Buisness unit 4.1, 4.2, 4.3, 4.4

Question 1

what are fixed costs?

Answer 1

the costs that do not change with the number of items sold or produced e.g rent, management salaries, loans, morgage

Question 2

what are variable costs?

Answer 2

the costs that do change with the number of items sold or produced e.g raw material costs, piece rate labour

Question 3

how do you calculate total costs?

Answer 3

total variable cots + total fixed costs

Question 4

how do you calculate average cost?

Answer 4

total costs of production/total output

Question 5

how do you calculate total revenue?

Answer 5

price x quantity sold

Question 6

how do you calculate profit?

Answer 6

total revenue - total costs

Question 7

what is the breakeven level of output ?

Answer 7

the quantity of goods that must be produced/sold for total revenue to equal total costs

Question 8

what is the breakeven formula?

Answer 8

fixed costs/contribution per unit
(contribution = selling price - variable cost per unit)

Question 9

what is the formula for contribution?

Answer 9

selling price - variable cost per unit

Question 9

what is the margin of safety?

Answer 9

the amount by which current sales exceed the breakeven point

Question 10

what is the formula of margin of safety?

Answer 10

current sales - breakeven point
(BEP = fixed costs/contribution per unit)

Question 11

what are the drawbacks of breakeven?

Answer 11

• breakeven calculations may be inaccurate if the selling price changes over time
• assumes the fixed costs never change with output, eventually they will increase if the business has to move to a bigger factory as rent costs will increase

Question 11

what are the benefits of breakeven? (3)

Answer 11

• managers can read off the graph how much profit/loss the business has made at any level of output
• allows the business to see the impact on the breakeven point if the business decides to increase the selling price/decrease variable costs
• allows business to see the margin of safety to determine if they are at high/low risk of making a loss

Question 12

what is lean production?

Answer 12

techniques used to cut down on a waste of resources leads to increase efficiency

Question 13

how to achieve lean production? (2)

Answer 13

• just in time stock control (onlt get recources when needed from suppliers)
• kaizen

Question 14

what is just in time stock control? (lean production)

Answer 14

only reciving resources from suppliers when they are needed –> reduces the amount of stock and storage costs

Question 14

whats kaizen? (lean production)

Answer 14

small groups of workers meet together regularly to discuss problems of excess waste and solutions to reduce it

Question 14

what are the benefits of lean production? (3)

Answer 14

• less storage costs of inventory
• less money tied up in inventory
• quicker production of goods and services

Question 15

whats production?

Answer 15

the total output of a buisness in a given period of time

Question 16

whats productivity?

Answer 16

output measured against the input used to create it

Question 17

how do you calculate productivity?

Answer 17

output/quantity of input

Question 18

what does efficiency lead to for your business?

Answer 18

lower average costs which means businesses can decrease their process to be more competitive or make more profit per unit

Question 19

how can a buisness increase efficiency? (3)

Answer 19

• replace employees with more machinery —> producing more goods per hour
• motivate employees to be more efficient
• train employees so that they have more skills to become more efficient

Question 20

what are the methods of production? (3)

Answer 20

• job production
• batch production
• flow production

Question 21

what is job production?

Answer 21

where a single unique product is made at a time

Question 22

what are the benefits and drawbacks of job production? (2,2)

Answer 22

benefits = - unique selling point so they can charge a higher price - workers are doing varied tasks so they are not bored, increasing motivation drawbacks = - skilled labour is often used so higher costs need to be paid to skilled labour - time consuming so lower productivity and efficiency

Question 23

what is batch production?

Answer 23

where large quantities of a product are produced, then a quantity of another slightly different item will be made,

Question 24

what are the benefits and drawbacks of batch production? 2,2

Answer 24

benefits = - production can be easily changed leading to more choices for consumers - offers some variety to workers compared to flow production drawbacks = - machines have to be reset between production batches, causing a delay and a reduction in efficiency - machinery breakdowns will cause a decrease in efficiency

Question 24

what is flow production?

Answer 24

where a large quantity of products are produced in a continuous process

Question 25

what are the benefits and drawbacks of flow production? 3,3

Answer 25

benefits = - high output of a standard product --> higher levels of sales - it is capital intensive which increases efficiency causing average unit costs to be lower - as they produce a large amount of products they will be able to benefit from E.O.S drawbacks = - very boring system for workers --> demotivating - as producing large amounts of products, will need a large storage space for inventory --> high storage costs - if one machine breaks will stop whole prices --> decreasing efficiency and output

Question 26

how technology has changed production methods and productivity --> (turn around) (7)

Answer 26

- automation - computer aided design (CAD) - computer aided manufacture (CAM) - computer integrated manufacturing (CIM) - electronic point of sale (EPOS) - electronic funds transfer at point of sale (EFTPOS) - contactless payment

Question 27

what is automation?

Answer 27

using more machinery can increase efficiency

Question 28

what is computer aided design? (CAD)

Answer 28

allows you to design products online, decreasing the costs of designing and making it physically initially

Question 29

what is computer aided manufacture (CAM)?

Answer 29

computers monitor the automated production process and robots in the factory increasing efficiency and reducing the risk of mistakes

Question 30

what is computer integrated manufacturing (CIM)?

Answer 30

CAD and CAM integrated

Question 31

what is an electronic point of sale (EPOS)?

Answer 31

allows sales assistants to scan barcodes, increasing efficiency at checkouts and so shorter ques for customers

Question 32

what is electronic funds transfer at point of sale (EFTPOS)?

Answer 32

paying by card increases efficiency at checkouts at sales and so shorter ques for customers

Question 33

what is contactless payment?

Answer 33

increases efficiency at checkout at sales and so shorter ques for customers

Question 34

what is the definition of quality?

Answer 34

tp produce a good or service which meets customer services

Question 35

why is quality important? (5)

Answer 35

1. strong brand image 2. helps bring customer loyalty 3. maintains a good reputation 4. increase in sales 5. gives competitors advantages

Question 36

what is quality control?

Answer 36

the checking for quality at the end of the production process. doee by quality inspectors

Question 37

what are the benefits and drawbacks of quality control? (2,2)

Answer 37

benefits = - tries to eliminate faults before the customer receives the product - less training is required for the workers as inspectors are employed to check quality drawbacks = - identifies faulty products at the end but doesn't find out the problem and so cant solve the problem - as quality is checked at the end, the product may have to be scrapped if it now faults, causing higher costs

Question 38

what are the benefits and drawbacks of quality assurance? 2,2

Answer 38

benefits = - tries to eliminate faults or errors at all stages of production so save costs - lower customer complaints drawbacks = - expensive to train all employees to check the quality of their own work at each production stage - relies on all employees to be committed to checking quality. if one doesn't it will impact overall quality

Question 38

what are the benefits and drawbacks of total quality management? 2,2

Answer 38

benefits = - it aims for zero faults and so this increases customer satisfaction - production costs should be lower as there is less wastage from faulty products drawbacks = - it is expensive to train al epmaolyees to check the product or service - relies on all employees to be committed to checking quality. if one doesn't, it will impact overall quality

Question 39

what is quality assurance?

Answer 39

checking the standard throughout and at all stages of the production process by all employees

Question 40

what is total quality management?

Answer 40

the continuous improvement of products and processes by focusing on quality at every stage of production (aim is zero faults)

Question 40

what are the factors influencing the location of a manufacturing business? 5

Answer 40

- proximity to customers, reduce transportation costs - proximity to suppliers/raw materials, reduce transport costs - government influence, government grants or fewer laws - availability of skilled labour and the wage rate of the labour - being close to transport to reduce transportation costs

Question 41

what are the factors influencing the location of a service business (retail) 5

Answer 41

- proximity to customers (be in the centre to attract customers) - availability of labour - cost of rent - available parking for nearby customers - if there are competitors nearby

Question 42

what are the factors to condider when deciding which country to operate in? 5

Answer 42

- new markets overseas - wage rates in that country and availability of skilled labour - rent and corporation taxes in that country - availability of government grants - tariffs and quotas

Question 43

what are the roles of legal controls of location decisions? 2

Answer 43

- grants to encourage firms to locate in a certain area - planning permission regulations