12. Allocating Resources Types of Resources The assets of the organization
Financial: debt, equity, retained earnings, and other financial holdings
Physical: buildings, equipment, raw materials, and other tangible assets
Human: experiences, skills, knowledge, and competencies
Intangible: brand names, patents, reputation, trademarks, copyrights, and databases
Structural/cultural: history, culture, work systems, working relationships, trust, and policies
Learning Objective #2
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition
Copyright © 2009 Pearson Education Canada

13. Exhibit 8.3 Techniques for Allocating Resources
Scheduling
Detailing what's to
be done, in what
order, by whom,
and when
Breakeven Analysis
Determining the
point where revenue
and costs of a
project will match
Linear Programming
Using a
mathematical
technique to solve
resource allocation
Budgeting
Creating a numerical
plan for allocating
resources to
specific activities
Revenue
Expense
Profit
Cash
Gantt
Load
PERT
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition
Copyright © 2009 Pearson Education Canada

14. Allocating Resources: Budgeting
Budgets
Numerical plans for allocating resources (e.g., revenues, expenses, and capital expenditures)
Used to improve time, space, and use of material resources
Are the most commonly used and most widely applicable planning technique for organizations
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition
Copyright © 2009 Pearson Education Canada

15. Exhibit 8.4 Types of Budgets
Variable Budget
Takes into account
the costs that vary
with volume
Fixed Budget
Assumes fixed
level of sales
or production
Cash Budget
Forecasts cash on hand
and how much will
be needed
Revenue Budget
Projects future sales
Profit Budget
Combines revenue and expense
budgets of various units to determine
each unit ’
’s profit contribution
Expense Budget
Lists primary activities
and allocates dollar
amount to each OR
Source: Based on R.S. Russell and B.W. Taylor III. Production and Operations Management (Upper Saddle River, NJ: Prentice Hall, 1995), p. 287.
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition
Copyright © 2009 Pearson Education Canada

16. Tips for Managers: Improving Budgeting
Be flexible.
Understand that goals should drive budgets—budgets should not determine goals.
Coordinate budgeting throughout the organization.
Use budgeting/planning software when appropriate.
Remember that budgets are tools.
Remember that profits result from smart management, not because you budgeted for them.
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition
Copyright © 2009 Pearson Education Canada

17. Allocating Resources: Scheduling
Schedules
Plans that allocate resources by detailing what activities have to be done, the order in which they are to be completed, who is to do each, and when they are to be completed
Represent the coordination of various activities
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition
Copyright © 2009 Pearson Education Canada

18. Allocating Resources: Charting
Gantt Chart
A bar graph with time on the horizontal axis and activities to be accomplished on the vertical axis
Shows the expected and actual progress of various tasks
Load Chart
A modified Gantt chart that lists entire departments or specific resources on the vertical axis
Allows managers to plan and control capacity utilization
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition
Copyright © 2009 Pearson Education Canada

19. Exhibit 8.5 A Gantt Chart Copy-edit manuscript Design sample pages
Draw artwork
Print first pages
Print final pages
Design cover 1 2
Month
Reporting Date
Activity 3 4
Actual progress
Goals
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition
Copyright © 2009 Pearson Education Canada

20. Exhibit 8.6 A Load Chart Ling Antonio Kim Maurice Dave Rashid 1 2
Month
Editors 3 4 5 6
Work scheduled
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition
Copyright © 2009 Pearson Education Canada

21. Allocating Resources: Analysis
Program Evaluation and Review Technique (PERT)
A flow chart diagram that depicts the sequence of activities needed to complete a project and the time or costs associated with each activity
Events: endpoints for completion
Activities: time required for each activity
Slack time: the time that a completed activity waits for another activity to finish so that the next activity, which depends on the completion of both activities, can start
Critical path: the path (ordering) of activities that allows all tasks to be completed with the least slack time
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition
Copyright © 2009 Pearson Education Canada

22. Exhibit 8.7 Steps in Developing a PERT Network
Identify every significant activity that must be achieved for a project to be completed.
Determine the order in which these events must be completed.
Diagram the flow of activities from start to finish, identifying each activity and its relationship to all other activities.
Compute a time estimate for completing each activity.
Using the network diagram that contains time estimates for each activity, determine a schedule for the start and finish dates of each activity and for the entire project.
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition
Copyright © 2009 Pearson Education Canada

23. Exhibit 8.8 Outline of Major Events for Constructing an Office Building
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition
Copyright © 2009 Pearson Education Canada

24. Exhibit 8.9 A PERT Network for Constructing an Office Building
Critical Path: A - B - C - D - G - H - J - K
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition
Copyright © 2009 Pearson Education Canada

25. Allocating Resources: Analysis
Breakeven Analysis
Is used to determine the point at which all fixed costs have been recovered and profitability begins
Fixed costs (FC)
Variable costs (VC)
Total Fixed Costs (TFC)
Price (P)
The Breakeven Formula:
Costs
Variable
Unit -
Price
Fixed
Total
Breakeven :
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition
Copyright © 2009 Pearson Education Canada

26. Exhibit 8.10 Breakeven Analysis
70 000
60 000
50 000
40 000
30 000
20 000
10 000
100
200
300
Output (in thousands)
400
500
600
Breakeven
Point
Variable Costs
Fixed Costs
Profit
Area
Total
Revenue
Loss
Costs
Revenue/Cost ($)
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition
Copyright © 2009 Pearson Education Canada

27. Allocating Resources: Analysis
Linear Programming
A technique that seeks to solve resource allocation problems using the proportional relationships between two variables
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition
Copyright © 2009 Pearson Education Canada

28. Exhibit 8.11 Production Data for Cinnamon-Scented Products
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition
Copyright © 2009 Pearson Education Canada

29. Exhibit 8.12 Graphical Solution to Linear Programming Problem
700
600
500 F
400
Quantity of Scented Candles
300 B
200 C
Feasibility
100
Region A D E
100
200
300
400
500
600
Quantity of Potpourri Bags
Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition
Copyright © 2009 Pearson Education Canada