DURRAH/BUSINESS STUDIES- OPERATIONS MANAGEMENT

what is meant by value added?

the difference between the final selling price and the cost of raw materials/components

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a new machine has been introduced into a factory and 100 workers can now produce 1500 units perday, the old machine only produced 1000 units per day. how much has output per head increased?

output increased 50 units per head

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4 ways a business might increase productivity?

improve employee motivation, introduce more modern equipment, improve inventory control, train staff to be more efficient, improve quality control reducing waste.

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4 ways business might benefit from increasing productivity?

output relative to inouts increased, lower costs per unit, fewer workers maybe needed leading to low wage costs, maybe able to pay increased wages increasing motivation.

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who benefits froma business increasing its efficiency?

employees having increased wages,job security , owners and share holdershave increased profits, reduced prices can benefit consumers

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lean production?

means the use of continuous improvement and the elimination of waste and delay to achieve greater efficiency.

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2 methods of lean production?

kaizen, just-intime inventory control

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advantages of holding low levels of components and raw material inventories?

reduced storage costs, reduced expiry dates, less cash tied up in materials

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job production?

a single product is made at a time specifically to custoner's order.

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as its output expands, a business changes from job production to batch production. what are the advantages of doing this?

a larger quantity is made at one time and is therefore cheaper to produce, making it easy to plan raw material needs.

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what factors influence the type of production a business should use?

size of the market, tyoe of product demanded, technological aspects of the product

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disadvantage of holding low levels of components and raw material inventories.

raw materials need to be available on the production line when they are needed or production will cease, communication needs to be efficient so orders arrive in time, problem in delivry will lead to production stop.

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identify and explain 2 reasons why its important for a business manager to know the costs of the business?

to calculate appropriate selling price:manager will want price higher than the cost of making the product/calculate profits,loss by comparing revenue over a period.

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state one example of a fixed cost for a car manufacturer, explain why you consider it to be a fixed cost.

for example, cost of the equipment used in the factory, this will not vary with the number of cars produced in any one time period

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explain why the cost fo wool woul be a variable cost for a carpet manufacturer

wool is one of the variable cost in carpet making. the more carpets produces the higher will be the cost of wool bought in

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can you draw a break even chart to show variable costs?

if you dont practice!

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calculate break even level of production for malavi bricks lts from following data, fixed cost 40000per year, variable cost 5c per brick, selling orice 13c per brick

6000units . 1500 units

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how might this firm reduce its break even level of output?

40000/8 _ 50000 bricks

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what would be the advantage to the business of reducing the level of output at which it breaks even?

a lower break even output increases the margin of safety, it increases the range of profitable output and will usually lead to higher profits.

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identify and explain 2 possible uses of break even charts?

charts allow managers to forecast likely profit levels at different levels of output, they allow mangers to suggesst changes,eg: higher or lower prices and to see what happens to the break even point and profits if this chage is made.

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identify and explain 2 possible drawbacks to break even charts.

assuming all products made will be sold, no inventories held. assume that sales revenue and variable costs vary directly with output, this won't be if the price has to be reduced to increase sales.

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what is meant by the term total cost?

is the sum of variable costs and fixed costs at a particular level of output.

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what is meant by the term average cost?

average cost= total cost/ output. the cost of producing each unit or unit cost.

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state 3 examples of economies of scale that supermarket might gain as it expands by opening new stores

purchasing/bulk buyig economies/ financial economies, managerial economies

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2 possinble dieconomies of scale for this supermarket as it expands

poor communication between branches or head office, lack of staff motivation if they feel unimportant.

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what is meant by quality?

quality means to produce a good or service which meets consumer expectations

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2 reasons why a business needs to produce products or services which are free of defects?

helps establish brand image, builds brand loyalty, will maintain a good reputation, will help increase sales, will help attract new customers

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outline three effects on a businees if it does not retain the quality of a product or service?

lose customer to other brands, bad reputatuin, raises costs when replacements for faulty good or services required

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explain each method of achieving a quality good or service, quality contril, quality assurance and total quality management

q:control- inspection by quality control inspectors/Q: assurance-setting quality standards at each production stage/Total Q: management-all workers involved in the quality process to achieving zero defects

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2 advantages of quality control

tries to discover faults or errors/ less training required for workers

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2 disadvantages of quality contril

expensive io implement, may not find out ehy fault has occurred, increased cost if product is scrapped

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2 advantages of quality assurance

fewer customer complaints, reduced cost if fewer goods or services scrapped, tries to eliminate faults at each stage of production before customer receives product or service.

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2 disadvantages of quality assurance

expensive to train employees, relies on employees following instructions to achieve and maintain standards set

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2 advantages of quality management

quality is inbuilt into production process, it eliminates faults, no customer complaints, reduced costs as no products or services scrapped, waste from faulty items eliminated

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2 disadvantages of total quality management

expensive to train emplyees, relies on employees following TQM ideology and they may not understand it

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2 factors affecting a business location decision and explain why each of them is important?

closeness to the market or raw materials, availability of power and water, availability of goverment grants, transport links, cost of site, availability and wage rate of skilled workers.( the factors need to be discussed to gain extra marks.

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why does the type of product influence where it is produced

whether the finished product is too bulky to transport need to be considered in determining where the cheapest place to locate the factory would be.

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six factors that would affect the location of decision maufacturing business

market, raw materials, availability of labor, goverment influence, transport and communication, power, water supply, climate, cost of site.these have to be explained briefly.

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a new computer shop is opening in the local town. what factors will influence the decision to loacte on the outskirts of the town or in the centre?

such as will customers come specifically to the shop or do they want passing trade, rnt paid on the shop, availability of vacant premises, location of local competition.

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what factors affect where a business providing computer training for other business will locate?

factors such as: where the business customers are located, available vacant premisese, availability of skilled workers, rent/ taxes on the prperty, technology available.

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why do the factors afeecting the location of service sector businss differ from those afeecting a primary sector business/

factors such as ;primary sector business do not need to be near customers whereas service sector business need to provide perrsonal services and have direc access to customers, p: secto governed by nature,S:sector governed by customer needs

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why do factors affecting the location of an e-commerce business differ from those affecting a retail business

discussion of factors such as no need to locate neat customers, need to be able to access postal services, warehouse space needed, good transport network, good internal link

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2 reasons why goverment intervene in companies location decisions

to encourage/ discourage foreign investments. to stop/ encourage business locating in certain areas,eg: open in high unemployment areas/ to regulate pollution

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List three economic objectives of goverments

economic growth/ low inflation/ low unemployment

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2 disadvantages to a country's economy arising in rapid infation

makes products made within the country less competitive, foreign goods seem cheaper/ reduces people's real incomes

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why might a goverment want to achieve a lower rate of unemployment in a country

increases output and GDP/ reduces the cost of unemployment benefits paid by the goverment.

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draw a labelled diagram of the business/economic cycle and explain the boom and recession stages

do you know ?

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difference between direct and indirect taxes

direct taxes have to be paid directly from incomes of individuals and businesses/ indirect taxes are added to the prices of goods and services

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identify and explain 2 possible effects on a luxury hotel might respond to higher interest rate

they could lower prices of hotel rooms to attract cutomers whose income after payin interest has fallen/ advertise the hotel to other countries to attract foreign customers

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how would a governent decision to reduce direct taxes be likely to affexr the demand for luxury foreign holidays

lower direct taxes will increase consumers; disposable income so the demand for foreign holidays is likely to increase.

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manufacture of cell phones, many are exported, the business has expanded and borrowed money from the bank / write the affects of increased interest, reduced corporation tax, raised income tax?

will not be affected by higher income tax as customers are abroad, it will be affected by higher interest cost, reducing profits. low corporation tax will increase profit after tax, high interest may cause currency to appreciate,,expensive exports.

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firm B produces flour for bakeries, it buys its wheat from other countries, there have been changes in goverment poicies/ the affects of increased interest rates, reduced corporation taxes, raised income taxes?

higher income tax will not affect firm much as bread is essential good , if currency appreciates imported flour will become cheap, profit after tax will be higher as corporation tax has been reduced.

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economic growth?

is an increase in the real value of goods and services produced by a country , measured by increases in real GDP

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affects of increaes interest rate to a luxury hotel?

reduced demand as customers will be paying higher interest costs on loans/ if the hotel has any loans not on a fixed interest rate, the interest costs on these will increase, rducing profits

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DURRAH/BUSINESS STUDIES- OPERATIONS MANAGEMENT

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