Production methods, capacity, stock, and basic financial concepts (Edexcel)

A set of practice flashcards covering production methods, capacity and stock concepts, and essential financial terms.

What is batch production?

A manufacturing process in which components or goods are produced in groups (batches).

What term describes production where output is mainly through machinery and capital relative to labour?

Capital-intensive production.

What is cell production?

A method of manufacturing where employees are organised into multiskilled teams, with each team responsible for a particular part of the production process.

What describes the ability to minimise waste and reduce costs by making the best use of resources?

Efficiency in production.

What is continuous production?

The manufacture of an item/product in a continuous process.

What is job production?

The production of a single good/service that is tailored to customer requirements (one at a time).

What is labour-intensive production?

A production method that requires a higher proportion of labour than capital or machinery.

What is standardisation in production?

Using uniform resources and activities or producing a uniform product.

What is capacity utilisation?

Current output as a percentage of maximum possible output.

What is downsizing?

Involves reducing capacity, such as making employees redundant, to cut costs.

What is full capacity?

The point where a business cannot produce any more output.

What is overutilisation of capacity?

The position where a business is running at full capacity and straining.

What is underutilisation of capacity?

The position where a business is producing at less than full capacity.

What is buffer stock?

Stock held as protection against reductions in supply; a minimum level of stock kept in reserve.

What is the minimum level of stock kept as a buffer called?

Buffer stock.

What is inventory (stock) in a business context?

Raw materials, work-in-progress (WIP) and finished goods held by a business.

What is Just-in-Time (JIT)?

A stock control system where items arrive just before they are needed, with little or no buffer stock.

What is lean production?

An production approach focusing on waste minimisation, often incorporating KTotal Quality Management (TQM) and Just-in-Time (JIT).

What is Economic Order Quantity (EOQ)?

The optimum quantity of stock to hold to minimise total costs.

What is reorder level?

The level of current stock at which new orders should be placed.

What is order quantity?

The amount of stock ordered when an order is placed.

What is inventory?

Materials, WIP and finished products held by a business for future sale or production.

What is equity?

Share capital plus retained profit minus drawings; represents owners’ stake in the business.

What is working capital?

Current assets minus current liabilities; indicates liquidity.

What is liquidity?

The ability to pay short-term debts as they fall due using current assets.

What are current assets?

Assets that can be converted into cash within 12 months (e.g., inventories, trade receivables, cash).

What are current liabilities?

Debts that must be repaid within one year.

What are long-term liabilities?

Debts owed by the business for more than one year (e.g., loans).

What is net profit margin?

Net profit divided by sales revenue times 100.

What is operating profit?

Profit from core business activities: total revenue minus operating costs (excluding interest and tax).

What is a profit and loss account?

A document showing income and expenditure of a business over a financial year.

What is tax?

A charge by governments on activities, earnings and income.

What are external failure conditions?

Factors outside a business that might cause failure (competition, legislation, consumer tastes, economic conditions).

What are internal causes of business failure?

Causes within the business such as poor decision‑making or loss of key staff.

What is overtrading?

Growing too fast and exhausting cash resources, leading to cash flow problems.