly variable. Cost accountants of the modern era fully support variable costing for the purpose of cost accounting, listing its merits as follows: Variable costing talks about contribution margin, which is the excess of sales over variable costs. If this is going to be high, sufficient enough to cover the fixed costs, then profit is assured for the firm. It is a key factor to determine the percentage of profit. Variable costing assigns only those costs to a product that varies directly with the changing levels of production, which is helpful in making a distinction of profit made from sales and those resulting from changes in production and inventory. Segregating the costs into fixed and variable is done for the purpose of providing information to reflect cost-volume-profit relationships and to facilitate management decision-making and control. Some applications of variable costing that facilitates management decision making: Profit planning: By increasing the volume of sales or decreasing the selling price of the product. Performance evaluation of profit centres:Like, sales division, marketing department, product line etc., Decide on product priorities: In view of market potential and profit potential Make or Buy Decisions: Depending on the production capacity and sales demand. Budgeting: Flexible budgeting and cost control are possible by variable costing technique and the striking feature is the treatment given to fixed costs, where it is treated as a period cost and not apportioned among all the departments and products that enable the firm to understand the movement of profits in the same direction as that of the sales. Although considered to be a controversial technique and weighed against the conventional methods of costing such as absorption costing, it is believed that it is to stay and exist as the next step in the evolutionary method of cost accounting....

Evolution and Growth of Human Resource Management It is very interesting to trace out the evolution and growth of Human Resource Management. People – The Principal Resource The principal resource of any organization is people and managing people is the most important and challenging aspect of an organization. What we call human resource management today, dates back to 1800 b.c.,which is evident from the inscriptions of Babylonian code of Hammurabi and Kautilya’s Arthasashtra, which explains in detail the importance of selection, incentives, performance evaluation, quality of a manager and wage rates. So,we understand that the concept of managing people has existed even in the previous eras through ancient literature and philosophy. India, China and Greece have been the origin points of human resource management concepts. Evolution of Human Resource Management Industrial Revolution Till, 1930’s, there was no such department called “personnel management” that was considered necessary to cater to the needs and welfare of the labor society. The factory manager was acting as a link between the workers and the management, and most of the time he had to comply with the rules of the management to satisfy them, even if it were against the welfare of the workers. Also proper attention was not given to areas like, worker safety, security and living conditions. Industrial revolution saw mass exodus of workers to urban areas in search of jobs. Need for Employment Department Application of science and technology in production made the rich owners even richer; the poor workers were not paid adequately and their life became miserable. Since the owners lost direct contact with the employees, managers came into the picture to take over control of production and administration. Machines ruled the industry and importance of labor got reduced. This condition existed for sometime until the advent of new and improved management concepts by people like F.W.Taylor who is considered to be the father of scientific management and B.F.Goodrich who was instrumental in forming the “employment department” which can be considered the fore runner of present human resource department. Introduction of Scientific Management Scientific methods were introduced to make the workers perform the job with ease and perfection. It also saved enormous time and reduced the monotony of work. job-designs, job-specification, training and development and human relations were given due importance and the owners slowly started realizing the importance of labor. Through 1940’s to 1970’s behavioral approach was applied to professional management, the major architects being Abraham Maslow, Herzberg and Douglas McGregor. This approach suggested managers to modify their leadership styles to suit the type of followers and motivate the workers. Consequences of World War I and II World War I and II also had profound influence on Human resource development. The concepts of role playing, improved training methods, supervision and group discussions came into the fray. The advent of labor unions also established a clear pathway for the workers to claim their rights, ably supported by the labor laws enacted by various governments. International labor organization was formed in 1919 which created sensation in the worker community all over the world. All said and done, empowerment of workers has been achieved only in developed nations where “job security” is no more a great concern because job opportunities are more. But in unorganized and small sectors, employers continue to exploit workers because “supply” is more than “demand”. The responsibility to develop and empower the employees solely lies on the shoulders of human resource department. It should try to address the problems of workers to the management and amicably settle issues relating to wages, welfare, safety and security. → Objectives and Functions of...

Self Appraisal-Amuse Yourself What is  Self Appraisal: Self evaluation process involved in determining the level of self efficacy . By and large, corporate companies go for a one tier system of appraisal-where the supervisor generates a confidential report about his subordinates as and when required. This serves as a basis for the management to decide on increments or promotion for the respective candidate. But the question is, is this system fool proof? Definitely not. There are certain lapses that deserve mention and the management has to design suitable appraisal formats to improve or strengthen the weak areas. Purple Minimalist We Are Hiring Project Manager Poster by managementguru.net Some areas where the appraisal process can take a deviation: A biased report given by the appraiser due to various reasonsPerception of appraiser may be wrongThe appraiser sees the appraisee through his ideas and not from the management’s view point, which may lead to clash of ideas where the appraisee is made the victimFlaws in the design of the appraisal process where the top management may not come to know the real need of the appraiseeAppraisees sometimes don’t identify themselves with the organization and its objectivesAppraisees may not know what kind of behavior traits is expected of them by the management So it is imperative on the part of the management to introduce self appraisal process in its agenda, where the appraisee himself becomes the appraiser. This helps the organization to accomplish its overall objectives in a short time through a high performance system. This kind of appraisal by ‘oneself’ makes each and every employee to clearly understand where he stands against the expected scale of behavior. 7 ways to be professional at work Two-tier system as we may call it will help in the following manner: Participative approach infuses a sense of belongingness amongst the workforcePotential of the appraisee can be brought outThe real problem of the employees is knownHigher level of approach or interest to know or evaluate one’s own behavior is seen. Basically, organizations must examine their assumptions about human behavior and come to a common belief about people. If they believe people are basically “bad” management might go for hiring “watch-out-look-out” supervisors, rigid disciplinary regulations, and separate facilities such as parking, dining and rest rooms. All these clearly spell out the existence of distinction between the management and workforce. If the organization comes to a common agreement that people are basically “good”, entirely the approach will be different. Every worker becomes a manager and uniform treatment is given to both the employees and managers of higher cadre. Essentially in my opinion, no organization or work society will succeed without visionaries and uniform treatment that is consistent with basic principles and ethics. It has to be understood that work attitudes and values are ultimately a company’s best competitive advantage. Note: Larsen & Toubro – Engineering major Larsen & Toubro has developed a competency matrix which lists 73 competencies-that vary across managerial levels-to measure performance and gauge developmental needs of its employees. National Panasonic – The Japanese white-goods major has developed a performance-assessment system driven by Key Result Areas (KRAs). KRAs describe performance goals-business, functional, and behavioural ones-with defined time-frames and are decided jointly by the employee and his manager at the beginning of the...

An Open Frame of Mind: Line and staff authority should be open with each other and come out of their compartmentalized state of mind. Rationale thinking and logical action is what is required to understand and resolve conflicts.Be a Manager rather than a Technocrat: Specialization has made people to stick to their line of action and they act merely like tech wizards and conveniently forget the human element of flexible mental purview and compromise. Development of each individual’s managerial qualities will minimize conflicts. A manager has to harmonize functions of diverse natures and bring about co-ordination.Think as an Entrepreneur: Thinking about the strength, weaknesses, opportunities and threats an organization faces makes each individual realize that he or she is part of the organization and whatever happens to the firm directly affects his/her stability and security.Make others feel a Sense of Achievement: It is the job of a manager to appreciate and encourage the achievements of his sub ordinates that bring greater joy in the minds of individuals and motivate them to work for the cause.Interaction among Functions: Cross functional interactions on a continuous basis are found to be useful in preventing and resolving conflicts. Informal groups serve as the best example of a committee consisting of members from different functional groups but with a common interest. These groups can be best identified and utilized by the management to resolve conflicts by seeking the help of the key person in the group.Roles, Responsibilities and the Scope of other Functions: The basic requirement is to first clearly define the objectives and sub objectives, the process, the roles of each function as a tool and their rights and responsibilities. One should know the roles and responsibilities of all functions having common interface: their position in the firm as well as their relevance and contribution towards the organizational goals.Communication and Information Sharing: The informal communication system helps in achieving group dynamics and cohesion while the formal channels take care of organizational directives. A quick and effective means of communication can considerably reduce the conflict level that arises out of communication disorders.Adequate Planning and Co-ordinations: At each operational level, hasty actions must be avoided to stop conflicts from arising. Planning and Co-ordination go hand in hand: Say, if a new product launch is aimed at without proper promotion, what would happen to the success of the project?Evaluation of Functional Performance: A standard mechanism must be set to evaluate managerial performance in terms of their ability to achieve an integrated set of objectives in a balanced manner.Necessity of Transparency: Transparency is needed at all functional levels or the initiator appears to be tainted with the accusation of having an ulterior motive. In case of big corporate firms all the policy decisions are taken by the board and not by a single person to avoid conflicts. Conflict need not necessarily be viewed as an evil but a disorder to be curbed. Sometimes a conflict might showcase the inherent inflexibility and malfunctions in the firm  to be corrected paving way for innovations. Sometimes it causes frustration for the management by preventing synergy amongst the sub-systems. All said and done, conflict once identified have to be immediately dealt with and resolved by the management in order to facilitate smooth functioning of the...