IGCSE Business Studies: Unit 4 Operations Management Key Terms

Productivity

The output measured against the inputs used to create it.

Buffer inventory level

Inventory held to deal with uncertainty in consumer demand and deliveries of supplies

Kaizen

A Japanese term meaning 'continuous improvement' through the elimination of waste.

Just-in-time (JIT)

A lean management technique which involves reducing inventories of raw materials, components or finished goods. Supplies arrive just when needed for production or resale

Variable costs

Costs that vary directly with the level of output

Total Costs

Fixed costs and variable costs added together

Economies of Scale

The factors that lead to a reduction in the average cost per unit to fall as the level of output increases

Break-even chart

A graphic presentation of the break-even analysis that shows when total revenue and total cost intersect to identify the break-even point

Break-even point

The level of sales at which profit is zero. Total costs are equal to total revenue.

Margin of Safety

The difference between actual/expected sales and the break-even output

Quality

The extent to which a product/service meets customers expectations

Quality Assurance

A method of quality management that involves checking for quality standards by employees throughout the production process

Job Production

Where a single product is made at a time.

Flow production

Where large quantities of a product are produced in a continuous process. It is sometimes referred to as mass production.

Contribution

The product's selling price minus its variable cost.

Diseconomies of scale

The factors that lead to an increase in average costs as a business grows beyond a certain size.

Revenue

The income during a period of time from the sales of goods or services.

Break-even level of output

The quantity that must be sold/produced for total revenue to equal total costs (also known as BEP)

Average cost per unit

The total cost of production divided by total output (sometimes referred to as 'unit cost').

Lean production

An approach to production that emphasizes the elimination of waste in all aspects of production processes

Fixed costs

Costs that do not vary in the short run with the number of items sold or produced. They have to be paid whether the business is making any sales or not. They are also known as overhead costs.

Total Quality Management (TQM)

The continuous improvement of products and processes by focusing on quality at each stage of production.

Quality control

The checking for quality at the end of the production process, whether it is the production of a product or service. It uses quality inspectors as a way of finding any faults.

Batch production

A production method in which products where a quantity of similar products are made at a time.