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Level 4

Section 4


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Productivity
the output measured against the inputs used to create it
Productivity Formula
Quantity of output / Quantity of input
Labor Productivity Formula
Output over a given period of time / number of employees
Buffer Inventory Level
inventory held to deal with uncertainty in customer demand and deleveries of supplies
Lean Production
techniques used by the business to cut down waste and therefore increase efficiency, for example, by reducing the time it takes for a product to be developed and become available for sale
Kaizen
a Japanese term meaning 'continuous improvement' through the elimination of waste
Just-In-Time (JIT)
a production method that involves reducing or virtually eliminating the need to hold inventories of the finished product. Supplies arrive just at the time they are needed
Job Production
where a single product is made at a time
Batch Production
where a quantity of one product is made, then a quantity of another item will be produced
Flow Production
where large quantities of a product are produced in a continuous process. It is sometimes referred to as mass production
Automation
where equipment used in the factory is controlled by a computer to carry out mechanical processes, e.g. spraying paint on a car. The production line will consist mainly of machines and there are only a few people needed to ensure everything runs smoothly
Mechanisation
where production is done by machines but operated by people, e.g. printing press.
Computer Aided Design (CAD)
a computer software that draws items being designed more quickly and allows them to be roatated to see the item from all sides. It is used for designing new products or re-styling existing ones
Computer Aided Manufacture (CAM)
where computers monitor the production process and control machines or robots on the factory floor
Computer Intergrated Manufacturing (CIM)
the total intergration of computer aided design (CAD) and computer aided manufacture (CAM). The computers that design the products are linked directly to the computers that aid the manufacturing process
Electronic Point of Sale (EPOS)
used at checkouts where the operator scans the bar code of each item.
Electronic Funds Transfer at Point of Sale (EFTPOS)
where the electronic cash register is connected to the retailer's main computer and also to banks over a wide area computer network.
Fixed Costs
costs which do not vary with the number of items sold or produced in the short run. They have to be paid whether the business is making any sales or not. They are also known as overhead costs
Variable Costs
costs which vary directly with the number of items sold or produced
Total Costs
fixed costs + variable costs
Average Cost per Unit
the total cost of production divided by the total output. Also known as unit cost
Economies of Scale
the factors that lead to a reduction in average costs as a business increases in size
Diseconomies of Scale
the factors that lead to an incease in average costs as a business grows beyond a certain size
Break-Even Level of Output
the quanity that must be produced/sold for total revenue to equal total costs
Break-Even Charts
graphs which show how costs and revenues of a business change with sales. They also show the break-even level of output
Revenue
the income during a period of time from the sale of goods and services
Total Revenue Formula
Quantity Sold x Price
Break-Even Point
the level of sales at which total costs = total revenue
Contribution
Selling Price - Variable Costs
Break-Even Formula
Total Fixed Costs / Contribution per Unit
Quality
to produce a good service which meets customer expectations
Quality Control
the checking for quality at the end of the production process, whether it is the production of a product or service
Quality Assurance
the checking for the quality standards throughout the production process, whether it is the production of a product or service
Total Quality Management (TQM)
the continuous improvement of products and processes by focusing on quality at each stage of production