Cost effectiveness

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Added : 2017-04-12 Views :113K

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Cost effectiveness




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Presentations text content in Cost effectiveness

Slide1

Cost effectiveness

One of the main ways a business can become cost effective and therefore competitive to have reduced variable costs.

Firms can use cheaper materials or they can become as efficient as possible by raising productivity

Slide2

ProductivityThe amount that can be produced with the resources available.Its all about reducing costs per item produced

LABOUR PRODUCTIVITY =

TOTAL OUTPUT

NUMBER OF WORKERS

Slide3

EXAMPLE

In 2009, 100 workers produce 500 t-shirts per hour

Productivity:

500/100 = 5 t-shirts per worker

per hour

In 2010 the same workers produce 600 t-shirts

per hour

Productivity

:

600/100

= 6 t-shirts per hour

WHICH IS BEST FOR THE BUSINESS?

WHICH YEAR HAS THE LOWEST PRODUCTION COSTS?

Slide4

WAYS OF INCREASING PRODUCTIVITY

TRAINING

Expensive at first but can increase skills and speed of

workers, they make less mistakes and therefore less wastage and more produced per worker

BETTER EQUIPMENT

Can reduce time to undertake tasks, fewer staff needed can reduce costs

MORE EFFECTIVE WORK PRACTICES

Can reduce waste and find more efficient ways of production

Slide5

REMEMBER………….

Increasing productivity is not achieved by taking on more staff, it is achieved by getting staff to produce more in the time given.

You can of course take on more staff, this will allow you to produce more BUT that does not mean that the productivity per person increases.

Slide6

OTHER

METHODS OF REDUCING COSTS

Slide7

WAYS OF REDUCING COSTS

METHOD

PROBLEM?

Buy cheaper raw materials

Although variable

costs are reduced, they might be of lower quality and dissatisfy customers

Relocation to a cheaper site

Fixed costs reduced, but is this convenient for customers?

Cutting overhead costs –

eg

. Staff wages, power

Could effect staff motivation, may

inmpact

on ability to met customer

needs


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