added value Flashcards
What does operations management involve?
Managing the process of converting inputs into outputs
What is the difference between goods and services?
Goods are tangible items; services are intangible
What is added value?
The difference between the cost of purchasing raw materials and the price for which the finished good is sold
How is added value calculated?
Added value = Selling price - Cost of raw materials
What is the total cost of raw materials in the example provided?
£24
What is the selling price of the finished product in the example?
£104
What is the added value in the example?
£80
List the processes involved in making the table as mentioned in the example.
- Cutting
- Sanding
- Joining
- Painting
- Varnishing
What does operations management focus on?
The day-to-day running of a business
True or False: Added value is the same as profit.
False
What must be deducted from added value to determine profit?
Wages of the carpenter and any overheads
Does added value only apply to goods?
No, it also applies to services
Give an example of added value in a wholesale business.
Selling baked beans for more than the purchase price
How might added value be increased? (List any three methods)
- Purchasing cheaper raw materials
- Improving efficiency of the production process
- Raising the price of the product
What is a potential risk of raising the price of a product?
A fall in overall revenue due to price sensitivity
What can create added value for a product?
Achieving brand status
What is an example of offering additional services to add value?
Providing a technical helpline
How can improving customer access add value?
By providing convenience, such as drive-through outlets
