4 Flashcards
What is a critical path analysis
Working out the most efficient way to complete a project
What is the critical path
The time required to finish all activities in a project
Draw a node (for a critical path analysis)
Activity number on left side Earliest starting time upper right Latest finishing time lower right Letter between nodes shows activity Number between nodes shows duration
How to calculate flexibility of an activity on a critical path analysis
(Latest finishing time - earliest starting time) - duration of activity
If the flexibility is 0 what does this mean
The activity has no flexibility
What makes up the critical path
The activities with no flexibility
Advantages of critical path analysis
- Reduces risk and cost
- Can spot flexibility
Disadvantages of critical path analysis
- Based on estimates
- Resources May not be flexible (eg labour)
What is a Gantt chart
Chart with a series of horizontal lines showing different projects over a period of time
What does PERT stand for
Programme
Evaluation
Review
Technique
What does PERT do
Help to predict the amount of time a project will take
Formula for PERT
Optimistic time + (4xlikely time) + pessimistic time / 6
What is productivity
Measuring the output per unit of input
What is economies of scale
Unit costs fall as quantity increases
What are fixed costs
Costs that don’t change as output does
What are fixed costs also known as
Indirect costs
What are the types of economies of scale
Purchasing Production/technology Marketing Managerial Financial Risk bearing
What is purchasing EOS
Lower unit costs for buying in higher quantity
What is production/technology EOS
Spreading cost of production over more output
What is marketing EOS
Spreading cost of promotion of larger output, eg by using brand name
What is managerial EOS
Ability to employ best specialist managers
What is financial EOS
Ease of borrowing at low interest rates
What is risk bearing EOS
Spreading risk over range of products/assets etc
What is diseconomies of scale
Average costs rise as output does
Eg communication issues, lack of customer service
What is external EOS
Costs fall within an industry
Eg infrastructure
What is meant by breaking even
When revenue covers total costs
What are the 3 lines on a break even graph
Total revenue
Fixed costs
Total costs
What is the margin of safety
The difference between output and the break even point
What is the formula to work out break even point
Fixed costs/contribution
What is contribution ( when working out break even)
Selling price - variable costs
How is break even useful
- Set targets
- Justify loans
What are limitations of break even
- Estimation of figures
- Assumption that all products are sold at full price
