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BITNOTES

# BITNOTES - Process Selection Notes Pg 229-235 Process...

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Process Selection Notes Pg. 229-235 Process Selection - Production processes can be classified into projects, batch production, mass production, and continuous production o Projects – one at a time production of a product to customer order – they take a long time to complete, involve a large investment of funds and resources Ie: construction, new product development, aircraft manufacturing o Batch production – processing many different jobs at the same time in groups or batches – products are typically made to customer order, volume is low, and demand fluctuates. Ie: printers, bakeries, machine shops, education and furniture making o Mass Production – producing large volumes of a standard product for a mass market – product demand is stable and product volume is high. Ie: automobiles, PCs, fast food, consumer goods o Continuous Production – used for VERY high volume commodity products – highly automated, typically 24 hours a day Ie: refined oil, treated water, paints, chemicals, and foodstuffs - Whichever process is chosen to produce product must be CONSISTENT with product and service characteristics. o Most important characteristics: Degree of Standardization and Demand Volume Process Selection with Breakeven analysis - Breakeven analysis – examines the cost trade offs associated with demand volume – components of it are volume, cost, revenue, profit

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- Volume = level of production, number of units produced and sold – we assume whatever is produced is sold - Cost is in 2 categories o Fixed – remain constant o Variable – varies with volume of units produced - TC = FC + VC, VC = Volume X per unit variable cost - Revenue on per unit basis is price at which item is sold. o Total Revenue = volume X price o Profit = Total Revenue – Total cost - By equating total revenue with total cost and solving for V (volume) we can find the volume at which profit is zero. (set total revenue = total cost and solve for V) - Breakeven analysis useful when evaluating different degrees of automation o More automated processes have higher fixed costs but lower variable costs Bottom 262 – middle of 266 Process Layouts - Process layout – aka functional layouts – group similar activities together according to process or function they perform - Equipment in a process layout is general purpose and workers are skilled at operating the equipment in their department -
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BITNOTES - Process Selection Notes Pg 229-235 Process...

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