17

Production of goods
and services
Revision answers
1 The difference between the final selling price and the cost of raw materials/
components.
2 Output per head has increased by 50 units per day (150–100).
3 Examples:
i) Improve employee motivation.
ii) Introduce more modern equipment.
iii) Improve inventory control to make sure that inventories are always available
for workers to use.
iv) Train staff to be more efficient.
v) Use machines instead of people to do jobs (labour-saving machinery).
vi) Improved quality control/assurance reduces waste.
4 i) Increased output relative to inputs required.
ii) Lower costs per unit.
iii) Fewer workers may be needed, possibly leading to lower wage costs.
iv) May be able to pay higher wages for workers, so increases motivation.
5 Discussion of, for example, employees having increased wages or increased job
security, and owners of the business (shareholders in a Ltd or plc) have increased
profits. May be able to reduce prices; customers could benefit.
6 a) Lean production means the use of continuous improvement and the
elimination of waste and delay to achieve greater efficiency.
b) i) Kaizen
ii) Just-in-time inventory control
7 Advantages: reduced storage costs (less space is needed in warehouse); reduced
expiry dates (inventory will not go out of date and be of no use); less cash tied
up in materials.
Disadvantages: raw materials/components need to be available on the
production line when they are needed or production will cease; communication
needs to be efficient to ensure orders arrive on time; if there are problems with
delivery then production will stop.
8 A single product is made at a time specifically to a customer’s order.
9 A larger quantity is made at one time and is therefore cheaper to produce. It
becomes easier to plan raw material requirements.
10 i) The size of the market.
ii) The type of product demanded.
iii) Technological aspects of the product: can it be produced using flow
production methods?

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 17 Production of goods and services

Answers to activities
Activity 17.1
a) See table below: output per worker increased to start with but then remained
steady.

Year Output = number Number of Output per worker

of cakes produced workers
2012 10 000 30 333.33
2013 20 000 40 500
2014 25 000 50 500

b) Increase the productivity of Better Bakers by introducing new technology;

improve worker motivation; train staff.
c) Benson cannot measure the output of his office workers if it is not a physical
output or measurable in some way.

Activity 17.2
Student’s own answer but answer should give examples for each of the following:
overproduction, waiting, transportation, unnecessary inventory, motion, over-
processing, defects.

Activity 17.3
Changes identified should include: reduced space needed for production; work-in-
progress is reduced; less inventory of raw materials; finished product not stored;
more of a flow through the factory; some machines are grouped together.

Activity 17.4
a) Job production then batch production when she first rents a factory. Finally she
uses flow production when moving to the larger factory.
b) Increased demand means more output needs to be produced. Also Tara wanted
increased efficiency and lower costs per unit.

Activity 17.5
a) Walls: flow production, as the ice-cream is mass produced and each type of
ice-cream is the same.
Alexander: job production, as each customer wants individual attention. Each
hairstyle is different to meet each customer’s needs.
b) Batch production is the most suitable method, given that the components are
standardised for use in several engines. The production of engines will not be
large enough to make flow production viable.

Activity 17.6
Student’s own answer.

Activity 17.7
Student’s own answer.

Cambridge IGCSE Business Studies 4th edition Teacher’s CD © Hodder & Stoughton Ltd 2013 2
 17 Production of goods and services

Sample answers to Paper 1 style questions

(with mark annotations for Question 2)
1 a) Lean production is a technique used by business to cut down on waste and
therefore increase efficiency.
b) i) Kaizen
ii) Just-in-time inventory control
iii) Cell production
c) i) Training his staff to be able to produce the cakes more quickly using better
techniques.
ii) Improve the motivation of the bakers, such as by giving them a share of
the profits or increasing their wages.
iii) Introduce more modern ovens, so that cakes are baked more quickly and
more could be produced in a given time.
d) i) It is a flexible way of working, so the bakery can easily change from one
batch of cakes to another batch of another type of cake. This will allow a
greater variety of products to be produced.
ii) It gives a variety of jobs for workers, so they can change from baking cakes
to baking bread. This makes their jobs more interesting and therefore they
are less likely to leave the business.
iii) Production is less affected if machinery breaks down, such as the ovens
stop working: then the workers could swap to making an alternative cake
which uses other machinery and so production doesn’t halt.
e) Yes, because production will be faster, high output produced, costs are lower,
capital-intensive methods could be used, may benefit from economies of scale.
No, because standardised products, boring for the workers, large capital
costs, machinery breaks down then whole production line stops, consumers
may not want to buy large quantities of standardised items.
Overall conclusion/judgement needed.
2 a) Productivity is the output measured against the inputs used to create it. [2K]
b) Any two of:
i) Lower costs for each item of furniture.
ii) Increased output of furniture if quantity of inputs remain the same.
iii) Can charge lower price for his furniture. [2App]
c) Any two of:
i) Automation means that equipment in the factory is controlled by
computers and not people. [1K; 1An]
ii) Mechanisation is where production is done by machines but operated by
people. [1K; 1An]
iii) CAM is where computers monitor the production process and control
machines or robots on the factory floor. [1K; 1An]
d) Any two of:
i) Skilled workers in furniture making are used and therefore their wages
might be high which could cause prices of furniture to be higher and sales
may be lower because of this. [1K; 1App; 1An]
ii) Production of each item of furniture often takes a long time as each piece
must be made separately and customers may want their furniture quickly
and so be unhappy with the business. [1K; 1App; 1An]
iii) Products are made especially to order and so if mistakes are made then
this will be costly as it is harder to put them right and a new item of
wooden furniture will need to be made instead of just replacing the
product as with standardised products. [1K; 1App; 1An]

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 17 Production of goods and services

e) Yes: it will increase efficiency. It may make unit costs of each piece of
furniture lower so prices could be reduced or the profits for Mr Patel
increased.
No: customers might want an individual item of furniture made to their own
design. If new technology is introduced the furniture may be standardised
and these customers may be lost. Jobs could be lost.
Student’s overall conclusion. [1K; 1App; 2An] + [2Eval]

Answers to revision test

 1 2)
 2 2)
 3 4)
 4 3)
 5 4)
 6 3)
 7 4)
 8 2)
 9 3)
10 2)
11 4)
12 2)
13 1)
14 2)
15 2)
16 2)
17 4)

Cambridge IGCSE Business Studies 4th edition Teacher’s CD © Hodder & Stoughton Ltd 2013 4