Question

name two Modern days of techniques and state the function of each

Answer 1

1. Traditional Techniques:

Traditional techniques refer to the techniques that have been used by business organisation for longer period of time and are still in use.

Such techniques are:

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a. Personal Observation

b. Statistical Reports.

c. Breakeven Analysis.

d. Budgetary Control.

(a) Personal Observation:

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This is the most traditional technique of control. It helps a manager to collect first hand information about the performance of the employees. It also creates psychological pressure on the employees to improve their performance as they are aware that they are being observed personally by the manager. However, this technique is not to be effectively used in all kinds of jobs as it is very time consuming.

(b) Statistical Reports:

Statistical analysis in the form of percentages, ratios, averages etc. in different areas provides useful information regarding performance of an organisation to its managers. When such information is presented in the form of tables, graphs, charts etc., it facilitates comparison of performance with the standards laid and with previous years’ performance.

(c) Breakeven Analysis:

The technique used by managers to study the relationship between sales volume, costs and profit is known as Breakeven Analysis. This technique helps the managers in estimating profits at different levels of activities. The following figure shows breakeven chart of a firm.

The point at which the total revenue and total cost curves intersect is breakeven point. The figure shows that the firm will have the breakeven point at 60,000 units of output. At this point, there is neither profit nor loss. The firm starts earning profit beyond this point.

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Breakeven Point= Fixed Cost/ (Selling Price per unit- Variable cost per unit).

Through breakeven analysis, a firm can keep a check on its variable cost and can also determine the level of activity at which it can earn its profit target.