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41 Cards in this Set
- Front
- Back
Break-Even Analysis
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Process of generating information that summarizes various levels of profit or loss associated with various levels of production.
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Basic Ingredients of Break-Even Analysis
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1. Fixed costs
2. Variable costs 3. Total costs 4. Total revenue 5. Profits |
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Fixed costs
(Basic Ingredients of Break-Even Analysis) |
Expenses incurred by the organization regardless of the number of products produced.
Some examples are real estate taxes, upkeep to the exterior of a business building, and interest expenses on money borrowed to finance the purchase of equipment. |
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Variable costs
(Basic Ingredients of Break-Even Analysis) |
Expenses that fluctuate within the number of products produced.
Examples are costs of packaging a product, costs of materials needed to make the product, and costs associated with packing products to prepare them for shipping. |
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Total costs
(Basic Ingredients of Break-Even Analysis) |
The sum of the fixed and variable costs associated with production.
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Total revenue
(Basic Ingredients of Break-Even Analysis) |
All sale dollars accumulated from selling manufactured products or services. Naturally, total revenue increases as more products are sold.
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Profits
(Basic Ingredients of Break-Even Analysis) |
The amount of total revenue that exceeds the total costs of producing the products sold.
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Shop-floor control activities
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Include input/output control, scheduling, sequencing, routing, dispatching, and expediting.
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Inventory control activities
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Ensure the continuous availability of purchased materials.
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Inventory control
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Specifies what, when, and how much to buy
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Inventory control subsystems
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Work-in-process and finished-goods inventory
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Materials control
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operations control activity that determines the flow of materials from vendors through an operations system to customers.
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Potential Pitfalls of Budgets
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1. Placing too much emphasis on relatively insignificant organizational expenses.
2. Increasing budgeted expenses year after year without adequate information. 3. Ignoring the fact that budgets must be changed periodically. |
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variable budget
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also known as a flexible budget, outlines the levels of resources to be allocated for each organizational activity according to the level of production within the organization.
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Zero-base budgeting
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Planning and budgeting process that requires managers to justify their entire budget request in detail rather than simply referring to budget amounts established in previous years.
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budget
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Financial plan outlining how funds in a given period will be obtained and spent.
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Budgetary control
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Ensuring that income and expenses occur as planned.
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Successful Characteristics of JIT (Just In Time) Programs
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1) Closeness of suppliers.
2) High quality of materials purchased from suppliers. 3) Well-organized receiving and handling of materials purchased from suppliers 4)Strong management commitment |
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Layout Strategy
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Plan of action that outlines the location and flow of all organizational resources around, into, and within production and service facilities.
Usually last part of the operations strategy to be formulated. |
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Layout
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Overall arrangement of equipment, work areas, service areas, and storage areas within a facility that produces goods or provides services.
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Three basic types of layouts
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1. Product layout
2. Process (functional) layout 3. Fixed-position layout |
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Product Layout
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Designed to accommodate high production volumes, highly specialized equipment, and narrow employee skills.
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Process (functional) Layout
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Layout Pattern that groups together similar types of equipment. Good for organizations with a large number of different tasks.
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Fixed-position layout
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One in which the product is stationary while resources flow. Appropriate for organizations involved in a large number of different tasks that require low volumes, multipurpose equipment, and broad employee skills. Large products.
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Location strategy
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Plan of action that provides the organization with the competitive location for its headquarters, manufacturing, services, and distribution activities.
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Types of processes
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1) Continuous process
2) repetitive process 3) job-shop process |
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Continuous Process
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Product-oriented, high volume, low-variety process used.
ex: producing chemicals, beer, and petroleum products. |
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Repetitive Process
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Product-oriented production process that uses modules to produce items in large lots.
ex: mass production - auto industry |
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Job-shop Process
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Used to produce small lots of custom designed products such as furniture. High variety, low volume system.
ex: spaceship and weapon systems production. |
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Capacity Strategy
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Plan of action aimed at providing the organization with the right facilities to produce the needed output at the right time.
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Operations Management
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Performance of managerial activities entailed in selecting, designing, operating, controlling, and updating production systems.
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Automation
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The replacement of human effort by electromechanical devices in such operations as welding, materials handling, design, drafting, and decision making.
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Production
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The transformation or organizational resources into products.
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Productivity
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Relationship between the total amount of goods or services being produced (output) and the organizational resources needed to produce them (input)
input -> transformations -> output |
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Transformational strategies for increasing productivity
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1. Improving the effectiveness of the organizational workforce through training.
2. Improving the production process through automation. 3. Improving product design to make products easier to assemble. 4. Improving the production facility by purchasing more modern equipment. 5. Improving the quality of workers hired to fill open positions. |
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transformation
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Set of steps necessary to change organizational resources into products.
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Four Ratios
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1. Profitability
2. Liquidity 3. Activity 4. Leverage |
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Profitability
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ex: Return on investment
Productivity of assests |
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Liquidity
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ex: Current Ratio
Short term solvency / How fast it turns into cash |
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Activity
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ex: Inventory Turnover
Efficiency of inventory management |
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Leverage
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ex: Debt Ratio
How a company finances itself |