What are the 10 factors influencing the choice of location?
Type of business, government initiatives, type of market, globilsation, cost of materials, cost of site, location of consumers. infrastructure, planning regulations and competition
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What are the 4 types of production?
Job, batch, flow and cell
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Types of production
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Define what job production is
Producing a single item or product.
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State 2 benefits of job production
1. It meets customer needs exactly. 2. The quality of work is usually high as only one product is being produced at a time
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State 2 drawbacks of job production
1. No opportunities to benefit from economies of scale 2. Higher costs of production
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Define batch production
Is used when a set procedure and stages that the production process needs to go through in order to create the product
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State 2 benefits of batch production
1. The system is able to produce in larger quantities than job production . 2. There may be some economies of scale, depending upon batch size
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State 2 limitations of using batch production
1. There may be a time delay between batches (increased downtime) 2. The space needed to store for the next batch could be used in more productive manner.
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Define flow production
Is a continuous process, utilising a conveyor belt approach whereby the product is assembled on a production line
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State 2 benefits of flow production
1. Gains from economies of scale 2. The business can divide their large-scale production and reduce costs further
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State 2 limitations of flow production
1. The initial set-up is costly - due to the vast use of technology 2. It lacks flexibility to produce a wide range of products
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Define cell production
Within the production process there are groups of employees who are responsible for the whole of the production process for a given product.
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State 2 benefits of cell production
1. As the employees are responsible for their segment of production, it provides an incentive = motivated staff 2. Opportunities for job rotation
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Size of production
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What are the 2 main types of economies of scale?
Internal and external
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What is internal economies of scale?
This is growth that takes place over time, as the business gradually increases its ability to produce more goods
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What is external economies of scale?
This is a much quicker method of growing, achieved by takeovers, mergers and acquisitions
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What are the 6 internal economies of scale?
Buying-in-bulk economies, Financial economies, Technical economies, Marketing economies, Managerial economies and Risk-bearing economies
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What is buying-in-bulk?
As the level of production increases, more supplies and components are required. This means the business should be able to negotiate a better price.
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What are financial economies?
As a business increases in size, it has more assets to use as security to obtain a loan.
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What are technical economies?
This means an alteration that increases the capacity percentage, that could lead to savings and a fall in the unit cost of transporting goods.
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What are marketing economies?
As the business increases in size, marketing economies can be gained. This is because the larger business can afford to hire specialist marketing staff who will improve the marketing of the business.
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What are managerial economies?
Spreading the costs over more units of production.
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What is risk-bearing economies?
As the business grows the availability of finance improves ether by increased profits or financial economies
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What are external economies?
Benefits are gained outside of the business when it grows.
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What are diseconomies of scale?
This is the disadvantages of operating production on a large scale. For example, as the level of production increases, the complexity of running the plant will increase.
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What is specialisation in economies-of-scale?
As a business expands they can start to afford to hire specialist staff
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What is division of labour?
This occurs when a job is broken down/divided into separate tasks.
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How do you work out productivity?
Productivity = Output / Input
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What are the other 4 ways productivity can be measured?
1. Number of goods produced / average number of employees 2. Output / Number of employees and machines 3. Sales revenue / Number or value of machines (fixed assets) 4. Sales revenue / wage bill or number of employees
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Constraints on production
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What are the main external constraints upon a business?
The economic climate. government economic policy, the market, competitors, legislation, environmental/ethical issues and suppliers.
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What is a monopoly?
Allows a firm to charge higher prices and produce quantities to suit themselves
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What is an oligopoly?
This is in a market were a few businesses tend to compete on a non-price basis. They are not competing for prices, but for customers instead.
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What is meant by the mass market?
This is when businesses decide to focus on satisfying large numbers of consumers.
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What is a niche market?
This means the number of potential customers is lower, which will lower the level of production.
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Give some examples of laws that may impact upon a business?
Health and safety issues, the manufacturing of products and waste management and food safety.
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What is standard costing?
Is the cost that the business would normally expect for the production of a particular product, or to complete a particular activity.
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State 2 advantages of standard costs:
Give a business a good idea of the target cost they should be aiming for. 2 - Gives employees a target to aim for and can alert there to problems as and when they arise.
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State 2 disadvantages of standard costs:
Collecting info to arrive at a standard cost may be time-consuming. 2- The use of standard costing, especially when tied to bonuses for workers, may result in a situation where quality is sacrificed.
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What is a cost centre?
A cost centre is specific part of a business where costs can be identified and allocated with reasonable ease.
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State 2 benefits of cost centres:
1 - The information will help highlight those departments that are performing well and those that are not.
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State 2 limitations of cost centres:
1 - The collecting and separating out of information into different cost centres, is likely to be expensive and time consuming. 2 - In some businesses it is difficult, if not impossible, to separate out the costs into different departments.
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What are profit centres?
The same concept of cost centres, however the profit coming in are ascribed to different parts of the business.
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What is absorption costing?
This is where all indirect costs or overheads are absorbed by different cost centres. This is done by output of each unit or its proportion of direct costs to allocate the overheads.
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What is contribution or marginal costing?
This is a method where by the over heads are ignored and the business considers only the variable costs of production.
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What is contribution?
Contribution is the revenue received from selling a product minus the direct costs of producing that good.
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How do you work out contribution?
Revenue - direct costs
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How do you work out C.P.U?
cpu = price - variable costs (direct costs)
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What is the main advantage of using cpu?
The advantage of contribution costing is that the overheads do not have to be allocated at all.
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Why is cpu helpful when it comes to 'special orders'?
The concept of contribution can be used to decide whether it is worthwhile for a business to take on an additional or special order.
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How do you work out profit?
Total contribution - overheads
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How do you work out break-even level by formula?
Contrbution = Fixed costs / Contribution per unit
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Give 2 benefits of using break-even
Tables & diagrams are easy to view ans comprehend and easy to interpret. 2 - This is a good tool to aid the decision-making process.
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Give 2 limitations of using break-even
1 - It is based on the utilisation of predicted figures. 2 - Direct/variable costs may change, depending upon the quantities involved (e.g petrol)
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What are fixed costs?
Costs that do not alter with output.
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What are variable costs?
Costs that do vary with output
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What are total costs?
The addition of fixed and variable costs
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How do you work out total revenue?
Price x sales/output
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What is margin of safety?
The difference between the actual level or output and the break-even level.
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Why is knowing the capacity utilisation important?
Because it affects the covering of its fixed costs.
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How do you work out capacity utilisation?
Actual or current level of output / Maximum possible output x 100%
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How can a business reach full capacity?
1 - Increase the demand for the products produced 2 - Producing different additional products with the same resources 3 - Reducing capacity
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What are some constraints on reaching full capacity?
1 -The competition within the market in relation to the size of the market - If there are many competitors competing for a limited number of consumers. 2 - The stage of the product life cycle; if demand for the product is declining,no full capacity
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State 2 benefits of operating at full capacity
As capacity utilisation increases, the average unit will fall. 2 - Less wastage of resources
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State 2 limitations of operating at full capacity
Little or no opportunity for maintenance and therefore breakdowns will mean downtime will occur. 2 - Any additional orders will be either impossible to meet or will require additional costs overtime.
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What is over-utilisation of capacity?
This can be a short term factor, when resources are pushed beyond their normal levels.
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What is stock?
Usually one of the following - 1. Raw materials 2. Work-In-Progress 3. Finished goods
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State 2 benefits of holding stock:
1. Satisfying demand 2. Copying with fluctuations in demand
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State 2 cost of holding stock:
1. Storage costs 2. Security costs
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Name 3 factors that may determine the maximum stock level:
1. The storage capacity available 2. The product 3. The level of sales
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Name 3 factors that may determine the minimum stock level:
1. The level of sales 2. The amount of time taken to deliver new stock 3. The history of unforeseen circumstances
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What is the re-order level?
The amount of time that is taken from re-order to the actual delivery, which is known as the lead time.
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What is the buffer stock level?
This is the difference of holding minimum stock level and holding no stock.
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What is lead time?
The length of time between re-ordering the stock and its arrival.
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How do you calculate the average level of stock?
Maximum stock level + minimum stock level / 2 = Average stock
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What is quality?
Quality is concerned with: - The design of the product - The reliability of the product - Ensuring that the product is properly checked while in production and not only when completed
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Why is quality important?
Quality has become more important in today's markets because consumers now expect it as standard and not an additional extra.
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What is quality assurance?
Quality assurance is concerned with the way in which a business sets out its procedures to assure its consumers that the products produced are of the right quality.
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What is TQM?
Employees are responsible for the well-being of a business and not just those that produce the product. Employees are therefore empowered to take the responsibility to take the responsibility for the work they do.
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What is benchmarking?
This is when a business compares a product with their competitors, usually their main competitor.
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What are some limitations of benchmarking?
1 - Limited access to sensitive material 2 - Difficult to find which business offers 'best practise'
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What is Kaizen?
This is the philosophy of attempting to gain 'continuous improvement'
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What are quality circles?
This is a voluntary scheme where employees meet within the working day to consider problems affect their work.
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What can 'zero defects' lead to?
By applying zero defects, a business should be able to benefit from an improvement in quality and therefore a reduction in costs, as less defects equals less waste.
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What is lean production?
Originating from Japan, this is an approach in which all employees are involved in putting into operation a series of working practises that will help the business to meet the demands of the consumer in an efficient and effective manner.
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What are the main elements of lean production?
Time - based competition, TQM, Jidoka and Kaizen
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What is Jidoka?
This is a process that can be built into the production process in ability to detect and reject faulty goods and components at the earliest possible moment.
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What is Just-In-Time production?
This is a method whereby levels f stock are low in order to reduce the amount of space required for storing - stock.
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What is Ergonomics?
Ergonomics looks at the relationship between the employee and the capital equipment being used.
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What are the 3 sectors in technology?
Primary, Secondary and Tertiary
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How has technology helped the primary sector?
Technology has transformed the way in which our raw materials are collected
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How has technology helped the secondary sector?
The use of computer-aided design and computer - aided manufacture are well-established and help to reduce the lead time for the manufactoring of products.
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How has technology helped the tertiary sector? Give 2 examples.
This has helped advertising and becoming more applicable for everyone. Examples - Newspapers and Television
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Give 2 opportunities (potential benefits) of technology:
Technology allows for a faster lead time which leads to potential benefits such as - Enables the business to be first on the market. 2. IT allows a producer to see a design in three dimensions.;
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Give 2 threats of technology:
Costs and unemployment
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What is work study?
Method study considers how a job or task should be done, and the order of tasks required to complete the job. It is also used to improve how a job is performed.
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What are the main reasons for selecting a job to under-go work study?
High costs, Creating bottlenecks, low productivity and poor quality.
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What is the process of work study?
Select the job/task for study -> the existing method is observed and noted -> Examine the observations -> Consider better alternatives -> Introduce new methods
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How do you work out basic time?
B.T = observed time x observed rating / 100
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Research and development
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What is research and development?
Research and development is essential for many business, particularly those in a highly competitive or technical market. This enables them to keep up with or keep ahead of the competition.
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Why is research and development necessary? give 2-3 examples
1. Is necessary to launch new products successfully, to ensure customers' needs. 2. Examines how to improve the production process and its efficiency.
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What are 2-3 problems related to research and development ?
The cost, the risk, copying from other businesses.
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What is the process for research and development?
1. Market research 2. Brainstorming 3. Value analysis
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What is value analysis?
1. Function 2. Cost 3. Aesthetics
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What are some of the factors affecting the level of research and development?
1. The level of competition in the market 2. The product 3. The external environment
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Other cards in this set
What are the 4 types of production?
Job, batch, flow and cell
Types of production
Define what job production is
State 2 benefits of job production