The "Comprehensive IGCSE Business Studies Definitions Handbook" is an indispensable resource designed to support students, in mastering the fundamental concepts of business studies at the IGCSE level. It covers Section 4 of the IGCSE syllabus
The level of production is the total output of a business in a given time
period, for example, one year.
Production
Productivity is the output measured against the inputs used to create
it.
Productivity formula
Stock is any item stored by a business for use in production or sales.
Stock
Stock can be raw materials and components waiting to be used in the
manufacturing process
The buffer inventory or buffer stock is the inventory held to deal with
Buffer stock
uncertainty in customer demand and deliveries of supplies.
Job production Job production is where a single product is made at a time.
Batch production is where a quantity of one product is made, then a
Batch production
quantity of another item will be produced.
Flow/mass
production
Flow production is where large quantities of a product are produced in
a continuous process. It is sometimes referred to as mass production.
Automation
Lean production is a term for those techniques used by businesses to
cut down on waste and therefore increase efficiency, for example, by
reducing the time it takes for a product to be developed and become
Lean production
available for sale.
Kaizen Kaizen is a Japanese term meaning ‘continuous improvement’ through
the elimination of waste.
Just-in-time (JIT) is a production method that involves reducing or
Just in Time virtually eliminating the need to hold inventories of raw materials or
unsold inventories of the finished product.
Fixed costs are costs which do not vary in the short run with the
number of items sold or produced. They have to be paid whether the
Fixed costs
business is making any sales or not. They are also known as overhead
costs.
Variable costs
,Classification: Internal
26
Variable costs are costs which vary directly with the number of items
sold or produced
Total costs
Total costs are fixed, and variable costs combined.
Average cost per unit Average cost per unit is the total cost of production divided by total
output (sometimes referred to as ‘unit cost’)
Economies of scale Economies of scale are the factors that lead to a reduction in average
costs as a business increase in size
Diseconomies of
scale
Diseconomies of scale are the factors that lead to an increase in
average costs as a business grows beyond a certain size.
Revenue The revenue of a business is the income during a period of time from
the sale of goods or services. Total revenue = quantity sold × price
Profit Profit is total income of a business (revenue) fewer total costs.
Break-even – Break-even level of output is the quantity that must be produced/sold
definition and for total revenue to equal total costs (also known as break-even point)
formula
Total revenue = total costs (variable costs + fixed costs)
Margin of safety is the amount by which sales exceed the break-even
Margin of safety
point
Quality means to produce a good or a service which meets customer
Quality
expectations.
Quality control is the checking for quality at the end of the production
Quality control process, whether it is the production of a product or a service. It uses
quality inspectors as a way of finding any faults.
Quality assurance is the checking for quality standards throughout the
Quality assurance production process by employees, whether it is the production of a
product or a service
Total Quality Management (TQM) is the continuous improvement of
Total Quality
Management (TQM)
products and processes by focusing on quality at each and every
stage of production.
Revision questions
1) The role of the Operations department in a business is to
What are 2 roles of the take inputs and change them into outputs for customer use
operations
manager/operations 2) The Operations Manager is responsible for making sure that
department raw materials are provided and made into finished goods or
services
,Classification: Internal
27
1) Use machines instead of people to do jobs (automation)
What are 2 ways to increase
productivity/efficiency 2) Train staff to be more efficient
What are 2 benefits of 1) Reduced inputs needed for the same output level.
increasing
productivity/efficiency? 2) Fewer workers may be needed, possibly leading to lower
wage costs.
1) If inventory levels get too low, they might actually run out if
there is an unexpectedly high demand for the goods so they
keep a buffer stock so that the customer demand can be met
Why do firms often keep a
minimum (or buffer stock)
level?
2) It also allows a business to replace any damaged stock while
continuing to meet customer demand.
Advantage – Tries to eliminate faults or errors before the
customer receives the product or service.
Disadvantage – Expensive as inspectors need to be paid to
An advantage and
disadvantage of quality control
check the product or service.
Advantage – Tries to eliminate faults or errors at all stages of
production before passing on to the next stage
An advantage and
disadvantage of quality
assurance Disadvantage - Expensive to train employees to check the
quality of their own work at each stage of production.
Advantage – It eliminates all faults or errors before the
customer receives the product or service as it has a ‘right first
An advantage and time’ approach
disadvantage of Total quality
management (TQM) Disadvantage - It is expensive to train all employees to check
the product or service.
Advantage – The product meets the exact requirements of the
An advantage and
disadvantage of job production
customer.
, Classification: Internal
28
Disadvantage - Production often takes a long time.
Advantage – It allows more variety to products which would
otherwise be identical. This gives more consumer choice (for
example, different flavours of ready meals).
An advantage and
disadvantage of batch Disadvantage – Machines have to be reset between production
production batches which means there is a delay in production and output
is lost.
Advantage – There is a high output of a standardised product
An advantage and
Disadvantage - It is a very boring system for the workers, so
disadvantage of flow/mass
production
there is little job satisfaction, leading to a lack of motivation for
employees
1) Automation is where the equipment used in the factory is
controlled by a computer to carry out mechanical processes
2) Mechanisation is where the production is done by machines
but operated by people, for example, a printing press.
What are 4 ways technology is
changing production methods?
3) CAD (computer-aided design) is computer software that
draws items being designed more quickly and allows them to
be rotated to see the item from all sides instead of having to
draw it several times.
4) M (computer-integrated manufacturing) is the total
integration of computeraided design (CAD) and computer-aided
manufacturing (CAM)
1) quicker production of goods or services
What are 2 benefits of lean
production?
2) less storage of raw materials or components
1) Kaizen
What are 2 examples of lean
production?
2) just in time inventory control
Advantage – Warehouse space is not needed, again reducing
costs.
What is an advantage and
disadvantage of JIT? Disadvantage - JIT production can be very sensitive to any kind
of error. Since bare minimum inventory levels are maintained,
there is no room for any kind of error.
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