Operations - efficiency, labour productivity, capacity Flashcards
what is productivity?
- labour productivity is a measure of efficiency
- it measures the output of a firm in relation to labour inputs
- it is output per worker in a time period
(hours, months, years)
what is efficiency?
- producing as quickly as possible
- with the least possible waste materials
- using the lowest possible amount of energy
- causing the lowest possible pollution
why is productivity important?
- it is a very important measure of a firm’s performance
- it has a direct impact on the cost of producing a unit of output
how do you calculate labour productivity?
output per period / no. of employees
how can a business increase labour productivity?
- improve skills of workers
- improve employee motivation
what’s a problem with increasing productivity?
- quality of products may suffer
what are unit cost?
- unit costs are the average cots of producing one unit of output
how do you calculate unit costs?
total costs / no. of units
how do you calculate fixed costs per unit?
total fixed costs / no. of units
what is capacity utilisation?
the percentage of total capacity that is actually being achieved in a given period
how do you calculate capacity utilisation?
actual level of output / max amount possible x 100
what does the maximum level of capacity depend on?
- buildings
- machinery
- labour
what is capacity utilisation often used as a measure of?
- often used as a measure of productive efficiency
- average production costs tend to fall as output rises
why do businesses operate at less that 100% capacity utilisation?
- due to lower demand
- seasonal changes in demand e.g weather
- inefficiency
how can businesses increase capacity?
- use resources more times during the working week
- buy more machinery
- increase productivity
