Production Function Flashcards
What are the factors of production
Land, entrepreneur, labour and capital
What income does land give us
Rent
What income does labour give us
Wages
What income does capital give us
Interest
What income does enterprise give us
Profit
What are the the difference systems of production
Jobbing, batch production and mass production
What are the characteristics of mass production
- Single purpose machines
- standardised products
- little variety
- assembly lines
- balanced machine capacity
What are the advantages of mass production
- Lower cost per unit
- work is done faster and cheaper
- specialisation Is cost saving (one specific thing to make)
- easy quality control
What are the disadvantages of mass production
- inflexible
- hard to deal with changes in demand
- expensive machines
- expensive to make changes to machine
What are the characteristics of jobbing
- interrupted system
- one job must finish before the next one is started
- uses general purpose machines
- jobs are seldom repeated
What are the characteristics of batch production
- in between jobbing and mass production
- products are made in batches
- machines have to be stopped and reprogrammed for new batches
What are examples of jobbing
Hospital, seamstress
What is batch production exams
Clothes dryer, fast food, trucks
What is production planning aimed at
Implementing the organisations policy on production. It is the what and how of producing the product itself
What are economies of scale
Buying in bulk, meaning discounts can be offers if large quantities are ordered because the fixed costs are split, it is a phenomenon of mass production
What are diseconomies of scale
When the benefits of buying in bulk are no longer in place because of lack of raw materials, communication, inefficient decision making or shortage of skilled labour. These cancel out the discounts because of a change in turn around time and life span of the product.
What are the different aspects relating to production planning
Optimum manufacturing plant scale, factory layout , equipment and machines in the plant, machine utilisation
What does optimum manufacturing plant scale refer to
- Size of factory
- law of increasing returns or diminishing costs
- spacing planing
What does factory layout refer to
- logical flow of production
- workstations close to materials
- use of all space
- future alterations
- safety standards compliance
What does equipment and machines in the plant refer to
significant capital investment requires careful purchases which depends on
- production system and rate of production
- price and maintenance cost
- availability of spare part
- lifespan of machine
- resale value
- training and safety
What does machine utilisation refer to
-number of operational hours per day
- used to fill capacity
- 24 hour production (shifts)
- avoiding bottlenecks
- planned maintenance (remedial, preventative and conditional)
What are the advantages of automation
- lower labour costs
- faster production time
- better quality (less human error)
- workers can be retrained to learn new skills
- less issues with labour law
What are the disadvantages of automation
- workers may lose their jobs
- worker dissatisfaction (division of labour is monotonous)
- high capital investment
- cost to retrain
- service delivery may be intermittent (eg electricity)
- productions may need further refinement after machine processing
Why is factory safety important
Any condition that jeopardises health decreases productivity
What are the factory hygiene requirements
- ventilation (windows or air vents)
- temperature and humidity control
- good lighting reduced accidents
- ablution facilities and change rooms
- canteens
- first aid basic medical assistance
What are the different factory safety requirements
- structural
- fire protection
- protection of workers against machinery
- factory legislation
- general safety and conservation of the environment
What is structural safety
Involves the construction of the building
What are the fire protection requirements
Every room must have two exits, fire escapes, firefighting equipment, warning labels for flammable materials and fire walls
What are the safety requirements for protection of workers against machinery
Provide correct safety clothes and non slip floors
What is factory legislation
All factories must be registered with the department of manpower to be inspected regularly. Compliance is required regarding installation, operation and use of machines, safety and health precautions, clothing and safety equipment, details of first aid equipment and fire prevention methods
What does general safety and environmental conservation entail
Control pollution: dispose of waste safely without harming environment
Business are going green to show the consumer to show that they are responsible
It may be part of the business corporate social responsibility
What is the occupational health and safety act
It is the duty of the employers to
- have acceptable levels of cleanliness
- where possible provide safety equipment
- provide health protection equipment
- appoint a health and safety officer per 20 employees and a committee if there are more than 20 employees
- have strategies to deal with problems that may arise
- employees are required to take reasonable care to ensure their own safety
What is quality control
Operational techniques and activities that are used to fulfil requirements for quality in a product or process
What are the advantages of quality control
- Increased sale
- reduced wastages
- improved reputation
- reduced inspection cost
- good customer relations
- uniformity in quality
What are the methods of quality control
Sampling and inspection
What is sampling
Testing a few products from the batch
What is the disadvantages of sampling
There is a risk of bad batches being accepted. More samples can reduce this risk but will increase cost of quality control
What is inspection
When each product is tested against set standard (this is used on expensive products such as a car)
What is the disadvantage of inspection
It’s time consuming and costly
What is the importance of effective costing
It is important that the cost accountant provides management with accurate cost calculations in order for management to determine a competitive selling price. The cost accountant will work closely together with the purchasing and production departments to try and minimise costs.
What is the cost of the product important to the manufacturer
- the lower the cost the higher the profit
- selling prices can only be determined once the cost price has been calculated
- management needs accurate cost calculations in order to make decisions and to forecast income
- it is important to determine the break even point
What are examples of direct costs
Direct raw material, direct labour, primary cost
What is direct raw material
Materials used directly in the production of the product (eg wood and nails to make a desk)
What is direct labour
The salaries and wages of the workers producing the product on the factory floor
What is primary costs
The sum of direct raw material and direct labour is known as the primary cost
What are variable overheads
Varies in relation to units produced. As production increases variable costs will increase. (Eg water and electricity)
What are fixed overheads
Remains the same irrespective of the output (eg rent, insurance, depreciation and indirect labour)
What is the total cost
The sum of primary cost as well as all fixed and the variable overheads
What is the cost per unit
Total cost divided by the number of units produced
What is the break even point
When the business makes neither a profit nor a loss, when volume of production increases, a profit will be made. This means income generated is equal to the total production cost
