a293 Flashcards
define productivity
the quantity of products a business can produce in a given amount of time using its existing resources
define efficiency
a measurement of how effective a business is at producing a good in terms of time quality and waste
define mechanisation
when machinery is used in a business but labour is still required to work the machines e.g. combine harvester
define automation
when machinery is used and a computer controls it. Workers programme and supervise the work that machines do
what does CAD stand for and what does it mean
computer aided design- using a computer to design products
what does CAM stand for and what does it mean
computer automated manufacture- the machines used to make a product are controlled by a computer
what does CIM stand for and what does it mean
computer integrated manufacture- every aspect of production including finance and stock control is controlled by a computer
advantages of technology in business:
products
-large amounts can be made which can lead to economies of large scale production
what happens to the productivity of workers when there is technology in business - advantage
it improves and the output per each worker increases and so labour costs fall for each product
why can quality of production be improved with machines - advantage
because machines are less likely to make mistakes which may attract new customers
how can technology make production flexible- advantage
machines can be programmed to produce a variety of products
why are machines safe for humans- advantage
because they can do repetitive or dangerous jobs
give a very big disadvantage for having technology in business
it is very expensive to buy and install machines
why is have technology a DISADVANTAGE for workers and the business
- workers may need training in order to learn how to work with the machines which is bad for the business as this can cost a lot of money
- the business may have to recruit skilled workers
having technology in business can make some workers …..
disadvantage
redundant
why is having technology good for the long run
becuause it may increase the sales of the business sand it will be cheap to produce each product
why is technology bad for the short run
it is very expensive
define: quality product
a product or service that meets customer’s expectations and is therefore ‘fit for purpose’
define: quality standards
the expectations of customer expressed in terms of the minimum acceptable production or service standards
why is checking quality important
- customers may not want buy ‘poor’ quality products
- customer may buy from another producer
- gives business a bad reputation
if a product is bad quality why is this bad for production
because it may disrupt production and may stop the whole thing as the business cannot let any problems happen to the other products
give 3 methods of quality control
- traditional quality control- quality control vs quality assurance
- total quality management (tqm)
- kaizen- continuous improvement
define quality control
a system of checking the quality of finished goods
what does quality control check
completed goods for faults, Quality inspectors measure or test every product, samples from each batch, or random samples.
what is the aim of quality control
to ensure the business is achieving
What happens to BreakEven if costs increase
Their breakeven goes up so you would have to sell more
What happens to BreakEven if costs go down
Breakeven goes down so you would have to sell less to cover costs
If price goes up what happens to breakeven
Breakeven goes down
If price goes DOWN what happens to Breakeven
It goes up so you would have to sell more
Why do businesses use breakeven (3)
- helps to workout forecast sales and work out how to make enough profit
- may help to get a loan from the bank
- make judgements about prices and costs
What are the limitations of breakeven (2)
- forecast figures could be different in reality
- number of competitors may change- so business may have to change price
Limitations of breakeven: why might the firm reduce prices
To sell at high levels of output and to actually sell something
Limitations it breakeven: as firm gets bigger …
As the firm gets bigger they may beed to buy more machines, get bigger premises or take on extra staff
Limitations of breakeven: products
Some products may need to be sold at different prices and BE only works for one product
What happens if a business is selling more than their breakeven level of sales
It is making a profit
If a business is selling less than their breakeven level of sales what do they make
A loss
Give 3 advantages of small scale production
- you can offer a personal service (coffee shop)
- specialised products made
- can charge lots of money
Give 2 advantages of large scale production
- average costs of producing goods will be lower than firms who produce on a small scale
- business will be able to sell goods at a lower price and make a higher profit margin on each product sold
What is economies of scale
The advantages of producing large quantities of output. These advantages should reduce unit cost
What is breakeven
A business will breakeven when it sells enough products so that its total sales revenue is equal to its total costs (the business is not making a profit or a loss)
What is TECHNICAL economies of scale
When a business saves on production costs by using better methods and equipment
What is MANAGERIAL economies of scale
When a business employs specialist managers who improve efficiency
What is FINANCIAL economies of scale
When a business does not have to pay out as much money to raise finance e.g. lower interest payments therefore lower costs
What is RISK-BREAKING economies of scale
When a business has a range of products or services, so it is not dependant on one product
What is PURCHASING economies of scale
When a business is given a discount for buying large quantities (bulk buying) therefore lower costs and higher profit margins
What is MARKETING economies of scale
When a business saves on advertising and transport costs
What is diseconomies of scale
When a business becomes too big and average costs start to rise
2 reasons why diseconomies of scale occurs
- management and control problems- decisions take a long time
- workers may lack motivation- workers may feel left out or not worthy enough (industrial relations problems)
Why is it important to calculate average cost
- helps to decide what price to charge
- to make a profit- price must be more than average cost
Lower costs =
Higher profits
Lower costs means profit can br lowered =
More sales, still make a profit and take customers away from rivals
How to reduce average costs (3)
- reduce variable costs per unit e.g find cheaper materials but i must not affect quality
- increase efficiency of labour- more jobs per hour
- achieve economies of large scale production
What are variable costs (2)
- money spent on items that are directly linked to the number of items made and sold
- variable costs DO change with output
What is variable cost per unit
The variable cost of making one product
Give 3 examples of variable costs
- raw materials
- parts and components
- stock and ingredients
What are foxed costs
- money spent on items that are needed no matter how many goods or services
- foxed costs DO NOT change with output
Give 4 examples of fixed costs
- rent
- insurance
- bills
- salaries
Give the 3 main methods of increasing sales revenue
- increase selling price
- decrease selling price to increase quantity sold
- increase quantity sold without changing the price(more advertising)
What is PEICE ELASTIC
A change in price which results in a greater change in demand (lose lots of customers)
What is PRICE INELASTIC
A change in price which results in a smaller change in demand (less customers lost or none at all)
What does lowering or raising prices depend on (3)
- number of competitors
- is the product a luxury or a necessity
- how much people spend on the product out of their income
JIT-what can be done to avoid problems with the supply of stock (4)
- hold a small buffer stock
- locate close to suppliers
- computerised order systems
- thoroughly check suppliers for reliability before working with them
3 benefits if JIT
- costs are reduced- no warehouse
- stock does not go out of date
- stock should not run out
3 problems of JIT
- huge reliance on suppliers you need excellent coordination between business and suppliers
- stock control must be excellent
- if delivery of stocks are delayed production will stop
