Unit Cost and Efficiency
Operational efficiency – shows how well a business uses it resources including machinery materials
and labour to maximise its outputs
LUCC – Ways to improve effeciency
Labour productivity
Unit cost
Capacity
Capacity Utilisation
Efficiency can be improved by:
- Increase capacity utilisation
- Increasing labour productivity
- Lean production techniques
- Choosing the optimal resource mix
- Using technology
Unit cost = Key indicator of efficiency and productivity of a business
Average cost per unit is calculated using:
Total Production costs∈ period( £)
Total output ∈a period(Units)
Labour vs Capital
Unit costs are closely linked to the relationship between labour and capital in operations
Labour intensive – labour resources
Capital Intensive – production relies on machinery
Examples:
Labour Capital
Food processing Oil extraction
Hotels and restaurants Car manufacturing
Hairdressing Transport infrastructure
Operational efficiency – shows how well a business uses it resources including machinery materials
and labour to maximise its outputs
LUCC – Ways to improve effeciency
Labour productivity
Unit cost
Capacity
Capacity Utilisation
Efficiency can be improved by:
- Increase capacity utilisation
- Increasing labour productivity
- Lean production techniques
- Choosing the optimal resource mix
- Using technology
Unit cost = Key indicator of efficiency and productivity of a business
Average cost per unit is calculated using:
Total Production costs∈ period( £)
Total output ∈a period(Units)
Labour vs Capital
Unit costs are closely linked to the relationship between labour and capital in operations
Labour intensive – labour resources
Capital Intensive – production relies on machinery
Examples:
Labour Capital
Food processing Oil extraction
Hotels and restaurants Car manufacturing
Hairdressing Transport infrastructure
