Production, costs, operations management

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Production, costs, operations management
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Outline

1. Production
2. Costs
3. Operations management

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Production

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

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Production

Input 1) tangible - raw materials -
semi-finished goods - subassemblies 2)
intangible - ideas - information - know how
Output goods services
FIRM
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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
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Vocabulary

• Revenue, costs, profit
• TR total revenue
• AR average revenue, ARTR/Q
• MR marginal revenue, MRTR
• TC total costs
• AC average costs, ACTC/Q
• MC marginal costs, MCTC
• PR profit, PRTR-TC

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Costs

• TCFCVC
• FC fixed costs (TCQ0)
• VC variable costs

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Costs

• Manufacturing
• direct material costs
• direct labor costs
• manufacturing overhead costs.
• Non-manufacturing
• marketing and selling costs
• administrative costs.

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Optimization

• MCMR

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Operations management

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

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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.