HL Unit 2

Question 1

What are Stock Control charts

Answer 1

A visual aid to maintaining suitable levels of inventory over a period of time
Predict future stock levels in order to ensure:
- Do not run out of inventory
- Minimise inventory levels

Question 2

What is Supply chain

Answer 2

• All the steps necessary to get a finished good or service from the supplier to the customer.
• Might involve suppliers, producers, wholesalers, retailers, agents etc

A food supply chain can:
- Reduce costs
- Reduce delivery time to customers
- Improve quality (Can lead to less waste)
- Reduce waste

Question 3

What is Inventory/stock

Answer 3

When a business holds stock of
- Raw materials
- Finished goods
- Work-in-progress

Question 4

Why do businesses hold inventories

Answer 4

Need inputs for production otherwise, workers and machines are idle
Work-in-progress is still in the production line otherwise, the production line stops
Finished goods are waiting to be sold to customers otherwise, sales may be lost

Question 5

What is Just in time Production

Answer 5

• Stock control method where inputs arrive just before they are used in the production process
• Finished products are delivered to consumers as soon as they are produced
• No or limited inventory is held

Question 6

What is Just in Case Production

Answer 6

A stock management strategy whereby the firms hold high levels of stock

Question 7

Pros of JIC and JIT

Answer 7

Pros of JIC:
- Less likely to run our of stock
- More potential to buy bulk - higher economies of scale
- Can deal with a sudden increase with consumer demand

Pros of JIT:
- Lower costs from holding less stock. - Lower warehousing costs
- Lower insurance costs
- Factory space can be used for other profitable activities
- Can respond to the market quickly
- Stock does not become outdated
- Lower obsolescence costs
- Especially the case for items like food

Question 8

capacity utilization rate calculation

Answer 8

current output level/maximum output level x 100

Question 9

capacity utilization rate definition

Answer 9

Measures how much a business producers in relation to the maximum possible - Capacity utilization rate measures the percentage of an organization’s potential output that is actually being produced.

Question 10

what should you do if capacity utilization rate is low?

Answer 10

• Boost marketing efforts
• Move to a factory with lower capacity
• Rent out the unused capacity to another business

Question 11

is a high capacity utilization rate good or bad?

Answer 11

In general a high capacity utilization rate is desirable as higher production leads to higher revenue

Question 12

what does it mean if capacity utilization rate is high?

Answer 12

Machinery and employees are used all the time
- Increased possibility of breakdowns
Possibly reduced consumer service quality
- Overworked employees

Question 13

what is a defect product

Answer 13

A defect product is one which is faulty of below the required quality

Question 14

what is a defect rate - what is the calculation

Answer 14

a measurement of how many units of production are defective, or unusable, out of a specific number of units

Question 15

what is productivity rate

Answer 15

ratio of output to intput

Question 16

what is labour productivity

Answer 16

output per worker or per hour worked

Question 17

what is the calculation for labour productivity

Answer 17

Question 18

what is capital productivity

Answer 18

the measure of how well physical capital is used in providing goods and services

Question 19

what is the calculation for capital productivity

Answer 19

Question 20

how do you raise productivity

Answer 20

• train workers
• raise employee motivation
• better management

Question 21

what is operating leverage

Answer 21

a cost-accounting formula (a financial ratio) that measures the degree to which a firm or project can increase operating income by increasing revenue.
Quantity sold x (price - variable costs)/ Quantity sold x (price - variable costs) - Fixed costs

Question 22

what is cost to buy

Answer 22

• when a product is bought from a supplier
• costs are the price from the suppliers

Question 23

what is cost to make

Answer 23

• when a business makes the product themselves
• costs are from making the tires themselves, which increases fixed and variable costs

Question 24

What are the benefits of Sales forecasting

Answer 24

Benefits
- Helps decide production numbers
- Less likely to have unsold stock
- Hr planning
- How many employees are needed
- Can help with loan applications
- Predictions may help persuade banks
- Cash flow management
- Ensure enough cash flow is on hand

Question 25

What are the limitations of Sales forecasting

Answer 25

Just a prediction
- Things may change in the future
External factors may change everything
- E.g. recession
Some industries are changing very quickly
New businesses don’t have past sales numbers

Question 26

Simple Linear regression

Answer 26

Simple linear regression:
- Quantitative tool that allows us to see whether two variables are related
- We will have a depend and independent variable and see that:
- If we change the independent variable, does the dependent variable also change?
- E.g. if a business increases its market budget, will their sales increase?

Draw a table of two variables
Draw a scatter diagram
Draw line of best fit
Describe the regression

Question 27

What are the correlations

Answer 27

Strong positive correlation:
- If one variable increases, so does the other
- The data points are close to the line of best fit
Weak positive correlation:
- If the independent variable increases, so does the dependent variable
- The data points are not always super close to the line of best fit and more scatted away from eachother
Weak negative correlation:
- If one variable increases, the other variable decreases

Perfect positive is 1, strong positive is 0.9, weak positive is 0.5, no correlation is 0, weak negative is -0.5, strong negative is -0.9, perfect negative is -1

Question 28

What is research and development

Answer 28

The scientific and technical development of new products and processes

Question 29

The importance of research and development for a business

Answer 29

Advantage over competitors:
- More desirable products
- Can become future market leader
Higher customer loyalty:
- Improved brand image
- Higher prices (less price sensitivity)
- E.g. allows premium price
Creates property rights:
- Intagible assets e.g. patents
- Could potentially sell these
Lower costs of production:
- E.g. more efficient ways of production

Question 30

The importance of developing goods and services that address customers’ unmet needs (of which the customers may or may not be aware)

Answer 30

• R&D is costly and doesn’t guarantee success
• Businesses who do not do it can save money in the short term

Question 31

Intellectual property protection; copyrights, patents, trademarks

Answer 31

Intellectual property rights (IPR) is legal rights assigned to the owners of works related to human creativity.
Patent is IPR relating to inventions.
It stops anyone else making use of the invention.
A Trademark is an IPR related to brand, image, logos, name. It stops anyone using similar images.
Copyright is an IPR relating to artists, writers and musicians. It stops anyone using their work.

Question 32

Incromental innovation and Disruptive innovation

Answer 32

Incromental innovation:
- When the innovations are relatively small, and the updated product is a small improvement on the previous version
- E.g. new version of the Iphone
Disruptive innovation:
- When the innovation is much larger and can create new product or market
- E.g. the original iphone