AICE Business Unit #4: Business operations

an activity or group of activities that transforms one or more inputs, add value to them, and produces outputs for customers is called the...

• transition process

• transformational process

• transcending process

• production process

• turnover ratio

• capital utilization

• labor productivity

• market share

Advantages to labor intensive production include:

• interesting and varied work

• low machine costs

• one-off designs meet customer requirements

• skilled, high-paid workers required

The advantages of capital-intensive production include:

• economies of scale

• consistent quality

• high fixed costs

• low unit costs of production

• the ability to supply to the mass market

The limitations of labor intensive production include:

• low machine costs

• low output levels

• skilled, high-paid workers are required

• product quality depends on skill of each worker

Limitations of capital intensity include:

• consistent quantity

• high fixed costs

• high maintenance costs and need for skilled workers to repair

• quick pace of technological change can result in inefficient and obsolete equipment

Analyze one reason why a shoe maker would switch from labor intensive methods of production to capital intensive methods.

Working capital tied up in goods in storage that could be put to other use.

• Opportunity cost

• Storage cost

• Risk of wastage and obsolescence

If inventories are not used or sold as rapidly as expected, there is a danger of goods deteriorating or becoming outdated.

• Opportunity cost

• Storage cost

• Risk of wastage and obsolescence

Inventories have to be held in secure warehouses.

• Opportunity cost

• Storage cost

• Risk of wastage and obsolescence