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Production, costs, operations management

Production, costs, operations management. Outline. Production Costs Operations management. Production. Production – processes and methods used in the transformation of tangible and intangible inputs into goods and services. Production. Input 1) tangible: - raw materials

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Production, costs, operations management

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  1. Production, costs, operations management

  2. Outline • Production • Costs • Operations management

  3. Production • Production – processes and methods used in the transformation of tangible and intangible inputs into goods and services

  4. Production Input 1) tangible: - raw materials - semi-finished goods - subassemblies 2) intangible: - ideas - information - know how Output goods & services FIRM

  5. Production Competitors Input 1) tangible: - raw materials - semi-finished goods - subassemblies 2) intangible: - ideas - information - know how Suppliers Customers/ buyers FIRM Output goods & services Competitors

  6. Vocabulary Revenue, costs, profit TR – total revenue AR – average revenue, AR=TR/Q MR – marginal revenue, MR=TR’ TC – total costs AC – average costs, AC=TC/Q MC – marginal costs, MC=TC’ PR – profit, PR=TR-TC

  7. Costs TC=FC+VC FC – fixed costs (TC|Q=0) VC – variable costs

  8. Costs • Manufacturing: • direct material costs; • direct labor costs; • manufacturing overhead costs. • Non-manufacturing: • marketing and selling costs; • administrative costs.

  9. Optimization MC=MR

  10. Operations management Operations management - area of management concerned with overseeing, designing, and redesigning business operations to ensure that business operations are efficient and effective.

  11. Efficient vs. Effective Efficient – 1) using as little resources as possible to ensure a needed level of output; – 2) providing maximum output with the given resources. Effective – ensuring that a target is achieved.

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