Productive efficiency: unit costs

• how to calculate average unit costs?

  fixed costs + total vc

  unit costs= Total cost/number of units
• what are the aims of operations management?

  make sure the right quantity of good are produced at the right time at the right costs and with the right quality
• what does managing the firms resources involve?

  make sure the right inputs are there when they are needed

  make sure the most effective method of production is used to provide high quality products at minimum costs

  make sure the firm can produce an appropriate range of goods and services

  make sure the gods are produced on time for the customer
• what does operations management involve decisions about?

  how to produce products

  what resources are required to produce products e.g. people

  the amount and type of raw materials and components the firm requires at any particular time
• what is productice efficiency?

  measures the cost of producing a unit in terms of the resources used. more productively efficient the business is the lower the unit costs. aim is to increase the business's productive efficiency whilst achieving a set quality standard
• what can falling unit costs result in?

  poor quality and unreliable products which will damage the firms image and reduce sales volume
• what are factors that will affect the unit costs?

  cost of materials

  • labour costs
  • market demand
  • exchange rates
• what does the level of unit costs depend on?

  how the product is produced

  • cost of materials and components involved
  • Volume of units being produced as it is cheaper per unit to produce on a large scale
  • level of motivation of workers
  • effectiveness of training
  • level of investment in plant and machinery