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business > unit 4 > Flashcards

unit 4 Flashcards

1
Q

total costs

A

fixed costs+variable costs

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2
Q

total revenue

A

selling price x quantity sold

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3
Q

average costs

A

total costs/ unit produced (output)

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4
Q

breakeven level

A

FC/ SP-VC

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5
Q

breakeven def

A

the quantity of goods/ sales that must be produced in order to cover costs. for total revenue to equal total costs

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6
Q

margin of safety

A

the amount by which current sale exceed breakeven level
= current sales - BEP

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7
Q

benefits of breakeven analysis

A
  • managers can read off the graph how much profit/loss has been mad at any levels of output
  • allows to see the margin safety, risk of loss
  • allows the business to the impacts of lowering VC or increasing SP on the break-even level
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8
Q

drawbacks of breakeven analysis

A

breakeven calculations may be inaccurate if the selling price changes over time
it assumes that fixed costs doesn’t change with output

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9
Q

quality

A

to produce a good or service which meets the customer’s expectations

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10
Q

why is quality important

A
  • establishes a strong brand image
  • helps bring brand loyalty
  • maintains a good reputation
  • increases sales
  • gives competitive advantage
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11
Q

quality control

A

the checking of quality at the end of the production process. it uses quality inspectors as a way of finding faults

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12
Q

benefits of quality control

A
  • tries to eliminate faults or errors before the customer receives it
  • less training is required for the workers as inspectors are employed to check quality
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13
Q

drawbacks of quality control

A
  • identifies faulty products at the end but doesn’t find out the problem and so difficult to solve
  • as quality is checked at the end the product may have to be scrapped = higher costs
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14
Q

economies of scale definition

A

the factors that lead to the reduction of average costs as a business increases in size

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15
Q

economies of scale

A
  • purchasing
  • marketing
  • financial
  • technical
  • managerial
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16
Q

purchasing economy of scale

A

When a business grows they need to buy more raw materials/stock. If they are now buying large amounts of raw materials in bulk they can negoitate discounts from suppliers. This reduces average costs

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17
Q

marketing economy of scale

A

a business advertisement costs will be spread over more units

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18
Q

technical economy of scale

A

larger firms can afford better machinery improving efficiency and lowering average costs due to minimal manual labour required.

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19
Q

financial economy of scale

A

banks often larger firms to be less risky than smaller ones so then lower rates of interest are usually charged

20
Q

diseconomies of scale definition

A

factors that lead to an increase in average costs as a business grows beyond a certain size

20
Q

managerial economy of scale

A

large firms can afford specialist managers = increase efficiency

21
Q

diseconomies of scale

A
  • poor communication
  • lack of commitment from employees
  • weak coordination
22
Q

diseconomy of scale, poor communication

A

the larger the business the harder it is to communicate between each other due to the tall structure and lots of level of hierarchy

23
Q

diseconomy of scale, lack of commitment from employees.

A

employees may feel alienated and not valued as there is so many workers = demotivation and decrease efficiency

24
Q

diseconomy of scale, weak coordination

A

so many employees to control = employees not being coordinated and monitored which could lead to inefficiencies therefore higher costs.

25
Q

production

A

total output of a business in a given time

26
Q

productivity

A

the outputs measured against the inputs used to create it
output/ quantity input

27
Q

benefits of increasing efficiency

A
  • lower average unit costs
    =business being able to decrease their prices to be more competitive
    =business making more profit per unit
28
Q

how a business can increase efficiency

A
  • replace employees with machinery
  • motivate employees to be more efficient
  • train employees so they have more skills to become more efficient.
29
Q

why businesses hold inventories

A
  • allows a business to have enough inventory to produce their product o meet customer demand
  • allows a business to have enough inventory to have enough finished products for consumers
30
Q

lean production

A

techniques used to cut down on a waste of resources and therefore increase efficiency

31
Q

methods of lean production

A
  • just in time stock control: only ordering resources when they are needed
  • kaizen: continuous improvement through the elimination of waste
32
Q

benefits of lean prodction

A
  • less storage costs in inventory
  • less money tied up in inventory
  • quicker production of goods and services
33
Q

methods of production

A

job
batch
flow

34
Q

job production

A

when a single unique product is made at a time

35
Q

batch production

A

where large quantities of a product are produced, then a quantity of another slightly different item will be made

36
Q

flow production

A

where large quantities of an item are made in a continuous process

37
Q

benefits of job production

A
  • provides unique products leading to a unique selling point, allowing the business to charge a higher price
  • workers are doing varied tasks and so they are not bored
38
Q

drawbacks of job production

A
  • skilled labour is often used and so higher total costs
  • production takes longer= lower efficiency and productivity
39
Q

benefits of batch production

A
  • production can be easily changed causing more variety leading to more choices for customers
  • still offers some variety for workers
40
Q

drawbacks of batch production

A
  • machines have to be reset = reduction in efficiency
41
Q

benefits of flow production

A
  • high output of a standardised product
  • capital intensive = increasing efficiency
42
Q

drawbacks of flow production

A
  • boring system for workers = demotivation
  • large storage space requires = higher costs
  • if one machine breaks down it will stop the whole process decreasing output and efficiency
43
Q

factors influencing the location of a manufacturing business

A
  • proximity to suppliers
  • proximity to customers
  • government influence
  • availability of labour and wage rate
  • being close to effective transport
44
Q

factors influencing the location of service sector business

A
  • proximity to customers
  • availability of labour
  • cost of rent
  • availability of parking for customers
  • if there are competitors nearby

business (6 decks)

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