Business Decision Making
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 day’s 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 customer’s
opinion is very important to know about current products condition and
customer’s satisfaction. So know about these we need to ask some question to
the group of people for survey. Survey sample is like,
Name:

Age:

Sex:



Very satisfied

Somewhat satisfied

Either satisfied
nor dissatisfied

Somewhat
dissatisfied

Dissatisfied

Customer
satisfaction

o

o

o

o

o

Service

o

o

o

o

o

Quality

o

o

o

o

o

Cleaning

o

o

o

o

o

Decoration

o

o

o

o

o

Additional
comments...................................................................
c) Mean servicing
calculation:
f fx
1 – 100 1 50.5 50.5
101
– 200 5 150.5 752.5
201
– 300 6 250.5 1503.0
301
– 400 21 350.5 7360.5
401
– 500 14 450.5 6307.0
501
– 600 3 550.5 1651.5
∑fx = 17625
n = 50
Mean servicing cost = ∑fx/n
= 17625/50
= 352.5
Median:
f
CF
1 – 100 1
1
101
– 200 5 6
201
– 300 6 12
301
– 400 21 33
401
– 500 14 47
501
– 600 3 50
Median,
n/2 = 50/2 = 25
Median
= L_{M }+ C_{M }(n/2 – F_{M1}): f_{M}
= 301 + 100(2512)
21
= 301 + 1300/21
= 301 + 61.9
= 363
Where,
C_{M
} = median class range
L_{M
} = lower limit of the median class
F_{M1
}= cumulative frequency of class before median class
n = total of observations
f_{M } = frequency of median class
Mode:
Mode = L + C [d1_{:} d_{1}+d_{2}]
=
301 + 100 [216: (216) + (2114)]
=
301 + 100 [15: (15+7)]
=
301 + 100 [15: 22]
=
301 + 100×0.9
=
301 + 90
=
391
Where,
C
= modal class range
L = lower limit of modal class
d_{1}=
difference between the largest frequency and the frequency before it
d_{2}=
difference between the largest frequency and the frequency after it
Task
2
Scenario2
(a)
8,
5, 6.5, 4, 7.9
x
͞x
x͞x (x͞x)^{2}
8 86.28 1.72 2.96
5 56.28 1.28 1.64
6.5 6.56.28 0.22 0.05
4 46.28 2.28 5.20
7.9 7.96.28 1.62 2.62
∑x =
31.4
∑x 
͞x = 7.12
∑(x
 ͞x)^{2 }= 12.47
There
are two types of Measures of Dispersion,
(1)Mean Deviation
(2)Standard Deviation
(1)Mean Deviation
∑(x
 ͞x)/n
=
7.12/5
=
1.42
(2)Standard Deviation
√∑(x
 ͞x)^{2}/n
=
√12.47/5
=
√2.49
=
1.58
Scenario3
(a)
Class Intervals Frequency Cumulative
Frequency
£340 and under £370 9 9
£370 and under £400 17 26 .........
Q_{1}
£400 and under £430 18 44 ..........Q_{2}
£430 and under £460 12 56 ...........Q_{3}
£460 and under £490 4 60
Sum of all the frequencies = 60
Q_{1} = 60×1/4 = 15
Q_{2} = 60×1/2 = 30
Q_{3} = 60×3/4 = 45
Upper quartiles Q_{3} = 430 +
30 (4544)/12
= 430 + 30/12
= 430 + 2.5
= 432.5
Lower quartiles Q_{1} = 370 +
30 (159)/17
= 370 + 30×6/7
= 370 + 10.6
= 370 + 10.6
= 380.6
(b)
Q_{3
}is known as 75^{th }percentiles, so Q_{3 }= 432.5
Scenario4
Scenario4
(a)
Month
n

Output
£’000 of units
x

Cost
£’000s
y

xy

x^{2}

y^{2}

1

4

14

56

16

196

2

3

11

33

9

121

3

5

16

80

25

256

4

1

6

6

1

36

5

3

11

33

9

121

6

2

10

20

4

100

∑x
= 18
∑y
= 68
∑xy = 228
∑x^{2 } = 64
(∑x)^{2 }= 324
∑y^{2} = 830
(∑y)^{2} = 4624
Correlation coefficient r = n∑xy  ∑x∑y ÷ √ [n∑x^{2} – (∑x)^{2}]
[n∑y^{2} – (∑y)^{2}]
= (6×228) – (18×68) ÷ √ [(6×64) – 324]
[(6×830) – 4624]
= 1368 – 1224 ÷ √ [384 – 324] [4980 – 4624]
= 144 ÷ √60×356
= 144 ÷ √21360
= 144 ÷ 146
= 0.98
The value of ‘r ‘is always between 1
and +1.
Therefore, there is perfect positive
correlation between the output and cost in MPL production factory.
Scenario5
(a)Spreadsheet data of Budgeted sales figures
of Three departments,

October

November

December

Total


£’000

£’000

£’000

£’000

Novel

2,532

3,826

2,124

8,482

Soft

6,431

5,001

6,189

17,621

Weld

895

432

596

1,923

Total

9,858

9,259

8,909

28,026

(b)Column Chart
Line
Chart
Bar
Chart
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

Weeks



1

2

3

4

5

6


A

Obtain estimates for buildings and electrical works








B

Arrange computer link with head office








C

Appoint new staff








D

Building alterations








E

Test computer link









F

Train new staff








G

Internal rewiring








H

Install internal computer links









I

Install new computer









J

Test new computer








K

Test system








d) This is a formal business report of
installation a new computer system.
To: Board
of Directors
From: IT’S 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 rewiring 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.
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
organisation’s 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 daytoday plans
which involve all managers. It is largely quantitative and taskspecific.
In Management Information System (MIS), the
installation of new IT will be identified as Operational decision.
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
7,000 40,000 – 7,000 33,000
Year
2 25,000 33,000
– 25,000
8,000
Year
3
8,000 8,000 –
8,000 0
Year
4
5,000
As
this result, payback occurs at the end of Year 3
1(b)
Internal
Rate of Return IRR = [L% + NPV_{L}× (HL) ÷ NPV_{L} – NPV_{H}]
Where,
L = lower discount rate
L = low
H = highest discount rate
H = high
NPV_{L }= The NPV results for the lower
discount rate
NPV_{H }= The NPV results for the highest discount
rate
IRR = [5% + (366 × (65)) ÷ (366469)]
= [5% + (366) ÷ (835)]
= 5% + (0.44)
= 4.56%
2.
Economic Order Quantity: EOQ = √2DC_{o}/C_{h}
Where,
D = Annual Demand
C_{o} = Ordering cost per cycle
C_{h} = Holding cost per item
D = 10 items × 12 = 120 units per year
C_{o} = £50 per unit
C_{h }= £16 per unit
EOQ
= √2DC_{o}/Ch
=
√2×120×50/16
=
√12,000/16
=
√750
=
27.4 units
Number
of orders per year = Demand per year ÷ EOQ
= 10×12 ÷ 27.4
= 120 ÷ 27.4 = 4.4
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

Quarter

Trend Line

3

2^{nd}

22.8

3^{rd}

23.4


4^{th}

24





4

1^{st}

24.6

2^{nd}

25.2


3^{rd}

25.8


4^{th}

26.4

Year

Quarter

Trend Line Forecast

Average Seasonal Variation

Forecast of Achieve Sale

24

1^{st}

24.6

 0.1

24.5

2^{nd}

25.2

+ 12.4

37.6


3^{rd}

25.8

+ 1.1

26.9


4^{th}

26.4

 13.4

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.
Reference
·
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/network/RegionalCableHeadend.gif
·
Business decision,
Retrieved from,
http://tutor2u.net/business/organisation/decisionmaking.htm
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