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unit 4 (4.2 costs, scale of production and break-even analysis (break even…
unit 4
4.2 costs, scale of production and break-even analysis
fixed cost
varible cost
total cost = variable + fixed
average cost = total output
break even
definition: the point when total cost is equal to the income and revenue in a firm
Economies of scale
definition: as output increases the average cost per unit decreases
Diseconomies of scale
as output increases the average cost per unit also increases
4.1 production of goods and service
production
measures the value of output so the number of products produced in a certain period of time
productivity
measured by efficiency of factors of prodction E.G. the output per person employed or the output an hour per person
lean production
when the business cuts down on resources that are not needed E.G. materials, employees, time
just-in-time
producing the exact amount of stock needed by customers, which reduces the need to hold too much stock
Kaizen
making small continuos changes to the production process in order to create more efficient production, ussually suggestions and changes origanate from workers
4.4 location decision
factors affecting location of manufacturing businesses
cost of site
businesses have to pick a location that is affordable and within the budget
government influence
the government can influence a business to choose a certain area by offering grants
proximity to raw materials
enables the business to lower its transport cost and makes delivery quicker, especially when using just-in-time production
infrastructure
business need a location that has easy access to suppliers
scale of production
if the business uses flow production they need a bigger premisses, if they use job production then its a smaller premises
availability of labour
businesses need a location that can supply them labour at a cheap cost
factors affecting the location of a service business
customers
how close customers are to the location
government influences
may be asked by the government to set up their business in a certain area to support the economy
cost of site
the size and cost of the premises determines the location of the business
accessibility for customers
easy access for customers to the location
availability of skilled labour
need to locate in a ready supply of skilled labour
4.3 achieving quality production
quality control
when an individual or department do a check at random points to see if there are any problems with the goods
advantages
specialised quality checkers, all employees focus on quality production not just one department
disadvantages
does not check all products so some poor quality ones might make it to customers, the poor quality products that are discarded lead to waste, all employees must support the plan
step 1: the raw materials are checked for quality before production starts
step 2: products are checked at random points during the production process, also known as spot checking
samples of the product are taken to check that the quality meets customer expectations
quality assurance
workers and departments check the goods to make sure no mistakes occur, eliminates the need for quality control
Disadvantages
workers may need extra training, its expensive to use workers to check quality
Advantages
helps to make sure the quality meets the needs of the customer, cheaper as it doesn't require extra quality checkers