The ratio of the relationship between inputs and outputs is known as productivity.
Importance of Productivity
To make decisions regarding allocation of resources of the business
To make decisions on expansion of the business
To compare productivity with other similar business entities
To know the progress of the business entity
Some ways through which the productivity can be enhanced are mentioned below:
To make the management efficient
To utilize modern technology
To provide financial as well as non financial incentives to employees
To get the employee participation in decision making
To use the quality circles
Modern Technologies
CAD (Computer Aided Design)
CAM (Computer Aided Manufacturing)
CIM (Computer Integrated Manufacturing)
CNC (Computerized Numerical Control)
Break Even-Point
Total Cost
Total cost can be classified as fixed cost and variable cost.
The cost that does not change per unit up to a particular production level is known as fixed cost.
Eg:
Factory rent
Insurance premium
Factory rates
The cost that changes per each unit of production is called the variable cost.
Eg:
Direct material cost
Direct labour cost
Total Revenue
The total amount of revenue earned by a business firm through the sale of its total product is called the total revenue.
Break-Even-Point
The production or sales level at which the business neither yields a profit nor incurs a loss is known as the break-even-point. At this point the total revenue of the business is equal to the total cost.
The break-even-point can be depicted graphically as follows:
Stock Control
Keeping stocks at an optimal level in order to maintain the continuity of the manufacturing process is known as the stock control.
Techniques in Stock control
Stock level determining techniques
ABC analysis
Two bin system
Computer programs
Continuous stock recording system
JIT
JIT is a technique adopted to minimize the cost of storage by keeping the stocks of raw materials and finished goods at zero level.
This technique is named as Just-In-Time, since only the required materials are obtained at the required time and in required quantities, at each and every stage of production.
Keeping finished goods stored is not done in this system and immediately after the production the goods are released to the market on the demand.
Stock Levels
Several facts to be considered in computing stock levels are given below :
Consumption of materials in relation to a period
Re-order period
Re-order quantity
Consumption of materials in relation to a period
Required quantity of materials for the production in a particular period such as a day or a week or a month is known as the consumption of materials in relation to a period.
Re-order period
Duration of time from the event of ordering to the event of stocks reaching the stores is known as the re-order period.
Re-order quantity
Number of units included in a single order is known as re-order quantity.
Re-order level
The stock level at which an order is submitted is known as the re-order level.
Minimum stock level
Minimum stock level means the stock level at which the stocks are not allowed to drop further.
This is also known as the safety stock.
Maximum stock level
Maximum stock level means the stock level at which the stocks are not allowed to increase further.
This is the highest amount of stocks that can be held in the stores and it is not suitable to exceed this level.
Various stock levels can be depicted graphically as follows:
Economics Order Quantity
Total cost of stocks of a particular firm consists of two types as ordering cost and the holding cost of stocks.
Number of units to be ordered ones so as to minimize the total cost of stocks is known as theeconomic order quantity.
EOQ can be computed through the following graph:
EOQ can be computed using the following equation too:
How to calculate BEP and EOQ?