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Production Review

The Factors of Production Unit Test Review

QuestionAnswer
What are the six (6) factors of production? Natural resources, raw materials, labour, capital, information, and management.
Define Natural Resources. Natural resources are raw material extracted from the earth, water,or air.
What are the six (6)categories of natural resources? Agriculture, Water, Mining, fishing and trapping, fuel and energy, logging and forestry.
Define Raw Materials. Raw Materials are goods and services that are derived from natural resource and are used to manufacture other goods and services.
Raw materials are either ingredients or supplies. How do ingredients differ from supplies? Ingredients are direct materials that go into the product being manufactured. Supplies do not.
Define Labour. Labour consists of all the physical and mental work needed to produce goods and services.
What are three (3) types of labour cost reduction strategies used by companies to reduce cost? Automation, consolidation, and outsourcing.
How does automation save on labour costs? Machinery replaces people.
How can a company reduce its labour costs by purchasing its competitor? The company can pool its labour resources.
Beyond reducing labour costs, what is the benefit to outsourcing? Faster time to market and a free up of cash for other investments.
Beyond reducing labour costs, what is a reason for choosing to automate production? Increased yields, decreased cycle times, improved product quality and uniformity.
Beyond reducing labour costs, what is a reason for choosing to consolidate operations? Increased revenues, increased market share, and pooling of capital resources (e.g. cash, tech., people).
Identify one 'con' of automation. Initial capital costs are high. Also equipment can breakdown.
Identify one 'con' of consolidation. Potential loss of brand recognition or corporate identify. Plus its expensive (legal fees).
Identify one 'con' of outsourcing. Lack of control over quality, intellectual property, lead-time, and indirect costs.
How does consolidation save on labour costs? Centralization of work as well as through mergers and acquisitions.
How does outsourcing save on labour costs? Hire other companies to perform work for you.
Define Capital. The money invested in a business.
Capital can be either "liquid" or "non-liquid". What is an example of liquid capital. Cash. Others include stock, bonds, and AR. Items that can be easily transform in order to purchase things a company needs.
Capital can be either "liquid" or "non-liquid". What is an example of non-liquid capital. Buildings, equipment, intellectual property. Items used in the daily operations of a business.
How does having information minimize a company's risk? The right information at the right time can allow companies to make the good business decisions.
A Director of Purchasing is an example of what factor of production? Management.
What does the acronym GDP stand for? Gross Domestic Product.
What is GDP? GDP is a measure of the total value added to goods and services produced within an industry or country. It is a measure broad economic activity.
Are all natural resources raw materials? Yes. Everything that is produced is made from a type of natural resource.
Are all raw materials natural resources? No. Many raw materials purchased by companies are already transformed from natural resources by primary and secondary industries.
Raw materials are either ingredients or supplies. How do supplies differ from ingredients? Supplies do not go into the finished good (e.g. MRO).
Identify a type of information that companies frequently purchase and use to be successful in a competitive economy. Information regarding: Customers, Information regarding customers, competitors, sources of supply, and political conditions.
What is the role of Management? To allocate company resources (capital and human), to decide what to purchase, what to make, whom to hire, and where to sell etc.
Created by: tsyndikus
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