Production in Operation Management Quiz

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Questions and Answers

What is production?

The process of converting inputs such as land, labor, and capital into saleable goods.

What is the formula for labor productivity?

Productivity = total output / total employee

What is JIT in production?

JIT stands for Just-In-Time, where the business holds no inventories and items arrive from suppliers just as they are needed.

What does Kaizen mean?

Kaizen is a Japanese term meaning 'continuous improvement.' Signup and view all the answers

What are the benefits of Lean production (JIT + Kaizen)?

Benefits include quickly bringing new products, improved quality, waste elimination, reduced inventory costs, and increased profitability. Signup and view all the answers

What are the features of flow production?

Large quantities, standardized, unskilled workers, automation, high inventories of raw materials and work in progress. Signup and view all the answers

Define 'Economies of Scale' and list the types of economies of scale.

Economies of Scale refer to the cost advantages that a business can achieve due to expansion. Types include financial, managerial, marketing, purchasing, and technical economies. Signup and view all the answers

What is the purpose of a Break-even chart?

To show the relationship between a business's revenue and costs at different levels of output. Signup and view all the answers

List three benefits of Break-even analysis.

Easy to construct and interpret, provides useful information on covering costs, helps in decision-making. Signup and view all the answers

What factors should firms consider when choosing a production method?

Selling amount, product costs, variety of products, size of the market, type of good. Signup and view all the answers

What are the key inputs involved in the production process?

Land, labor, and capital Signup and view all the answers

Explain the concept of JIT in production.

Just-In-Time (JIT) is a method where the business holds no inventories and goods arrive from suppliers just as they are needed, and are delivered to the customer as soon as they are finished. Signup and view all the answers

What is Kaizen and how does it relate to production improvement?

Kaizen is a Japanese term meaning 'continuous improvement'. It involves making suggestions to improve quality or productivity. Signup and view all the answers

List three reasons for holding inventories in production.

To continue production planning, meet orders and make sales, and benefit from economies of scale. Signup and view all the answers

Explain the concept of Lean production and its benefits.

Lean production, combining JIT and Kaizen, aims to quickly bring new products, improve quality, eliminate waste, reduce inventory costs, and increase profits. Signup and view all the answers

Explain the relationship between fixed cost, variable cost, and total cost in production.

Total cost is the sum of fixed cost and total variable cost. Fixed cost remains constant regardless of production volume, while variable cost changes with the level of output. Signup and view all the answers

Discuss the types of economies of scale and provide examples for each type.

Types of economies of scale include financial economies, managerial economies, marketing economies, purchasing economies, and technical economies. For example, financial economies arise from access to cheaper sources of finance due to the size of the organization. Signup and view all the answers

What are the causes of diseconomies of scale in production?

Diseconomies of scale can result from poor communication, lack of commitment, and lack of coordination as organizations grow larger. Signup and view all the answers

Explain the significance of break-even analysis for businesses.

Break-even analysis helps businesses determine the level of sales needed to cover all costs and start making a profit. It also aids in decision-making related to pricing, cost changes, and profitability. Signup and view all the answers

What are the benefits and limitations of break-even analysis?

Benefits of break-even analysis include ease of construction, providing useful information on sales volumes and profitability, and assisting in decision-making. Limitations include the assumption of linear relationships and complexity in separating costs. Signup and view all the answers

Study Notes

Production Methods

Job production: production of items one at a time, completed before another, needs highly skilled workers and specialized equipment.
Batch production: production of goods in batches, each batch passes through one stage of production before moving onto the next stage.
Flow production: production of very large quantities of identical goods using a continuously moving process, moving continuously along a production line, required for high consumer demand.

Features of Flow Production

Large quantities
Standardized products
Unskilled workers
Automation
High large inventories of raw materials and work in progress

Benefits and Limitations of Production Methods

Factors to consider when choosing a production method: selling amount, product costs, variety of expectation, size of the market, type of good.
Advantages and disadvantages to businesses, workers, and consumers of using technology.

Cost Classification

Fixed cost
Variable cost
Total cost: fixed cost + total variable cost
Average cost

Economies of Scale

Types: financial, managerial, marketing, purchasing, technical economies.
Causes of diseconomies of scale: poor communication, lack of commitment, lack of coordination.

Break-Even Analysis

Break-even point: level of output where revenue equals total cost, where the business is making neither profit nor loss.
Reasons for using break-even: to calculate how many units to sell before making profit, to calculate the effect on profit of increasing or decreasing price, to calculate the effect on profits of an increase or decrease in business costs.
Purpose of Break-Even chart: to show the relationship between business's revenue and costs at different levels of output.

Benefits and Limitations of Break-Even Analysis

Benefits: easy to construct and interpret, provides useful information about output, shows the effect of a decision to change costs or revenues.
Limitations: assumes all costs and revenues can be represented by straight lines, not easy to separate costs.

Operation Management

Function of OM: cost-effective, meet consumer demand, meet quality standard.
Productivity: total output/total employee.
Ways to improve labor productivity: increase output, reduce employee, achieving employee productivity through skill level, motivation, automation, quality of management decision.

Lean Production

Production of goods and services with minimum waste of resources.
Reasons for waste: production defects, high inventories, over production, idle resources, transporting goods.
Just-In-Time (JIT): business holds no inventories, arrived from suppliers just as they are needed, delivered to the customer as soon as they are finished.
Kaizen: continuous improvement, making suggestions about how to improve quality or productivity.
Benefits of Lean production: quickly bring new products, improved quality, eliminate waste, eliminate inventory costs, reduce unit cost, increase profit, reduce selling price, increase competitiveness.

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Description

Test your knowledge on the process of converting inputs into saleable goods, cost-effective strategies, and ways to improve labor productivity in the context of Operation Management.