Production, Costs, Revenue and Profit Flashcards
What are the main business objectives?
Profit (maximisation)
Sales (maximisation)
Survival
Customer satisfaction
Welfare (charity)
What are the types of costs?
FIXED COST: doesn’t change with output e.g. rent
VARIABLE COST: does change with output e.g. raw materials
TOTAL COST: fixed + variable costs
AVERAGE COST: total cost / units produced
What are the types of revenues?
TOTAL REVENUE: All revenues generated by sales of goods
AVERAGE REVENUE: Total revenue divided by the number of units sold
PROFIT: Total revenue – total costs
How do ethics and moral considerations affect businesses?
It puts pressure on businesses to operate in a moral and ethical way - this may mean increasing average costs
What is production?
The process of manufacturing a good
What is productivity?
The level of efficiency throughout the production process. (output per person)
Methods in improving productivity?
Use of technology and machinery
Training of workers
Improving morale at workplace
More effective management
Benefits of increased productivity?
Increased output - more sales
Lower costs - more profit (possibly)
Lower pricing - more competitive
Improved quality - more competitive
Higher wages for workers
Define ‘Economies of scale’
Any financial advantage that comes from increasing output which leads to a fall in average unit costs.
Types of ‘Economies of scale’?
Risk-Bearing
Marketing
Financial
Purchasing
Technical
Managerial
What is ‘Diseconomies of scale’?
Any factor which starts to lead in an increase in average cost
Types of ‘Diseconomies of scale’?
Alienation
Bureaucracy
Communication
