OCR Business Paper 2

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  • Created by: simran
  • Created on: 02-02-20 20:26
What is job production?
When a business makes a one-off product to meet the needs of a customer.
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What is an advantage of job production?
Can charge high prices, high motivation of staff.
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What is a disadvantage of job production?
Productivity can be slow, might not meet demand.
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What is batch production?
When a business uses a production line to make similar products in batches. Machinery will be changed for each batch.
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What is an advantage of batch production?
Machinery is flexible
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What is a disadvantage of job production?
Idle time- workers doing nothing whist the machinery is being changed
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What is flow production?
When a business uses a product line to produce a product, it has continuous movement.
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What is an advantage of flow production?
High levels of productivity
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What is a disadvantage of flow production?
Not flexible in demand changes
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What is automation?
Using technology to produce products.
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What is an advantage of automation?.
Can use 24/7, no human error
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What is a disadvantage of automation?
Technology may fail, high capital costs.
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What is quality control?
This involves checking quality at the end of the manufacturing process.
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What is an advantage of quality control
Cheaper and quicker
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What is a disadvantage of quality control?
Does not identify defectives quickly which could result in high wastage.
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What is quality assurance?
This involves checking quality throughout the manufacturing process.
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What is an advantage of quality assurance?
Workers are more motivated (Responsibility), deals with defective products quickly, less wastage
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What is a disadvantage of quality assurance?
Higher costs (Training of staff), slower productivity
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Why is quality important?
Reputation of the business, to gain and retain customers and reduce product returns and recalls.
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What are the 3 methods of selling to a customer?
E-commerce, face to face and telesales
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What is an advantage of selling through e-commerce?
Open 24/7
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What is a disadvantage of selling through e-commerce?
Not everyone has access to the internet
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What is an advantage of selling face to face?
Personalised experience, sell up
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What is a disadvantage of selling face to face?
Not open 24/7, may be inconvenient for customers
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What is an advantage of selling through telesales?
Can target specific people
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What is a disadvantage of selling through telesales?
Bad phone line, communication barriers.
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Why is customer services important?
To gain and retain customers
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What is good customer services?
After sales service, contribution of subject knowledge and customer engagement
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What three areas does the consumer law protect?
Satisfactory quality, as described and fit for purpose.
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What is the impact of consumer law on business?
bad reputation, bad quality and bad safety.
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What are the factors that have an influence over business location?
Costs, the proximity to the market, proximity to labour and proximity to materials.
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What is the role of procurement?
Identify goods and services to buy, choosing suppliers, ordering goods and services, receiving deliveries from suppliers.
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What is logistics? 2
The management of transportation. Planning the movement of products from manufacturer to customer.
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What is the supply chain?
Its all the businesses that are involved in the production of a product.
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What is a disadvantage of having a complex supply chain?
Loss control, late deliveries.
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What is the purpose of the finance function?
provide financial information, support business planning and decision making. Sources of finance
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Why do businesses need finance?
Establishing a new business, funding expansion, to run the business, recruitment and marketing
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What is a bank loan?
An amount of money borrowed from the bank
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What is a benefit of loan?
Repayment is spread over time
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What is a drawback of a loan?
Pay interest
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What is an overdraft?
An arrangement with the bank that allows the business to spend more money than what is has in the bank.
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What is a benefit of an overdraft?
Meets short term cash problems
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What is a drawback of an overdraft?
Pay interest
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What is trade credit?
The business does not need to pay the supplier for goods for a period of time- normally 30,60 or 90 days
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What is a benefit of trade credit?
Allows the business to try and sell the good to the customers before having to pay for them.
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What is a drawback of trade credit?
Interest charged if not paid in the time given.
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What is retained profit?
Profit that the business has already made.
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What is a benefit of using retained profit?
No interest
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What is a drawback of using retained profit?
Only can be used if you have made a profit
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what is sales of assets?
Only can be used if you have made profits
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What is a benefit of sales of assets?
No interest
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What is a drawback of sales of assets?
May lose value (Depreciation)
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What is owners' capital?
The owner uses their own savings.
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What is a benefit of using owners' capital?
No interest
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What is a drawback of using owners' capital?
May not have enough money so still need to borrow.
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What is a new partner?
A new partner contributes finance to the business
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What is a benefit of a new partner?
may bring new skills and ideas.
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What is a drawback of a new partner?
Will need to share the profits.
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What is share issue?
Selling shares to raise finance
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What is a benefit of share issue?
Can raise a lot of finance
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What is a drawback of share issue?
Could lose control of your business
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what is crowdfunding?
Raising finance through donations
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What is a drawback of crowdfunding?
May not raise a lot of money
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What is a benefit of crowdfunding?
No interest.
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What is a fixed cost?
A cost that stays the same no matter what the business output is eg rent, salaries, marketing
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What is a variable cost? Eg:
A cost that changes as output changes e.g materials, stock, wages
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What is the formula for total costs?
Fixed costs+ Variable cost (The variable cost needs to be multiplied by the numbers sold)
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What is revenue?
Money coming into the business generated by sales.
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What is the formula for revenue?
Price x Quantity
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What is profit?
The money left after costs have been taken
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What is the formula for profit?
Total costs-Revenue
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What is the formula for gross profit?
Revenue-Cost of sales (Variable costs)
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What is the formula for net profit?
Gross profit-Expenses (Fixed costs)
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What is the formula for gross profit margin?
Gross profit/revenue x100
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What is the formula for net profit margin?
Net profit/revenue x100
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What is the formula for Average rate of return?
Annual average profit/Initial costs x100 How to work out Annual average profit. Step 1-Add up the profit for all the years, Step 2-Take away the costs, Step 3-Divide by the number of years
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What is break even?
The point where the business does not make a profit or a loss.
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What is the formula for breakeven?
Fixed costs/Selling price-Variable cost
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What are the advantages of breakeven?
Can do 'what if scenarios', informs decision about stock.
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What are the disadvantages of breakeven?
Only a prediction, only works for 1 product, does not consider discounts and sales.
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Why is cash important to a business?
enables a business to meet short term debts and expenses, can pay wages.
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What is an inflow?
Money coming into the business
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What is an outflow?
Money going out of the business
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What is the formula for net cash?
Inflows-outflows flow
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What is the formula for closing balance?
Netcash flow + opening balance
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What is the advantages of a cash flow forecast?
Provides targets, can identify when there will be a cash shortage and plans can be put in place.
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What are the disadvantages of a flow forecast?
Prediction, does not take into consideration cash external influences.
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Other cards in this set

Card 2

Front

What is an advantage of job production?

Back

Can charge high prices, high motivation of staff.

Card 3

Front

What is a disadvantage of job production?

Back

Preview of the front of card 3

Card 4

Front

What is batch production?

Back

Preview of the front of card 4

Card 5

Front

What is an advantage of batch production?

Back

Preview of the front of card 5
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