Business 3.4 Flashcards
What is the definition of unit cost?
The cost of producing one item
What is the definition of added value?
The difference between the basic raw materials and the selling price
How do you find added value?
Selling price - variable cost per unit
What is the formula for Unit Cost?
Total Cost / Number of Units (output)
What is the formula for Capacity Utilisation?
Current Output / Maximum Output × 100 = %
What is the formula for Labour Productivity?
Total Output / Number of employees = Units per employee
What is the definition of Capacity?
Maximum output you can produce (based on workers , resources and storage)
What is the definition of Efficiency?
Output is maximised by making the best use of resources
What is the Economies of Scale?
As units costs are falling as a firm’s increase scale and production
What is the Diseconmies of scale?
Unit cost increasing as a firm increases scale and production
What are the different types of economies of scale?
- Technical
- Marketing
- Managerial
- Financial
- Purchasing / Bulk buy
What can cause Diseconmies of Scale?
Poor Communication
Lack of Motivation
Loss of direction and co-ordination
What is the definition of capital intensive?
The use of a greater amount of Machinery Instead of Labour
What is the definition of Labour intensive?
The use of a greater amount of Labour instead of Machines
What is the definition of Spare Capacity?
When a firm’s is producing below maximum capacity (low capacity utilisation)
