Business Year 11 Flashcards
What is Mechanisation
When machinery is used, but labour is still required to work the machinery.
Example of Mechanisation
A combine harvester requiring a driver
What is Automation
When machinery is used and is controlled by a computer.
Example of automation
Amazon warehouse robots
Advantages of using technology on a production line
- Large amounts can be made (economies of scale)
- Productivity (output) of the business increases
- Quality increases as there are less mistakes (more consistency), lowering costs and increasing customer satisfaction
- Better for repetitive or dangerous jobs
- Production can be flexible/varied
Disadvantages of using technology
- Redundancy may lead to problems with unions
- Staff need to be retrained for new skills or new staff are required
- Expensive initial costs
- Faults in systems can cause large disruptions
Job production definition
Involves producing each product individually
Examples of job production
Custom Bentley
Oscar dress
Bridge
Advantages of job production
- Higher quality as more time and money invested
- Workers more motivated as it is not repetitive
Disadvantages of job production
- cost of production is higher
- labour costs higher due to skilled workers
Batch production definition
When there are set stages of production. One process has to be completed before the next starts. Each batch goes through the same processes but batches slightly differ from one another.
Example of batch production
Bread
Advantages of batch production
- different demands can be met by making batches different
- can use machinery to save costs
- can produce large quantities
Disadvantages of batch production
- Demotivated workers due to repetitive tasks
- down time between stages/batches
- less economies of scale as materials change
Flow production definition
Continuous movement of items through the production processes
Advantages of flow production
- produce on mass
- economies of scale
Disadvantages of flow production
-whole production line stops if one thing breaks
Process production definition
Involves a series of automated processes, which when applied to a variety of raw materials results in a large quantity of finished product
Examples of process production
Turning crude oil into petrol
Example of flow production
Viennetta Ice-cream
Cars
Advantages of process production
- large amounts can be made
- most processes can be automated, keeping costs low
Disadvantages of process production
-expensive to set up an automated process system of production
Division of labour definition
To organisation of production into a number of specialised ‘simple’ repetitive processes
Specialisation definition
Occurs where workers specialise in carrying of simple production tasks.
Added value definition
The increased worth that a business creates for a product. It is the difference between what it costs a business to produce/supply a product and the price that it is able to charge for the product/service.
6 examples of adding value
Quality- higher quality, higher price Design and formula- contains distinctive features Convenience Speed and quality of service Branding- recognisable Unique selling point
Efficiency definition
Achieving minimum productivity with minimum wasted effort or expense
Lean production definition
A Japanese production system which helps ensure that waste is kept to a minimum. One feature of this is JIT.
Just in time JIT definition
Stocks of materials and components are not stored but are used immediately when they arrive at the factory
TQM - total quality management definition
The process where all workers are responsible for quality throughout the process of production.
This increases efficiency as you can find problems early on
Technology (how it helps efficiency)
This leads to efficiency as it minimises costs long term. Machines are less likely to make mistakes so maximises productivity
Reasons for a business to raise money
- start up business
- to invest in business growth
- to buy new equipment
- to solve cash flow problems
- to move to new premises
Internal finance
Comes from within the business e.g. retained profits
External finance
Comes from outside the business e.g. Grants
Example of internal, short term finance (up to 12months)
Cash in bank
Example of internal, medium term finance (1-3 years)
Retained profit
Sale of assets
Example of internal, long term source of finance (3+ years)
Retained profit
Owners investment
Example of external, short term source of finance
Overdraft
Trade credit
Example of external, medium term source of finance
Bank loan
Lease
Hire purchase
Grant
Example of external, long term source of finance
Bank loan Mortgage New partner Share issue Lease Hire purchase
Opportunity cost definition
The cost of missing out on something else
Example of opportunity cost to the case study
If the business uses the finance to develop new products they cannot also pay for new premises
Revenue definition
The money a business receives from selling goods/services
Variable costs definition
Costs that change as output changes
Average costs definition
All the costs of producing a particular product or service divided by the number sold
Total costs definition
All the costs of producing a particular product or service
Fixed costs definition
Costs which remain the same (short term), regardless of output
Example of variable costs
VAT is paid on goods produced and sold, this will differ depending on the output of your business
Example of fixed cost
Rent
Why are average costs useful to a business
They can then decide on a selling price
5 ways average costs can be reduced
- reduce the amount paid for material and supplies (negotiate or find new supplier)
- reduce wages (redundancy)
- increase efficiency of production (e.g. change from batch to flow)
- economies of scale
- JIT
Break even definition
The point at which sales are equal to costs
Where on a graph can you find the break even point
Where total costs and sales revenue cross over
Margin of safety definition
The difference between the actual level of output and the break-even output
Benefits of break even
- Helps to set a sales target
- Helps with loans as it may convince banks that you will be able to pay back money
- Can help you decide whether to increase prices or reduce costs
Disadvantages of break even
- Forecast figures may turn out differently
- Figures often relate to one product, a business will usually sell more than one product
- It assumes all output is sold
Definition of cash flow
The movement of money into and out of a bank account
Definition of inflows/incomes
Refers to the money received by a business
