Operations Management Solutions Paper 1

Production of Goods and Services Solutions ✍🏽

Delishjuice is a small business and produces a range of fruit juice made from fruit using batch production. Delishjuice uses specialisation in its factory. The business has grown quickly over the last two years. Delishjuice has increased the number of production workers from 10 to 20 . This has increased the span of control for each manager. It has been difficult for Delishjuice to keep workers motivated.

(d) Identify and explain two possible reasons why Delishjuice uses batch production. [6]

Reason 1:            Range of products can be made

Explanation:       So able to change product easily to meet changes in customer demand for different fruit flavours.

Reason 2:            Can make use of specialist skills

Explanation:       so able to take advantage of specialisation in the factory to increase output of fruit juices.

Costs, Scale of Production and Break-even Analysis Solutions ✍🏽

CAR4 is a food retailer. It has 300 shops located in areas where average consumer incomes are low. CAR4 sells a limited range of own-label products including bread and soap. CAR4 does no promotion or market research. The Managing Director said: ‘Last year our market share increased to 7%. Profit increased by 30%. Keeping costs low means CAR4 can offer customers quality products at low prices.’ 

(d) Identify and explain two ways in which CAR4 could keep costs low. [6]

Reason 1:            economies of scale

Explanation:       buying its limited range of products in bulk leading to lower average costs.

Reason 2:            Use automatic checkouts instead of workers

Explanation:       This will reduce the number of shop workers required and keep variable costs low.

Achieving Quality Production Solutions ✍🏽

Daisy owns a small pet grooming business, which she started 10 years ago. Daisy believes providing a quality service is important to her success. Daisy’s business has two full-time and four part-time workers who have all been employed by her for a number of years. Each worker is expected to do any job that Daisy asks them to do. All workers are paid an hourly wage rate. They also receive a bonus if customers recommend the business to other people.

(c) Identify and explain two reasons why providing a quality service is important to Daisy’s business. [4]

Reasons 1:          attract new customers

Explanation:       through more recommendations from satisfied pet owners.

Reason 2:            no need for regrooming

Explanation:       If pets have to be seen twice if a low quality job was done the first time, this will reduce productivity and increase costs.

Location Decisions Exam Solutions ✍🏽

Rupert owns a small café in the city centre selling coffee and snacks. As it is a

competitive market, Rupert knows market research is important. Rupert is worried about the effect of an increase in café rent on his costs. Rupert said: ‘I will have to pay this higher rent as it is a good location. I need to increase revenue or reduce other costs.’

(c) Identify and explain two possible reasons why Rupert thinks the shop is in a good location. [4]

Factor 1:              Busy area

Explanation:       as many people likely to visit city centre.

Factor 2:              Good image of the location

Explanation:       So customers want to relax and drink coffee there.

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Check out Unit 1 Business Activity, Topic Guides, Questions and Solutions