exam topics Flashcards
what is the formula for sales revenue?
price x quantity sold
what is the formula for total costs?
fixed costs + variable costs
what is revenue variance?
actual revenue - budgeted revenue
what is cost variance?
actual cost - budgeted cost
what is job production?
when bespoke products are made to fit consumer needs and wants
what is flow production?
when identical items are produced in an assembly line
advantage and disadvantage of job production
✅you can charge a premium price
✅you can meet consumers needs/wants
❌ there are high Labour costs
❌time consuming
advantage and disadvantage of flow production
✅very efficient because of machinery
✅higher productivity because it is capital intensive
❌high start up costs of buying the machinery
❌if one machine breaks, the whole assembly line is delayed
what is batch production?
when products are made identically and are then modified to adjust the businesses’ needs, for example, differentiation of logos, colours, or sizes
advantages and disadvantages of batch production
✅ flexible as you slightly alter the end process
✅benefit from economies of scale
❌can be demotivating for workers
❌higher storage costs
what is a bank loan?
money borrowed from the bank
advantage and disadvantage of bank loan
✅ can get large sums of money quickly
✅can negotiate the amount of money that can be loaned
❌have to pay it back within a year (for short term loans)
❌the owner may have to offer collateral to secure it (assets if they don’t pay back in time)
what is an overdraft?
when you go into the negatives and the business lends you money until you have the income to pay it back
advantage and disadvantage of overdraft
✅leaves you to be more flexible
✅you have more working capital day to day
❌bank can ask for repayment at any time, and interest rates are high
what is crowdfunding?
when a business wants to start a project and asks large amounts of people to invest small sums of money into it
advantage and disadvantage of crowd funding
✅cheap and easy to set up
✅don’t have to pay anything back
❌you might not get enough money
what is the formula for labour productivity?
output/number of workers
how can you improve productivity?
- increasing capital (investment in machinery)
- motivating workers
- train workers to improve workforce - also for them to be specialist staff
what are some issues of increasing labour productivity?
- focusing on high levels of output can affect the overall quality of performance (customer service)
- more mistakes are more likely to occur, which could cost the business more
what are some benefits to increasing labour productivity?
- improves the competitiveness of the business as cost per unit is reduced
- with lower cost per unit, the business can then make higher profit margins or even giving their customers a more competitive price
what are benefits to increasing capital?
- the business is more efficient
- don’t have to spend as much on wages
- machinery works 24hrs a day- increased productivity
what are downfalls to increasing capital?
- the initial start up costs are high
- if machinery breaks, it can slow down production
what is quality assurance?
when you rely on the workers to maintain the quality of the business throughout production
what is quality control?
when you use inspections to upkeep quality
what is gross profit margin (calc)
gross profit/revenue x 100
what is gross profit? and give the formula after
profit made after direct costs have been met, the formula is revenue - cost of sales
how can you increase gross profit margin?
- by raising revenue by increasing price
- cutting the cost of sales (by finding a cheaper supplier)
what does gross profit margin tell you?
the gross profit made on sales/revenue
what is net profit? give the formula too
profit made from the business for the year, the formula is operating profit - tax
what is lean production?
production carried out to eliminate waste, like over production, waiting time, transportation time etc. this is through using JIT
what is just in time?
when you order stock just in time for it to be used
what is an advantage and disadvantage of just in time
- it can reduce storage costs
- however, it is more risky as any delays on transportation can put the business at risk of not having enough stock to sell
what is inflation?
the rise in general prices
what is hyperinflation?
when inflation goes above 50%
what are some advantages of holding stock?
- you are always prepared for sudden surges in demand
what are disadvantages of holding stock?
- products can get damaged or lost
- storing the products is expensive
how does inflation/hyperinflation affect a business?
- consumers would have less disposable income, and therefore businesses would be put at a disadvantage as consumers would be less likely to buy luxuries
what is market orientated mean?
when you focus on consumer wants and need rather than the products wants and needs
