Production

Question 1

Added value and formula

Answer 1

The difference between the cost of purchasing raw materials and the price at which the finished goods are sold
•selling price - bought-in goods and services

Question 2

How to add value

Answer 2

•purchasing cheaper raw materials
•improve efficency of the production process- up-to-date machinery, training
•raising the price of the product
•achieving brand status
•offering additional services
•improving customer access/convenience

Question 3

Job production and examples

Answer 3

A unique product that is often made by a skilled craftsman specific to a person’s requirement
•wedding dress, tailor made suits, buildings, bridges

Question 4

Advantages of job production

Answer 4

•unique product
•likely to be high quality
•charge higher prices due to uniqueness
•specialised employees

Question 5

Disadvantages of job production

Answer 5

•can be expensive for the customer
•time-consuming
•higher wage bill- skilled employees
•target a smaller market

Question 6

Batch production and examples

Answer 6

The manufacture of a limited number of identical products- within each stage of the production process work will be completed for the whole batch before the next stage is begun
•clothes, paint, bread

Question 7

Advantages of batch production

Answer 7

•reduction in unit cost- EOS
•products can be produced in large or small quantities depending on demand
•allows for a variation in the product being produced
•quicker than job production
•use specialist machinery- doesn’t need skilled employees

Question 8

Disadvantages of batch production

Answer 8

•if there’s a faulty product in the batch the whole batch has to be written off
•time lost switching between batches- cleaning and machinery
•employees become demotivated
•initial cost of machinery
•lost production time due to breakdown of machinery

Question 9

Flow production and examples

Answer 9

Production is organised so that different operations can be carried out one after the other, in a continuous sequence as production moves continuously from one stage of the process to the next
•creme eggs, car manufacturing

Question 10

Advantages of flow production

Answer 10

•large quantities can be produced for simplified, standardised products
•unit costs are reduced
•machinery means quality and uniformity can be maintained
•can be virtually non-stop for long periods of time
•less labour is required
•faster production methods
•reduction in wage bill

Question 11

Disadvantages of flow production

Answer 11

•set up costs can be very high
•products tend to be standardised
•breakdowns can be costly
•repetitive and boring jobs

Question 12

what does the type of production used depend on

Answer 12

•the product being produced
•cost of labour
•cost of capital
•availability of money for investment
•technology
•skills of labour
•size of the market
•customer requirements

Question 13

Productivity

Answer 13

A measurement of the efficiency with which a business turns production inputs into ouput

Question 14

Labour productivity formula

Answer 14

Output (per period)
÷
Number of employees

Question 15

Capital productivity formula

Answer 15

Output
÷
Capital employed

Question 16

Advantages of high productivity

Answer 16

•increased economies of scale
•increased competitiveness
•spreading the fixed costs over higher output
•lower unit costs
•performance bonuses to employees

Question 17

How to improve productivity

Answer 17

•technological improvements
•replacing labour with machinery
•multi-skilled workforce through training
•improve motivation of workforce
•reducing absenteeism
•redesigning production processes
•job enrichment, job rotation
•adapt management styles
•adopting a ‘kaizen’ approach
•delayering and empowerment
•benchmarking

Question 18

Capital utilisation and formula

Answer 18

The use that a business makes of its resources; measured by comparing actual output with potential output at full capacity

Actual level of output
÷ x100
Maximum possible output

Question 19

Advantages of operating at full capacity

Answer 19

•average costs minimised- fixed costs spread help to raise profits
•more job security- motivation
•improves company image

Question 20

Disadvantages of operating at full capacity

Answer 20

•possible fall in quality- strain on resources if over-worked
•pressure on staff- stress, absences, accidents
•machinery may be overworked and break down
•lack of flexibility

Question 21

Problems of spare capacity

Answer 21

•demotivating of staff- bonuses are limited, no overtime, threat of redundancy
•increased costs to the business- redundancy payments
•reduced profits- limit capital for investment and research and development
•lack of return on investment capital

Question 22

Resolving the problems of capacity underutilisation (spare capacity)

Answer 22

•subcontracting
•rationalisation
•increasing the use of assets

Question 23

Subcontracting

Answer 23

Getting someone else to produce the goods for you- reduction in risk to the business

Question 24

Advantages of subcontracting

Answer 24

•reduction in capital investment required- machines, factory space, workers

Question 25

Disadvantages of subcontractors

Answer 25

•lack of control
•limit number of potential subcontractors, then prices of goods can become high
•delays in delivery leading to customer dissatisfaction

Question 26

Rationalisation

Answer 26

Concentrating on core products or services and disposing of those products or services when they aren’t seen as profitable or necessary to the business’ long-term success

Question 27

Advantages of rationalisation

Answer 27

•allows management to concentrate and focus upon the business strengths

Question 28

Disadvantages of rationalisation

Answer 28

•lost customers
•reducing the book value of assets
•implies redundancy costs