production

Question 1

What is added value?

Answer 1

The difference between the cost of raw materials and the selling price of finished goods.

Question 2

what is the formula for added value

Answer 2

Selling price – Bought-in goods and services

Question 3

What is job production?

Answer 3

A method of producing a unique product specific to a customer’s needs, e.g., wedding dresses.

Question 4

what are the advantages of job production

Answer 4

Unique and high-quality product
Skilled workers enjoy their job

Question 5

what are the disadvantages of job production

Answer 5

Expensive and time-consuming
Targets a smaller market

Question 6

What is batch production?

Answer 6

Producing a limited number of identical products before switching to the next batch.

Question 7

what are the benefits of batch production?

Answer 7

Economies of scale
Quicker than job production

Question 8

what are the disadvantages of batch production

Answer 8

Time lost switching between batches
Possible cross-contamination

Question 9

What is flow production?

Answer 9

Continuous production of standardized products in a sequence.

Question 10

what are the positives of flow production

Answer 10

Large quantities produced
Lower unit costs

Question 11

what are the negatives of flow production

Answer 11

High setup costs
Jobs may become boring and repetitive

Question 12

what is productivity

Answer 12

A measure of efficiency in turning inputs into outputs.

Question 13

what is the formula for labour productivity

Answer 13

Output ÷ No. of employees

Question 14

what is the formula for capital productivity

Answer 14

Output ÷ Capital Employed

Question 15

what are the advantages of high productivity

Answer 15

Economies of scale
Lower unit costs

Question 16

How is capacity utilization calculated

Answer 16

CU=( actual output/ maximum possible output)×100

Question 16

What is capacity utilization

Answer 16

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

Question 16

What are the advantages of operating at full capacity

Answer 16

• Average costs minimized, fixed cost spread.
• increasing motivation as workers are needed so secure
• Company image improves

Question 17

What is spare capacity

Answer 17

Spare capacity is when output is less than total capacity, leading to underutilization of resources.

Question 18

What are the disadvantages of operating at full capacity

Answer 18

• Possible strain on resources and risk of breakdown.
• Overworked staff may face stress, fatigue, and accidents.
• Lack of flexibility, preventing accommodation of new customers.

Question 19

What are the problems of spare capacity

Answer 19

• Demotivation of staff.
• Increased costs (redundancies, reorganization).
• Reduced profits and investment.
• Lack of return on investment capital.

Question 20

How can spare capacity be resolved?

Answer 20

Through subcontracting, rationalization, and increasing the use of assets.

Question 21

What is subcontracting?

Answer 21

It involves getting someone else to produce goods for you, reducing the risk to the business.

Question 22

What are the advantages of subcontracting

Answer 22

Reduces capital investment.
No need to buy machines, lease space, or train workers.

Question 23

What are the disadvantages of subcontracting?

Answer 23

• Lack of control, particularly over quality.
• Limited subcontractors may increase costs.
• Delays in delivery, leading to dissatisfaction.

Question 24

What is rationalization?

Answer 24

Concentrating on core products or services while disposing of others that are not essential to long-term success.

Question 25

What are the advantages of rationalization

Answer 25

It allows management to focus on business strengths.

Question 25

What are the disadvantages of rationalization

Answer 25

• Risk of losing customers.
• Reduction in asset book value.
• Redundancy costs involved.