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business > Chap 19 & 20 > Flashcards

Chap 19 & 20 Flashcards

1
Q

define revenue & formual

A

-money from selling goods/ services
units sold x selling prices

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2
Q

note:
fc = fixed cost
vc = variable cost
EOS = economies of sclae

A
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3
Q

formula for profit

A

-revenue - total cost
-margin of safety x unit contribution

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4
Q

define fixed cost

A

cost that doesn’t change with no. items sold
eg. rent, electricity, worker salary

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5
Q

define variable cost & formula

A

cost that varies directly with no. items sold
no. units x vc per unit
eg. textbooks for students, raw materials

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6
Q

define total cost & formula

A

-fc and vc combined
-fixed cost + variable cost
-avg cost x output

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7
Q

uses of break even graph

A

-can set on a selling price
-can choose to lower costs
-choose to stop making a product
-helps determine location of business
-can know when to accept bargains

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8
Q

goals for selling price

A

-make it low but cannot be below fixed cost
-don’t change quality

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9
Q

define avg cost for each unit & formula

A

-total cost divided by no. output
total cost/ units sold

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10
Q

uses of finding cost data

A

-set prices that is not a loss
-stop or continue production of a product
-decide on location of business

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11
Q

how to draw break even graph
need:
-fc
-vc
-total cost
-total revenue
-units sold

A

-x = units of production
-y = cost & revenue
-fc; flat line
-vc; uniform line from 0
-total cost; line from fc
-sales revenue ; uniform line from 0
-break even point; intersection btw sales revenue & total cost - above = area of profit/ below = area of loss
-break even level of output = output below break even point
-margin of safety = break even level of output to units sold
-STOP THE GRAPH AT THE NO. OF OUTPUT

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12
Q

define contribution & formula

A

-value added to product
-vc + profit
(not profit)
unit contribution:
-selling price - variable cost per unit

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13
Q

why & when should you accept bargains

A

-offered price> fc = accept
-offered price< fc = decline
-to remove stocks

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14
Q

goals for fixed & variable cost

A

-keep fixed cost as low as possible = lower prices = more profit
-keep variable cost same = quality don’t go down

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15
Q

define Economics of scale EOS

A

-factors that led to a lower avg cost as business grows
(making more units with the same amount of fct)
benefits:
-can bargain with raw materials
-unit cost is lower

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16
Q

define Diseconomies of scale DisEOS

A

-factors that led to a higher avg cost as business grows

17
Q

how to draw EOS graph

A

-x = output
-y = unit cost
-EOS = line goes down
-DIsEOC = line goes up; when fc increases = unit cost increases

18
Q

advantages of break even graphs

A

-find is expected profit/ loss
-redrawing graph shows impact of business decisions
-set on selling price
-show margin of safety
-choose to stop making a product
-helps determine location of business
-can know when to accept bargains

19
Q

disadvantages of break even graphs

A

-assumes all goods are sold
-fc is only constant if scale of production doesn’t change
-assumes that cost & revenues can be drawn in a straight line
-focuses on break even point of production than other aspects of business
-assumes selling price is constant

20
Q

define margin of safety & formula

A

-no. units that exceed break even level of output
no. units sold - break even point level of output

21
Q

factors of EOS for big businesses

A

1) purchasing economies
-buying bulk = discounts & bargaining
-buy directly from manufacturers = cheaper
2) marketing economics
-use same add worldwide
-have own delivery trucks than relying on others
3) financial economics
-easier for business to get loans or sell shares; less risky for banks = low interest rate = low avg cost
4) managing economics
-hire experts to manage business
5) technical economics
-invest in machines & technology = produce high output with less avg cost

22
Q

factors of DisEOS for big businesses

A

1) poor communication = low efficiency/ high avg cost
-hard to com. with big business
-mis com.
-com. break downs
2) lack of motivation = low efficiency
-too many workers = feel under valued
-don’t understand people personally
3) weak coordination
-too many things happening = don’t know what’s going on
-need more coordinators = more fc

23
Q

define break even level of output

A

no. units that must be sold for total cost = total revenue
-total fc/ unit contribution

24
Q

define break even point & formula

A

-when total cost = total revenue ( no profit or loss)
fc/ unit contribution

25
Q

define break even charts

A

-chart that shows cost & revenue change with sales & break even level of output

26
Q

benefits of good quality

A

-easier to get customers
-creates brand image
-brand loyalty
-better reputation
-more sales, more profits

27
Q

result of bad quality

A

-customers go to competitors
-defect products need to be fixed
-bad reputation
-sued

28
Q

ways to maintain quality

A

-quality control
-quality assurance

29
Q

define quality

A

producing good service/ goods that meet customer expectations

30
Q

define quality control & how does it work

A

-checks defects in products at the end of production by an inspector
-picks samples to check on

31
Q

advantages & disadvantages of quality control

A

advantage:;
-stop customers from getting defect products
-less training for workers
disadvantages:
-expensive = need to pay for inspectors
-high cost if need to redo products
-allows defect products to be made already
-picks a sample amount to check = assumes about other products

32
Q

define quality assurance & how does it work

A

-checks defects in product in every stage of production
-everybody checks

33
Q

advantages & disadvantages of quality assurance

A

advantages:
-stop defect products from getting to next stage of production
-less customer complaints
-less cost if products don’t need to be redone
disadvantages:
-time consuming
-expensive to train workers to check
-workers need to be committed to standard set

34
Q

define Total quality management TQM

A

-continuous improvement of products to get good quality products at every stage
-aim: 0 defected products
-everyone thinks about quality

35
Q

advantages & disadvantages of Total quality management

A

advantages
-everyone focuses on quality
-stop customers from getting defect products
-no customer complaints
-less cost = no redo of products
-less waste
-more efficient
disadvantages:
-expensive
-everyone has to follow TQM & be accountable for it

36
Q

define quality standards

A

-product has to match a certain quality that gov. specifies
-if gov. inspector thinks it is acceptable, product can have a logo saying it it approved by gov.

37
Q

define quality circles

A

-workers are in charge of quality & meet regularly to discuss problems & find solutions

38
Q

note: add formula in definition & apply context to Q

A
39
Q

note: DO NOT GO OVER THE OUTPUT LINE FOR BREAK EVEN GRAPH

A

business (8 decks)

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