2.4 Flashcards
(12 cards)
What is net present value?
Recognises that money has a time value e.g. £10,000 in 2 years is only worth £8260
job production?
one-off production usually tailoring specific customer needs
3 advantages of job production?
charge premium prices due to specific customer needs being met
High quality due to skilled workers
worker motivation due to varied work
3 disadvantages of job production?
Limited output
High salary of skilled workers
Time consumer for customers
what is capacity utilisation?
about the use that a business makes of its resources
formula for capacity utilisation?
current output/max possible output X 100
2 benefits of under utilisation?
business can cope with sudden increase in demand
less work stress and absenses
2 drawbacks of under utilisation?
Total costs increases as fixed costs are spread across fewer units
workers may become too used to light work, leading to them finding it hard to work harder and moral plummets
3 benefits of over utilisation?
fixed costs are spread across more units creating cheaper cost per unit –> lower prices –> increase sales
staff could get bonus / profit sharing from the high profits
more opportunities/overtime for staff on zero hour contracts
2 drawbacks of over utilisation?
Puts a strain on resources (people and machines)
risk of accidents and absence and machines breaking due to overwork
3 ways of improving capacity utilisation?
sell of unused assets such as machinery and factory space
increase sales
increase usage e.g. offer discounts for travel in off peak times
