MB0043

MB0043, set2 : Q.1 Explain Wage Administration policy. What are the ways by which wages and salaries are managed in India?

Answer: Wage and salary administration revolves around designing and managing

policies and methods of disbursing employee compensation. Traditionally it includes such areas as

job evaluation, maintenance of wage structures, wage surveys, incentives administration, wage

changes and adjustments, supplementary payouts, profit sharing, control of compensation costs,

and other related pay items.

Salaried often implies a status distinction, because those who are on salary are generally white-

collar, administrative, professional, and executive employees, whereas wage-earners are designated

as hourly, non-supervisory, or blue-collar. Wage-earners in some organizations do receive full wage

if they are absent for such reasons as sickness, whereas salaried employees, especially at the

lower levels , often receive overtime pay when they work over the standard work week.

Compensation/ salary systems are designed to ensure that employees are rewarded appropriately

depending on what they do and the skills and knowledge (intellect) required for doing a specific job.

It must therefore provide for the following key factors in order to be effective:

The following factors may be helpful to raise the effectiveness of employees

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MB0042 set2 : Q1. Define Pricing Policy. Explain the various objective of pricing policy.

Answer: Pricing policy refers to the policy of setting the price of the product or

products and services by the management after taking into account of various internal and external

factors, forces and its own business objectives.

Pricing Policy basically depends on price theory that is the corner stone of economic theory. Pricing

is considered as one of the basic and central problems of economic theory in a modern economy.

Fixing prices are the most important aspect of managerial decision making because market price

charged by the company affects the present and future production plans, pattern of distribution,

nature of marketing etc. Above all, the sales revenue and profit ratio of the producer directly

depend upon the prices. Hence, a firm has to charge the most appropriate price to the customers.

Charging an ideal price, which is neither too high nor too low, would depend on a number of factors

and forces. There are no standard formulas or equations in economics to fix the best possible price

for a product. The dynamic nature of the economy forces a firm to raise and reduce the prices

continuously. Hence, prices fluctuate over a period of time.

Generally speaking, in economic theory, we take into account of only two parties, i.e., buyers and

sellers while fixing the prices. However, in practice many parties are associated with pricing of a

product. They are rival competitors, potential rivals, middlemen, wholesalers, retailers, commission

agents and above all the Govt. Hence, we should give due consideration to the influence exerted by

these parties in the process of price determination.

Objectives of the Price Policy

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MB0041 set2 : Q.1 Explain the tools of Management accounting?

Answer: Tools of Management Accounting

Management Accounting uses the following tools or techniques to fulfill its responsibilities and duties

towards management.

• Financial Statement Analysis

• Funds Flow Analysis

• Cash Flow Analysis

• Costing Techniques that includes marginal costing , differential costing, standard costing, and

responsibility costing

• Budgetary control

• Management Reporting.

Financial Statements are indicators of two significant factors that include profitability and financial

soundness. Analysis and interpretation of financial statements enables full diagnosis of the

profitability and financial soundness of the firm. Analysis means methodical classification of the data

given in the financial statements. Methodical classification enables comparison of the various inter-

connected figures with each other. Interpretation explains the meaning and significance of the data.

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MB0040 Set2 : Q1. What do you mean by Statistical Survey? Differentiate between “Questionnaire” and “Schedule”.

Answer : A search for knowledge by analysing numerical data is known as Statistical

Survey or Statistical Investigation.

A Statistical survey is a scientific process of collection and analysis of numerical data. Statistical

surveys are used to collect numerical information about units in a population. Surveys involve asking

questions to individuals Surveys of human populations are common in government, health, social

science and marketing sectors.

Statistical surveys are categorised into two stages – planning and execution. The figure 2.1 shows

the two broad stages of Statistical survey

Planning a Statistical Survey:

The relevance and accuracy of data obtained in a survey depends upon the care exercised in

planning. A properly planned investigation can lead to best results with least cost and time.

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MB0039 Set–II Q1 Explain with the help of specific examples, four different ways in which positive non verbal communication can create a better work environment.

Answer:1. Proxemics – Proxemics is derived from the word “proximity” or closeness and is the

communication term for personal space and distance. The space and distance which we choose to

keep from people is also part of non-verbal communication. Each of us has our own inner and outer

circles, which differ for different people.

Our inner most circle is an “intimate space”, into which we generally admit only select people such

as family and close friends. Next comes a “personal space” which might include other friends and

colleagues or coworkers. These two spaces involve communication of an informal nature.

Most of us also have a “social and public” space, which includes official or workplace relationships,

where

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MB0038 set2 Q.1 Write a note on classical era for evolution of Organization behaviour.

Answer:The Classical Era

We see this trend to continue in what is called as the classical era which covers the period between

1900 to mid 1930s. the first general theories of management began to evolve and the main

contributors during this era were Frederick Taylor, Henri Fayol, Max Weber, Mary parker Follet and

Chester Barnard.

Frederick Taylor’s main emphasis was on finding one best way of doing each job. He stressed on

selecting the right people for the job, train them to do it precisely in one best way. He favored wage

plans to motivate the workers. His scientific principles of management stressed the following

principles:

1. Shift all responsibility for the organization of work from the worker to the manager; managers

should do all the thinking relating to the planning and design of work, leaving the workers with the

task of implementation.

2. Use scientific methods to determine the most efficient way of doing work; assign the worker’s task

accordingly, specifying the precise way in which the work is to be done.

3. Select the best person to perform the job thus designed.

4. Train the worker to do the work efficiently.

5. Monitor worker performances to ensure that appropriate work procedures are followed and that

appropriate results are achieved.

Taylor was one of the first to attempt to systematically analyze human behavior at work. He insisted

the use of time-and-motion study as a means of standardizing work activities. His scientific approach

called for detailed observation and measurement of even the most routine work, to find the optimum

mode of performance.

The results were dramatic, with productivity increasing significantly. With passing time, new

organizational functions like personnel and quality control were created. Of course, in breaking down

each task to its smallest unit to find what Taylor called „„the one best way ‟‟ to do each job, the

effect was to remove human variability. Hence he lay the ground for the mass production techniques

that dominated management thinking in the first half of the twentieth century.

Henri Fayol, a mining engineer and manager by profession, defined the nature and working patterns

of the twentieth-century organization in his book, General and Industrial Management, published in

1916. In it, he laid down what he called 14 principles of management. This theory is also called the

Administrative Theory. The principles of the theory are:

1. Division of work: tasks should be divided up with employees specializing in a limited set of tasks

so that expertise is developed and productivity increased.

2. Authority and responsibility: authority is the right to give orders and entails enforcing them with

rewards and penalties; authority should be matched with corresponding responsibility.

3. Discipline: this is essential for the smooth running of business and is dependent on good

leadership, clear and fair arguments, and the judicious application of penalties.

4. Unity of command: for any action whatsoever, an employee should receive orders from one

superior only; otherwise authority, discipline, order, and stability are threatened.

5. Unity of direction: a group of activities concerned with a single objective should be co-coordinated

by a single plan under one head.

6. Subordination of individual interest to general interest: individual or group goals must not be

allowed to override those of the business.

7. Remuneration of personnel: this may be achieved by various methods but it should be fair,

encourage effort, and not lead to overpayment.

8. Centralization: the extent to which orders should be issued only from the top of the organization is

a problem which should take into account its characteristics, such as size and the capabilities of the

personnel.

9. Scalar chain (line of authority): communications should normally flow up and down the line of

authority running from the top to the bottom of the organization, but sideways communication

between those of equivalent rank in different departments can be desirable so long as superiors are

kept informed.

10. Order: both materials and personnel must always be in their proper place; people must be suited

to their posts so there must be careful organization of work and selection of personnel.

11. Equity: personnel must be treated with kindness and justice.

12. Stability of tenure of personnel: rapid turnover of personnel should be avoided because of the

time required for the development of expertise.

13. Initiative: all employees should be encouraged to exercise initiative within limits imposed by the

requirements of authority and discipline.

14. Esprit de corps: efforts must be made to promote harmony within the organization and prevent

dissension and divisiveness.

The management functions, that Fayol stated, consisted of planning, organizing, commanding, co-

coordinating and controlling. Many practicing managers, even today,

list these functions as the core of their activities. Fayol was also one of the first people to

characterize a commercial organization ‟ s activities into its basic components.

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MB0043 - Q.2 Explain the various techniques and methods used in selecting employees.

Answer:

There is no shortcut to fair and accurate evaluation of a candidate. As mentioned earlier, the hiring

procedures are therefore, generally long and multiple. Organizations are constantly evaluating the

selections tools they use to hire and keep innovating to ensure they hire quality candidates.

The following are popular methods commonly used:

1 Initial or preliminary interview

2 Application blank or blanks.

3 Check of references.

4 Skill / Psychological tests.

5 Employment interview

6 Approval by the manager.

7 Medical examination.

8 Induction or orientation.

1. Preliminary Interview: The more non-selective the recruitment programme, the more likely it is that

a preliminary interview will be required. This initial interview is usually quite short and has as its

object the elimination of the obviously unqualified. In many instances it is a over-telephone / short

face-to-face interview conducted at a desk. The facts and impressions collected are of the type

generally obtained in an initial interview. Many firms do not bother to initiate any paperwork at this

early stage. If the applicant appears to have some chance of qualifying for existing job openings, he

or she is given the application blank to complete.

2 Application Blank: An application blank is a traditional, widely accepted template for getting

information from a prospective applicant. This enables the recruiter to qualify the candidate to the

next level in the selection process and is used extensively subsequently during the selection

process. The blank aids in the interview by indicating areas of interest and discussion. It is a good

means of quickly collecting verifiable basic historical data from the candidate. It also is a excellent

document to share with the manager and with the interviewers and is a useful device for storing

information for, later reference. These templates generally carry information on biographical data,

educational attainment, work experience, salary, personal items, and other items such as names

and addresses of previous employers, references etc.

3 Check of References: The use of references is common in most selection procedures. It involves

minimum of effort and time/money. The objective is to obtain evaluation of prior employers and

professional colleagues, who have known the candidate in a professional capacity. Checks on

references are made by mail or telephone, and occasionally in person, and by using a reference

form.

4 Skill & Psychological Tests: The next step in the procedures outlined above is that of testing. The

use of tests is common and most popular in the lower levels in an organization. It serves as a

excellent qualifying criteria and in jobs that are dependent on a skill or a specific competency it is

very useful. The objectivity of the test results make it especially popular and a fair assessment of the

individual.

Most organizations do not use psychological tests. However, there is a direct relationship between

the size and firm and the use of such tests in hiring. Most of the larger companies that can afford to

have a more detailed and accurate selection procedure do utilize some form of employment testing.

It is the smaller company that frequently does not bother with tests, but places greater reliance upon

the interview.

5 Interviewing: Interviewing is probably the most widely used single method of selection. A

substantial amount of subjectivity, and therefore, unreliability, is to be expected from interviewing

when used as a tool of evaluation.

The interview consists of interaction between interviewer and applicant. If handled properly, it can be

a powerful technique in achieving accurate information and getting access to material otherwise

unavailable. Organizations aware of the challenges of using interviews have come up with a variety

of ways to overcome the subjectivity. The use of multiple rounds of interview (even upto 8-10

rounds) and use of panel interviews are some common work-around.

Four kinds of interviews for selection have been identified. These are:

1. Preliminary interview: These interviews are preliminary screening of applicants to decide whether

a more detailed interview will be worthwhile. The applicant is given job details during the interview to

afford him freedom to decide whether the job will suit him. This method saves the company’s time

and money.

2. Stress interview: Stress interviews are deliberate attempts to create pressure to observe how an

applicant performs under stress. Methods used to induce stress range from frequent interruptions

and criticism of an applicant’s opinion, to keeping silent for an extended period of time. The most

important advantage of the stress interview is that helps to demonstrate important personality

characteristics which would be difficult to observe in tension-free situations. However, stress-

inducing must be done carefully by trained and skilled interviewers.

3. Depth interview: Depth interviews cover the complete life history of the applicant and include such

areas as the candidate’s work experience, academic qualifications, health interest, and hobbies. It is

an excellent method for executive selection, performed by qualified human resources.

4. Patterned interview: Patterned interviews are a combination of direct and indirect questioning of

the applicant. The interviewer has certain clues and guidelines to areas which should be probed

deeply and the interview also encourages the candidate to express the relevant information freely.

After the patterned interview is complete, the interviewer should evaluate the candidate on the basis

of practical experience. According to R.N. McCurry and others, certain factors lead to accurate

predictions of the candidate’s suitability for a particular position. The factors are: (1) basic character

traits, (2) motivation, and (3) emotional maturity. One advantage of a patterned interview is that

systematic and chronological information is obtained, and hence this yields to statistical analysis.

6. Approval by the Manager: Following the outlined procedure, we should now be of the opinion that

a candidate who has successfully completed all steps so far should be hired. In executing the

recruitment unit screening functions, the emphasis tends to be more on formal qualifications and

general suitability. When the manager takes over, the emphasis tends to switch toward more

specifically job oriented worker characteristics such as training and relevant past experience.

7. Medical Examination: The medical examination is an employment step found in most businesses.

It can vary from a very comprehensive examination and matching of an applicant’s physical

capabilities to job requirements to a simple check of general physical appearance and well-being. In

the selection procedure the physical examination has at least three basic objectives. First, it serves

to ascertain the applicant’s physical capabilities.

The second objective of the examination is to protect the company against unwarranted claims

under workers’ compensation laws, or against lawsuits for damages. And the final objective is to

prevent communicable diseases from entering the organization.

8 Induction: Induction is concerned with introducing or orienting a new employee to the organization.

Organizations could have induction programs of duration of

1-3 days and even up to 1/3/6 months. Common objectives of an Induction program can be listed as

covering:

1. Overview of the organization, its history, its hero’s and important stories in the life of the firm so far

like mergers, acquisitions, JV’s, expansion in new countries etc…

2. Organization Vision / Mission and Objectives statement, its structure, hierarchy of the top and the

senior management, structure of the teams/divisions, focus on the division the employee/s is/are

joining

3. Overview of the HR policies and processes and introduction to the Facilities team, IT team and

other relevant teams per the location of joining.

4. Handover to the manager and induction at a team level on specificities related to the job and its

responsibilities.

Organizations also build processes by which the new employee provides feedback on the on

boarding experience and use this information to improve the Induction process. In as much as

various firms report that over half of their voluntary resignations occur within the first 6 months,

proper orientation can do much to reduce this problem and its accompanying costs

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MB0043 - Q.1Trace the phases of evolution of human resource management.

Answer: The historical background to the management techniques of human resources are in vogue since

ancient times. It’s only in the past 100 odd years that the techniques and study of human behaviour

at work has become formal and structured with certain basic practices established as core and a

host of other practices left to each organization to design and implement as per their individual

business driven practices. As per Fisher, Schonfeldt and Shaw, in their book titled Human

Resources Management, they have characterised the history of HRM as having evolved through

four broad phases, the Craft system, the scientific system, the human relations approach and the

prevalent organizational science-human resources approach.

The Craft system refers to early trends noticed in Egypt and Babylon, where skills based training

was provided to people to ensure a steady flow of craftsmen required to build huge monuments. By

the 13th century, subsequently the trend was noticed in Europe and later craft guilds evolved to

ensure not only the skill acquisition but regulate the conditions of employment, level of skill and

improved production techniques. Most relevant in the domestic industry where generations of skilled

workers trained and became experts in a particular skill.

The Scientific Management approach was a key part of the industrial revolution typical of the

nineteenth and early twentieth century. It was instilled in the principles of mass production and

organization of work – simple work skills and supervisory/managerial skills. This rapidly emerged as

the assembly line approach to managing workflow, which later Fredrick Taylor (1856-1915)

pioneered based on the philosophy that employees wanted to be used efficiently and money being

the primary motivator. Over a period of time this was proved wrong as employee dissent grew and

union issues surfaced. It was during this phase that employee welfare as a key HR practice emerged

which redressed employee issues like recreational facilities, medical program and employee

grievance systems.

The Human Relations approach was an outcome of the famous studies undertaken by US social

scientist Elton Mayo and Fritz Roethlisberger at the Western Electric’s Hawthorne plant in Chicago.

The Hawthorne Studies: As described in virtually every book written about management, the human

relations or behavioral school of management began in 1927 with a group of studies conducted at

the Hawthorne plant of Western Electric, an AT&T subsidiary. Curiously, these studies were

prompted by an experiment carried out by the company’s engineers between 1924 and 1932.

Following the scientific management tradition, these engineers were applying research methods to

answer job-related problems.

Two groups were studied to determine the effects of different levels of illumination on worker

performance. One group received increased illumination, while the other did not. A preliminary

finding was that, when illumination was increased, the level of performance also increased.

Surprisingly to the engineers, productivity also increased when the level of illumination was

decreased almost to moonlight levels. One interpretation made of these results was that the

employees involved in the experiment enjoyed being the centre of attention; they reacted positively

because management cared about them. The reason for the increase in the production was not the

physical but the psychological impact of the employee’s attitude towards the job and towards the

company. Such a phenomenon taking place in any research setting is now called the Hawthorne

effect.

As a result of these preliminary investigations, a team of researchers headed by Elton Mayo and F.J.

Roethlisberger from Harvard conducted a lengthy series of experiments extending over a six year

period. The conclusions they reached served as the bedrock of later developments in the human

relations approach to management. Among their key findings were the following:

• Economic incentives are less potent than generally believed in

influencing employees to achieve high levels of output.

• Leadership practices and work-group pressures profoundly influence employee satisfaction and

performance.

• Any factor influencing employee behaviour is embedded in a social

system. For instance, to understand the impact of pay on performance, you also have to understand

the climate that exists in the work group and the leadership style of the superior.

Leadership Style and Practices: As a consequence of the Hawthorne Studies, worker attitudes,

morale, and group influences became a concern of researchers. A notable development of the

nature occurred shortly after World War II at the University of Michigan. A group of social scientists

formed an organization, later to be called the Institute for Social Research, to study those principles

of leadership that were associated with highest productivity.

Finally the Organizational Sciences approach to human resources management has brought the

focus to the scientific process within organizations that can impact employee experience, and less

on just the individual. Today’s organizations focus on building their processes and policies and

compete to emerge as ‘preferred employers’ (best employer). It is not uncommon for competing

organizations to woo the employees through advertising more and better employee-friendly

initiatives like work-from-home jobs, careers for married couples, global work assignments and

internal job postings and world class workplace infrastructures from in-campus cricket grounds to

gymnasiums for employee wellbeing. This is the HR that we now see around us.

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MB0042 - Q2.Explain the price output determination under monopoly and oligopoly.

Answer:Price – Output determination under Monopoly

Assumptions

a. The monopoly firm aims at maximizing its total profit.

b. It is completely free from Govt. controls.

c. It charges a single & uniform high price to all customers.

It is necessary to note that the price output analysis and equilibrium of the firm and industry is one

and the same under monopoly.

As output and supply are under the effective control of the monopolist, the market forces of demand

and supply do not work freely in the determination of equilibrium price and output in case of the

monopoly market. While fixing the price and output, the monopoly firm generally considers the

following important aspects.

1. The monopolist can either fix the price of his product or its supply. He cannot fix the price and

control the supply simultaneously. He may fix the price of his product and allow supply to be

determined by the demand conditions or he may fix the output and leave the price to be determined

by the demand conditions.

2. It would be more beneficial to the monopolist to fix the price of the product rather than fixing the

supply because it would be difficult to estimate the accurate demand and elasticity of demand for the

products.

3. While determining the price, the monopolist has to consider the conditions of demand, cost of the

product, possibility of the emergence of substitutes, potential competition, import possibilities,

government control policies etc.

4. If the demand for his product is inelastic, he can charge a relatively higher price and if the demand

is elastic, he has to charge a relatively lower price.

5. He can sell larger quantities at lower price or smaller quantities at a higher price.

6. He should charge the most reasonable price which is neither too high nor too low.

7. The most ideal price is that under which the total profit of the monopolist is the highest.

Price – Output Determination under Oligopoly

It is necessary to note that there is no one system of pricing under oligopoly market. Pricing policy

followed by a firm depends on the nature of oligopoly and rivals reactions. However, we can think of

three popular types of pricing under oligopoly. They are as follows:

Independent pricing: (non-collusive oligopoly)

When goods produced by different oligopolists are more or less similar or homogeneous in nature,

there will be a tendency for the firms to fix a common pricing. A firm generally accepts the “Going

price” and adjusts itself to this price. So long as the firm earns adequate profits at this price, it may

not endeavor to change this price, as any effort to do so may create uncertainty. Hence, a firm

follows what is called is “Acceptance pricing” in the market.

When goods produced by different firms are different in nature (differentiated oligopoly), each firm

will be following an independent pricing policy as in the case of monopoly. In this case, each firm is

aware of the fact that what it does would be closely watched by other oligopolists in the industry.

However, due to product differentiation, each firm has some monopoly power. It is referred, to as

monopoly behavior of the Oligopolist. On the contrary, it may lead to Price-wars between different

firms and each firm may fix price at the competitive level. A firm tends to charge prices even below

their variable costs. They occur as a result of one firm cutting the prices and others following the

same. It is due to cut-throat competition in oligopoly. The actual price fixed by a firm may fall in

between the upper limit laid down by the monopoly price and the lower limit fixed by the competitive

price. It may be similar to that of the pricing under monopolistic competition.

However, independent pricing in reality leads to antagonism, friction, rivalry, infighting, price-wars

etc., which may bring undesirable changes in the market. The Oligopolist may realize the harmful

effects of competition and may decide to avoid all kinds of wastes. It encourages a tendency to

come together. This leads to pricing under collusion. In other words independent pricing can be

followed only for a short period and it cannot last for a long period of time.

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MB0042:1. What is Price Discrimination? Explain the basis of Price Discrimination.

Answer:The policy of price discrimination refers to the practice of a seller to charge different prices for

different customers for the same commodity, produced under a single control without corresponding

differences in cost.

Price Discrimination May Take The Following Forms: (Basis Of Price Discrimination)

1. Personal differences: This is nothing but charging different prices for the same commodity

because of personal differences arising out of ignorance and irrationality of consumers, preferences,

prejudices and needs.

2. Place: Markets may be divided on the basis of entry barriers, for e.g. price of goods will be high in

the place where taxes are imposed. Price will be low in the place where there are no taxes or low

taxes.

3. Different uses of the same commodity: When a particular commodity or service is meant for

different purposes, different rates may be charged depending upon the nature of consumption. For

e.g. different rates may be charged for the consumption of electricity for lighting, heating and

productive purposes in industry and agriculture.

4. Time: Special concessions or rebates may be given during festival seasons or on important

occasions.

5. Distance: Railway companies and other transporters, for e.g., charge lower rates per KM if the

distance is long and higher rates if the distance is short.

6. Special orders: When the goods are made to order it is easy to charge different prices to different

customers. In this case, particular consumer will not know the price charged by the firm for other

consumers.

7. Nature of the product: Prices charged also depends on nature of products e.g., railway

department charge higher prices for carrying coal and luxuries and less prices for cotton,

necessaries of life etc.

8. Quantity of purchase: When customers buy large quantities, discount will be allowed by the

sellers. When small quantities are purchased, discount may not be offered.

9. Geographical area: Business enterprises may charge different prices at the national and

international markets. For example, dumping – charging lower price in the competitive foreign

market and higher price in protected home market.

10. Discrimination on the basis of income and wealth: For e.g., A doctor may charge higher fees for

rich patients and lower fees for poor patients.

11. Special classification of consumers: For E.g., Transport authorities such as Railway and

Roadways show concessions to students and daily travelers. Different charges for I class and II

class traveling, ordinary coach and air conditioned coaches, special rooms and ordinary rooms in

hotels etc.

12. Age: Cinema houses in rural areas and transport authorities charge different rates for adults and

children.

13. Preference or brands: Certain goods will be sold under different brand names or trade marks in

order to attract customers. Different brands will be sold at different prices even though there is not

much difference in terms of costs.

14. Social and or professional status of the buyer: A seller may charge a higher price for those

customers who occupy higher positions and have higher social status and less price to common

man on the street.

15. Convenience of the buyer: If a customer is in a hurry, higher price would be charged. Otherwise

normal price would be charged.

16. Discrimination on the basis of sex: In selling certain goods, producers may discriminate between

male and female buyers by charging low prices to females.

17. If price differences are minor, customers do not bother about such discrimination.

18. Peak season and off peak season services

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MB0041 - Q.2 Pass journal entries for the following transactions

1. Madan commenced business with cash Rs. 70000

2. Purchased goods on credit 14000

3. Withdrew for private use 3000

4. Goods purchased for cash 12000

5. Paid wages 5000

Answer: 1. Capital a/c Dr. to Cash a/c.

2. Goods a/c Dr. to Creditors a/c.

3. Drawings a/c Dr. to Cash a/c

4. Goods a/c Dr. to Cash a/c

5. Wages a/c Dr. to Cash a/c.

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MB0041 - Q.1 Explain the Various accounting Concepts and Principles?

Answer:Concepts: Concepts take the form of assumptions or conditions, which guide the accountants while

preparing accounting statements.

Types of Accounting Concepts

As said earlier, concepts are the basic assumptions or conditions upon which the science of

accounting is based. There are five basic concepts of accounting, namely – business entity concept,

which is also termed as separate entity concept, going concern concept, money measurement

concept, periodicity concept and accrual concept. Each concept is discussed below.

Business Separate Entity Concept: The essence of this concept is that business is a separate entity

and it is different from the owner or the proprietor. It is an economic unit which owns its assets and

has its own obligations. This enables the business to segregate the transactions of the company

from the private transactions of the proprietor(s).

Going concern concept: The fundamental assumption is that the business entity will continue fairly

for a long time to come. There is no reason why an enterprise should be promoted for a short period

only to liquidate the business in the foreseeable future. This assumption is called “going concern

concept”.

This concept forms the basis for the distinction between expenditure that will yield benefit over a

long period of time (Fixed Assets) and expenditure whose benefit will be exhausted in the short term

(Current Asset). Similarly liabilities are classified as short term liabilities and long term liabilities.

Money Measurement Concept: All transactions of a business are recorded in terms of money. An

event or a transaction that cannot be expressed in money terms, cannot be accounted in the books

of accounts.

Periodicity Concept: The time interval for which accounts are prepared is an important factor even

though we assume long life for a business. The accounting period could be half year or even a

quarter. The financial statements should be prepared at the end of each accounting period so that

income statement shows profit or loss for that accounting period. So also a balance sheet is

prepared to depict the financial position of the business.

Accrual Concept: Profit earned or loss suffered for an accounting period is the result of both cash

and credit transactions. It is possible that certain incomes are earned but not received and similarly

certain expenses incurred but not yet paid during an accounting period. But it is relevant to consider

them while computing the financial results just because they are related to the specific accounting

period.

Accounting Principles: Accounting Principles are the rules basing on which accounting takes place

and these rules are universally accepted.

Principle of Income Recognition: According to this concept, revenue is considered as being earned

on the date on which it is realized, i.e., the date on which goods and services are transferred to

customers for cash or for promise. It should further be noted that it is the amount which the

customers are expected to pay which shall be recorded. In effect, only revenue which is actually

realized should be taken to profit and loss account. Unrealized revenue should not be taken into

consideration for determining the profit.

Principle of Expense: Expenses are different from payments. A payment becomes expenditure or an

expense only when such payment is revenue in nature and made for consideration.

Principle of Matching Cost and Revenue: Revenue earned during a period is compared with the

expenditure incurred to earn that income, whether the expenditure is paid during that period or not.

This is matching cost and revenue principle, which is important to find out the profit earned for that

period. Here costs are reported as expenses in the accounting period in which the revenue

associated with those costs is reported.

Principle of Historical Costs: This is called ‘cost’ principle. All assets are recorded at the cost of

acquisition and this cost is the basis for all subsequent accounting for the assets. The expenses and

the goods purchased are shown at the value at which they are incurred. The value of the assets is

constantly reduced by charging depreciation against their cost to present their book value in the

balance sheet.

Principle of Full Disclosure: The business enterprise should disclose relevant information to all the

parties concerned with the organization. It means that any information of substance or of interest to

the average investors will have to be disclosed in the financial statements.

Double Aspect Principle: This concept is the most fundamental one for accounting. A business entity

is an independent unit and it receives benefits from some and gives benefits to some other. Benefit

received and benefit given should always match and balance.

Modifying Principle: The modifying principle states that the cost of applying a principle should not be

more than the benefit derived from. If the cost is more than the benefit, then that principle should be

modified. This is called cost-benefit principle. There should be flexibility in adopting a principle and

the advantage out of the principle should over weigh the cost of implementing the principle.

Principle of Materiality: While important details of financial status must be informed to all relevant

parties, insignificant facts which do not influence any decisions of the investors or any interested

group, need not be communicated. Such less significant facts are not regarded as material facts.

What is material and what is not material depends upon the nature of information and the party to

whom the information is provided. While income has to be shown for income tax purposes, the

amount can be rounded off to the nearest ten and fraction does not matter. The statement of

account sent to a debtor contains all the details regarding invoices raised, amount outstanding

during a particular period. The information on debtors furnished to Registrar of Companies need not

be in detail.

Principle of Consistency: Consistency is required to help comparison of financial data from one

period to another. Once a method of accounting is adopted, it should not be changed. For instance if

stock is valued under FIFO method in first year it should be valued under the same method in the

subsequent years also. Likewise if the firm chooses to depreciate assets under diminishing balance

method, it should continue to do so year after year, unless the management takes a policy decision

to change the depreciation method. Any change in the accounting methods should be informed to

the concerned authorities with justification.

Principle of Conservatism or Prudence: Accountants follow the rule “anticipate no profits but provide

for all anticipated losses “. Whenever risk is anticipated sufficient provision should be made. The

value of investments is normally taken at cost, even if the market value is higher than the cost. If the

market value expected is lower than the cost, then provision should be made by charging profit and

creating investment fluctuation fund. This is the principle of conservatism and it does not mean that

the income or the value of assets should be intentionally under stated

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MB0040 - 2. Explain the purpose of tabular presentation of statistical data. Draft a form of tabulation to show the distribution of population according to i) Community by age, ii) Literacy , iii) sex , and iv) marital status.

Answer:

The objectives of tabulation are to:

i. Simplify complex data

ii. Highlight important characteristics

iii. Present data in minimum space

iv. Facilitate comparison

v. Bring out trends and tendencies

vi. Facilitate further analysis

Marital Status

Sex Educated Non-Educated

Age: Below 20yrs

20-40

Above 40

Below 20yrs

20-40

Above 40

Married

Male

Female

Unmarried

Male

Female

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Labels: FALL 2010 , MB0040 , Semester 1

MB0040 – STATISTICS - Q1. Why it is necessary to summarise data? Explain the approaches available to summarize the data distributions?

Answer:

Graphical representation is a good way to represent summarised data. However, graphs provide us

only an overview and thus may not be used for further analysis. Hence, we use summary statistics

like computing averages. to analyse the data. Mass data, which is collected, classified, tabulated

and presented systematically, is analysed further to bring its size to a single representative figure.

This single figure is the measure which can be found at central part of the range of all values. It is

the one which represents the entire data set. Hence, this is called the measure of central tendency.

In other words, the tendency of data to cluster around a figure which is in central location is known

as central tendency. Measure of central tendency or average of first order describes the

concentration of large numbers around a particular value. It is a single value which represents all

units.

Statistical Averages: The commonly used statistical averages are arithmetic mean, geometric mean,

harmonic mean.

Arithmetic mean is defined as the sum of all values divided by number of values and is represented

by X.

Before we study how to compute arithmetic mean, we have to be familiar with the terms such as

discrete data, frequency and frequency distribution, which are used in this unit.

If the number of values is finite, then the data is said to be discrete data. The number of occurrences

of each value of the data set is called frequency of that value. A systematic presentation of the

values taken by variable together with corresponding frequencies is called a frequency distribution of

the variable.

Median: Median of a set of values is the value which is the middle most value when they are

arranged in the ascending order of magnitude. Median is denoted by ‘M’.

Mode: Mode is the value which has the highest frequency and is denoted by Z.

Modal value is most useful for business people. For example, shoe and readymade garment

manufacturers will like to know the modal size of the people to plan their operations. For discrete

data with or without frequency, it is that value corresponding to highest frequency.

Appropriate Situations for the use of Various Averages

1. Arithmetic mean is used when:

a. In depth study of the variable is needed

b. The variable is continuous and additive in nature

c. The data are in the interval or ratio scale

d. When the distribution is symmetrical

2. Median is used when:

a. The variable is discrete

b. There exists abnormal values

c. The distribution is skewed

d. The extreme values are missing

e. The characteristics studied are qualitative

f. The data are on the ordinal scale

3. Mode is used when:

a. The variable is discrete

b. There exists abnormal values

c. The distribution is skewed

d. The extreme values are missing

e. The characteristics studied are qualitative

4. Geometric mean is used when:

a. The rate of growth, ratios and percentages are to be studied

b. The variable is of multiplicative nature

5. Harmonic mean is used when:

a. The study is related to speed, time

b. Average of rates which produce equal effects has to be found

4.9 Positional Averages

Median is the mid-value of series of data. It divides the distribution into two equal portions. Similarly,

we can divide a given distribution into four, ten or hundred or any other number of equal portions.

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MB0039 - Q 3 List out and briefly explain five “do”s and “don’t’s” for each of participants and chairperson of a meeting.

Answer:

Before the Meeting

As pointed out earlier, meetings need to be planned in advance, so that they are successful. Before

any planning can be done however, a basic question to be asked is whether to hold a meeting at all.

The answers to the following questions would help to decide whether a meeting is necessary in the

first place –

-Can the matter be decided or discussed over the telephone?

-Can the matter be expressed in writing, in the form of a memo, or an email message?

-Are key people available to attend the meeting and are they prepared?

-Is the time allotted for the meeting sufficient?

If the answers to the first two questions are yes and the answers to the other two questions are no,

there is no purpose in calling a meeting.

Once the need for a meeting has been determined, the next step is to start planning the meeting.

First of all, the type and number of participants should be decided. A problem solving meeting should

include representatives from all departments, since the decision would otherwise be incomplete.

Shareholders, who are the owners of the company, should also be included. In terms of numbers,

the size of the group could be anywhere between seven and eleven members. An exception to this

is an information sharing meeting, where the numbers could be larger, so that a maximum number of

people benefit from the information.

The second and most important step in planning a meeting is to indicate the purpose or agenda of

the meeting to the participants in advance. An agenda is essentially a list of topics that will be

discussed during a meeting. In the words of Adler and Elmhorst, “A meeting without an agenda is

like a ship at sea without a destination or compass: no one aboard knows where it is or where it is

headed.” An agenda is prepared by the Chairperson of the meeting, or the person who calls the

meeting.

During the Meeting:

The task of conducting and moderating the meeting rests with the chairperson. He or she must be

well versed with the procedures for opening the meeting, encouraging balanced participation, and

solving problems creatively, concluding the meeting and managing time efficiently. We shall discuss

each of these procedures in detail.

1. Opening the Meeting – The manner in which the meeting is opened is important, since a good

opening will ensure that the rest of the meeting will proceed smoothly. There are different ways of

opening a meeting. Generally, it is best to sum up what has been stated in the agenda – including

the goals, background information and expectations of the participants. It is also a good idea to

provide an outline of how the meeting will proceed, as well as a time budget.

2. Encouraging Balanced Participation – It is also the responsibility of the chairperson to encourage

silent members to contribute to the meeting and to moderate the dominant members, so that they do

not “hijack” the meeting. There are several techniques to encourage participation –

• Encourage Participation in the Reverse Order of Seniority – This means getting the junior members

to speak or air their opinions first. If the senior people speak first, they may feel suppressed or be

afraid to disagree with their superiors.

• Nominal Group Technique – In this method, the meeting participants are encouraged to work and

contribute their ideas independently

3. Managing Time – There is no prescribed length for a meeting. The duration of a meeting will

depend on the type and purpose of the meeting. Generally, problem-solving meetings will take

longer than other routine meetings. In any case, the chairperson should set a time budget for the

meeting, depending on the agenda and ensure adherence to the time limit.

4. Keeping the Meeting Focused – Often, a lot of time is wasted during meetings by going off track

and by discussing topics that are irrelevant. In such situations, it is the responsibility of the

chairperson, or the person moderating the discussion to make sure that the discussion remains

focused on the topics mentioned in the agenda.

5. Ensuring “Convergence” – Convergence means hearing the points of view of all the members and

then arriving at a decision. It is again the responsibility of the chairperson to bring the meeting to a

point where an opinion emerges on each item of the agenda.

6. Summing Up – This means summing up the different points of view, the decisions and the actions

to be taken. This should be done by the chairperson, identifying the role of each person on each

item of the agenda, along with a specified deadline.

Example – Chris will take the responsibility of contacting the media and sending material for

advertisements and press releases by March 13th.

7. Concluding the Meeting – The way a meeting is concluded is as important as the opening, since it

will influence the follow-up action taken on decisions made during the meeting. The chairperson

should know when and how to conclude the meeting.

The meeting should normally be concluded at the scheduled closing time, unless important issues

still remain to be discussed and members are willing to extend the meeting. Sometimes meetings

may be concluded before the closing time, when key decision makers are not present, or when

important information such as cost figures are not available.

8. Keeping “Minutes” of the Meeting – Since meetings are called to take important decisions

concerning the organization, it is important to maintain a permanent written record of the

proceedings, which can be referred to at a later stage, or serve as a guide for action. Such a record

is known as “minutes” of the meeting and may be done in an informal or formal manner, depending

on the type of meeting.

After the Meeting:

A meeting that proceeds smoothly will still not be successful, unless proper follow-up measures are

taken to ensure that the goals are fully accomplished. Follow-up may involve the following steps –

1. Plan for the Next meeting – Very few meetings is conclusive and cover all the items in the agenda

completely. It is the chairperson’s responsibility to make a note of the items that have not been

discussed and to schedule the next meeting, along with a fresh agenda. All participants must be

informed that a follow-up meeting is being planned.

2. Check Progress on Follow-up Actions – Members of the meeting may have been assigned

different responsibilities and deadlines for completion of tasks. Therefore, it is important to monitor

their progress every now and then, after the meeting is over, to ensure that the deadlines are met.

3. Do your own Groundwork – Apart from monitoring the progress of meeting participants, it is also

important that you as the chairperson finish any pending work before the next meeting.

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MB0039 - Q 2. Select a business article from any business publication. Evaluate it in terms of :a) Appropriate level of readability b) Use of jargon, slang and metaphors c)Use of simple vs. complex words. Is it well or poorly written, in your opinion? Attach a copy of the article with your response.

Answer:

World Markets Rise As Double-Dip Fears Ease: World stock markets advanced modestly Monday as

investors rode momentum from Friday, when an upbeat U.S. jobs report eased fears that the global

economy could slip back into recession.

With Wall Street closed for a holiday, however, trading was expected to remain light.

Markets took heart after official data last week showed private employers in the U.S. added 67,000

jobs in August, more than analysts expected.

The figure bolstered optimism that the U.S. will maintain a slow but steady recovery from last year's

recession and avoid another economic contraction later this year.

By mid-afternoon in Europe, Britain's FTSE 100 index was up 0.3 percent at 5,446.17, Germany's

DAX was 0.3 percent higher at 6,153.31 and France's CAC-40 was up 0.3 percent at 3,684.20.

Asian indexes closed higher and trading on Wall Street was to remain shut for Labor Day weekend

after closing higher on Friday.

With most major governments reining in economic stimulus measures and many pushing through

austerity spending cuts to reduce deficits, investors worry the global economy would be pushed into

a double dip recession, particularly as the U.S. slows down quickly.

Because the U.S. economy is the world's largest and consumer spending there accounts for a fifth of

global economic activity, the stronger-than-expected jobs data on Friday helped calm investors'

frayed nerves after weeks of worrying indicators.

"The renewed flight to safety we have witnessed over the past month is overdone and risks an

equally large reversal when the worries over a double dip subside," analysts from Rabobank said in

a report.

"As the unexciting, steady and below-trend global recovery continues, it's important not to confuse it

with a double dip recession."

Japan's benchmark Nikkei 225 stock index climbed 2.1 percent, or 187.19, to 9,301.32 and South

Korea's Kospi rose 0.7 percent to 1,792.42.

Hong Kong's Hang Seng index added 1.8 percent to 21,355.77. Australia's S&P/ASX 200 gained 0.8

percent at 4,575.50. Markets in mainland China, Taiwan, India, Indonesia and Singapore were also

higher.

The Dow Jones industrial average jumped 1.2 percent to close at 10,447.93 on Friday. The broader

Standard & Poor's 500 Index rose 1.3 percent to 1,104.51.

Shares in the U.S. ended the week in the positive, the first time that has happened in a month. The

early gains in September mark a stark turnaround from August trade, when shares fell on doubts

about the global economic recovery.

The dollar fell to 84.24 yen from 84.27 yen on Friday. The euro was slightly lower at $1.2880 from

$1.2895.

Benchmark oil for October delivery was down 40 cents at $74.20 a barrel in electronic trading on the

New York Mercantile Exchange. The contract fell 42 cents to settle at $74.60 on Friday.

Jargon refers to technical terms or specialized vocabulary. Some of the technical terms mentioned

above are “rode momentum, Kospi, FTSE, CAC, DAX, calm investors' frayed nerves, etc.” More

complex words and phrases are written in the above article and this reduces the level of readability

when read by a common man. The above article is well written, however, the reader of the article

should have a certain amount of knowledge in the field of stock trading and world financial markets.

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Labels: FALL 2010 , MB0039 , Semester 1

MB0039– BC - Q 1. Describe any situation that you experienced where the communication went wrong because the listening was faulty. Analyze the situation by explaining the type of listening barrier. . How could this barrier be overcome?

Answer: The following example illustrates an organizational barrier to communication. By

the time the message is passed down from the Chief to the lower level Executives, it is distorted

completely, so much so that the original message is interpreted differently by each level in the

organization.

Memo from CEO to Manager: Today at 11 o’clock there will be a total eclipse of the sun. This is

when the sun disappears behind the moon for 2 minutes. As this is something that cannot be seen

every day, time will be allowed for employees to view the eclipse in the parking lot. Staff should meet

in the lot at ten to eleven, when I will deliver a short speech introducing the eclipse, and giving some

background information. Safety goggles will be made available at a small cost.

Memo from Manager to Department Head: Today at ten to eleven, all staff should meet in the car

park. This will be followed by a total eclipse of the sun, which will appear for 2 minutes. For a

moderate cost, they will be made safe with goggles. The CEO will deliver a short speech beforehand

to give us all some information. This is not something that can be seen everyday.

Memo from the Department Head to Floor Manager: The CEO will today deliver a speech to make

the sun disappear for 2 minutes in the form of an eclipse. This is something that cannot be seen

everyday so staff will meet in the car park at ten or eleven. This will be safe, if you pay a moderate

cost.

Memo from Floor Manager to Supervisor: Ten or eleven staff are to go to the car park, where the

CEO will eclipse the sun for 2 minutes. This does not happen everyday. It will be safe, and as usual

it will cost you.

Memo from Supervisor to Staff: Some staff will go to the car park today to see the CEO disappear. It

is a pity this doesn’t happen everyday.

Communication was filtered or misinterpreted because of the following barriers:

Organizational Barriers – In organizations that are too hierarchical, that is, where there are multiple

“layers”, messages may have to pass through many levels before they finally reach the receiver.

Each level may add to, modify or completely change the message, so much so that it becomes

distorted by the time it reaches the intended receiver. In other words, there is likely to be loss of

meaning and the message may not reach the receiver in the same way as it was intended by the

sender.

Another type of organizational barrier is a departmental barrier. This means that each department in

an organization functions in isolation and there is no co-ordination or communication between them.

This barrier could be overcome by the following methods:

1. Encourage Feedback – Organizations should try to improve the communication system by getting

feedback from the messages already sent. Feedback can tell the managers whether the message

has reached the receiver in the intended way or not.

2. Create a Climate of Openness – A climate of trust and openness can go a long way in removing

organizational barriers to communication. All subordinates or junior employees should be allowed to

air their opinions and differences without fear of being penalized.

3. Use Multiple Channels of Communication – Organizations should encourage the use of multiple

channels of communication, in order to make sure that messages reach the intended receivers

without fail. This means using a combination of both oral and written channels, as well as formal

(official) and informal (unofficial) channels of communication. The types of channels will be

discussed in detail later, in a separate unit.

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Labels: FALL 2010 , MB0039 , Semester 1

MB0038 - Q.4 What are the factors influencing perception?

Answer: Factors Influencing Perception

Perception is our sensory experience of the world around us and involves both the recognition of

environmental stimuli and actions in response to these stimuli. Through the perceptual process, we

gain information about properties and elements of the environment that are critical to our survival.

Perception not only creates our experience of the world around us; it allows us to act within our

environment.

A number of factors operate to shape and sometimes distort perception. These factors can reside:

i) In the perceiver.

ii) In the object or target being perceived or

iii) In the context of the situation in which the perception is made.

1. Characteristics of the Perceiver: Several characteristics of the perceiver can affect perception.

When an individual looks at a target and attempts to interpret what he or she stands for, that

interpretation is heavily influenced by personal characteristics of the individual perceiver. The major

characteristics of the perceiver influencing perception are:

a) Attitudes: The perceiver’s attitudes affect perception. For example, suppose Mr. X is interviewing

candidates for a very important position in his organization – a position that requires negotiating

contracts with suppliers, most of whom are male. Mr X may feel that women are not capable of

holding their own in tough negotiations. This attitude will doubtless affect his perceptions of the

female candidates he interviews.

b) Moods: Moods can have a strong influence on the way we perceive someone. We think differently

when we are happy than we do when we are depressed. In addition, we remember information that

is consistent with our mood state better than information that is inconsistent with our mood state.

When in a positive mood, we form more positive impressions of others. When in a negative mood,

we tend to evaluate others unfavourably.

c) Motives: Unsatisfied needs or motives stimulate individuals and may exert a strong influence on

their perceptions. For example, in an organizational context, a boss who is insecure perceives a

subordinate’s efforts to do an outstanding job as a threat to his or her own position. Personal

insecurity can be translated into the perception that others are out to "get my job", regardless of the

intention of the subordinates.

d) Self-Concept: Another factor that can affect social perception is the perceivers’ self-concept. An

individual with a positive self-concept tends to notice positive attributes in another person. In

contrast, a negative self-concept can lead a perceiver to pick out negative traits in another person.

Greater understanding of self allows us to have more accurate perceptions of others.

e) Interest: The focus of our attention appears to be influenced by our interests. Because our

individual interests differ considerably, what one person notices in a situation can differ from what

others perceive. For example, the supervisor who has just been reprimanded by his boss for coming

late is more likely to notice his colleagues coming late tomorrow than he did last week. If you are

preoccupied with a personal problem, you may find it hard to be attentive in class.

f) Cognitive Structure: Cognitive structure, an individual’s pattern of thinking, also affects perception.

Some people have a tendency to perceive physical traits, such as height, weight, and appearance,

more readily. Others tend to focus more on central traits, or personality dispositions. Cognitive

complexity allows a person to perceive multiple characteristics of another person rather than

attending to just a few traits.

g) Expectations: Finally, expectations can distort your perceptions in that you will see what you

expect to see. The research findings of the study conducted by Sheldon S Zalkind and Timothy W

Costello on some specific characteristics of the perceiver reveal

• Knowing oneself makes it easier to see others accurately.

• One’s own characteristics affect the characteristics one is likely to see in others.

• People who accept themselves are more likely to be able to see favourable aspects of other

people.

• Accuracy in perceiving others is not a single skill.

These four characteristics greatly influence how a person perceives others in the environmental

situation.

Characteristics of the Target: Characteristics in the target that is being observed can affect what is

perceived. Physical appearance plays a big role in our perception of others. Extremely attractive or

unattractive individuals are more likely to be noticed in a group than ordinary looking individuals.

Motion, sound, size and other attributes of a target shape the way we see it.The perceiver will notice

the target’s physical features like height, weight, estimated age, race and gender. Perceivers tend to

notice physical appearance characteristics that contrast with the norm, that are intense, or that are

new or unusual. Physical attractiveness often colours our entire impression of another person.

Interviewers rate attractive candidates more favourably and attractive candidates are awarded

higher starting salaries.

Verbal communication from targets also affects our perception of them. We listen to the topics they

speak about, their voice tone, and their accent and make judgements based on this input. Non-

verbal communication conveys a great deal of information about the target. The perceiver deciphers

eye contact, facial expressions, body movements, and posture all in an attempt to form an

impression of the target .As a result of physical or time proximity, we often put together objects or

events that are unrelated.

For example, employees in a particular department are seen as a group. If two employees of a

department suddenly resign, we tend to assume their departures were related when in fact, they

might be totally unrelated. People, objects or events that are similar to each other also tend to be

grouped together. The greater the similarity, the greater the probability we will tend to perceive them

as a group.

Characteristics of the Situation: The situation in which the interaction between the perceiver and the

target takes place, has an influence on the perceiver’s impression of the target. E.g. meeting a

manager in his or her office affects your impression in a certain way that may contrast with the

impression you would have formed, had you met the manager in a restaurant. The strength of the

situational cues also affects social perception. Some situations provide strong cues as to appropriate

behaviour. In these situations, we assume that ±ie individual’s behaviour can be accounted for by

the situation, and that it may not reflect the individual’s disposition. This is the discounting principle in

social perception. For example, you may encounter an automobile salesperson who has a warm and

personable manner, asks you about your work and hobbies, and seems genuinely interested in your

taste in cars. Can you assume that this behaviour reflects the salesperson’s personality? You

probably cannot, because of the influence of the situation. This person is trying to sell you a car, and

in this particular situation, he probably treats all customers in this manner.

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MB0038 - Q.3 Explain the classification of personality types given by Myers -Briggs.

Answer: The Myers-Briggs Type Indicator

The MBTI classifies human beings into four opposite pairs (dichotomies), base on their

psychological opposites. These four opposite pairs result into 16 possible combinations. In MBTI,

Individuals are classified as (McCrae and Costa, 1989) :

a. Extroverted or introverted (E or I).

b. Sensing or intuitive (S or N).

c. Thinking or feeling (T or F).

d. Perceiving or judging (P or J).

• These classifications are then combined into sixteen personality types. For example:

a. INTJs are visionaries. They usually have original minds and great drive for their own ideas and

purposes. They are characterized as skeptical, critical, independent, determined, and often

stubborn.

b. ESTJs are organizers. They are realistic, logical, analytical, decisive, and have a natural head for

business or mechanics. They like to organize and run activities.

c. The ENTP type is a conceptualizer. He or she is innovative, individualistic, versatile, and attracted

to entrepreneurial ideas. This person tends to be resourceful in solving challenging problems but

may neglect routine assignments.

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MB0038 - Q.2 Discuss the methods of shaping behavior in detail. - Fall 2010

ANSWER: Shaping Behavior

When a systematic attempt is made to change individuals’ behaviour by directing their learning in

graduated steps, it is called shaping behavior. There are four methods of Shaping Behavior. They

are as follows:

1. Positive reinforcement – This is the process of getting something pleasant as a consequence of a

desired behavior, to strengthen the same behavior. For example, one get a commission, if he/she

achieves sales target.

For example,

i) Bonuses paid at the end of a successful business year are an example of positive reinforcement.

ii) Employees will work hard for a raise or a promotion.

iii) Salesmen will increase their efforts to get rewards and bonuses.

iv) Students will study to get good grades, and

v) In these examples, the rises, promotions, awards, bonuses, good grades, are positive reinforces.

2. Negative reinforcement – This is the process of having a reward taken away as a consequence of

a undesired behavior. For example, scholarship is withdrawn from the student who has not done well

on the examination. Just as people engage in behaviours in order to get positive reinforces, they

also engage in behaviours to avoid or escape unpleasant conditions. Terminating an unpleasant

stimulus in order to strengthen or increase the probability of a response is called negative

reinforcement.

3. Punishment is causing an unpleasant condition in an attempt to eliminate an undesirable

behavior. This is the process of getting a punishment as a consequence of a behavior.

According to B. F. Skinner, punishment is still the most common technique of behaviour control in

today’s life. When a child misbehaves, he is spanked. If a person does not behave as the society or

law wants him to do, he is punished by arrest and jail.

Example: Loss of pay for coming late to office. Punishment can be accomplished either by adding an

unpleasant stimulus or removing a pleasant stimulus. The added unpleasant stimulus might take the

form of criticism, a scolding, a disapproving look, a fine, or a prison sentence. The removal of a

pleasant stimulus might consist of withholding affection and attention, suspending a driver’s license,

or taking away a privilege such as watching television.

Accordingly, in situations where punishment is desirable as a means of behaviour modification,

certain guidelines would make it more effective thus minimizing its dysfunctional consequences.

a) Praise in public; punish in private.

b) Apply punishment before the undesirable behaviour has been strongly

reinforced. Thus, the punishment should immediately follow the undesirable

behaviour.

c) The punishment should focus on the behaviour and not on the person.

4. Extinction – An alternative to punishing undesirable behaviour is extension – the attempt to

weaken behaviour by attaching no consequences (either positive or negative) to it. It is equivalent to

ignoring the behaviour. The rationale for using extinction is that a behaviour not followed by any

consequence is weakened. However, some patience and time may be needed for it to be effective.

This type of reinforcement is applied to reduce undesirable behaviour, especially when such

behaviours were previously rewarded. This means that if rewards were removed from behaviours

that were previously reinforced, then such behaviours would become less frequent and eventually

die out. For example, if a student in the class is highly mischievous and disturbs the class, he is

probably asking for attention. If .the attention is given to him, he will continue to exhibit that

behaviour.

Both positive and negative reinforcement result in learning. They strengthen a response and

increase the probability of repetition. Both punishment and extinction weaken behavior and tend to

decrease its subsequent frequency