Analysis of production the specialists who make the cheese holes

1.

Analysis of production
the specialists who
make the cheese holes
1

2.

Once the need for this type of goods or
services is established,
the next step in production management should be
determination of the most profitable way to use the
resources of this company,
necessary for the production of the
specified goods or services
2

3.

To make the best decisions it is necessary to introduce the
concept of "production function"
3

4.

Production function - interdependence "input-output"
between one or more input factors of production and
produced goods or services
Determination of the most
Determination of the
efficient
combination of
inputs, providing a given
maximum achievable
level of output given the
level and structure of inputs
level of output
The production function is the base for cost
analysis
4

5.

The production function is the base for cost
analysis
Defining the production function of a certain company, you can
define the cost function, provided that the market prices of
production inputs are known
5

6.

Production is the process of transformation of inputs such as labor,
materials, equipment into finished products after a certain period
Finished products can be consumer commodities ready for sale to the
ultimate consumer
Or intermediate goods, which represents an input resource for
the production of other products
… you promised
to buy a computer
6

7.

By analogy with the demand function, the production
function can be represented in the form of a table,
graphically or analytically:
Equipment
Labor
raw material
Management
The specific value of the
output
Q
(X
,X
,.....
X
)
1
2
n
All inputs can be grouped into
two main factors of production: capital, C and labor, L:
Q f (C,L)
7

8.

It is important to bear in mind that
The production function corresponds to the given
level of technology
If this level of technology is changing due to the increase in quality of
labor, materials, equipment, processing, and management,
the production function
is changing accordingly
8

9.

At any given moment the production inputs can be divided into two categories:
2 categories of production factors:
Fixed factors of production
Are in most cases capital resources
Land, buildings,
equipment
The quantity cannot be
changed during the
considered period of time
9

10.

2 categories of production factors:
Fixed factors of production
and
the concept
of "short
period"
should
Because
inproduction
the long
run
can
change
all
permanent
inputs
should
be
be
interpreted
as
a
period
during
which
production within
inputs,a short period,
considered
some part of the input factors of
production remains constant
Are in most cases capital resources
Land, buildings,
equipment
The quantity cannot be
changed during the
considered period of time
10

11.

2 categories of production factors:
Fixed factors of production
Variable factors of
production
Are those inputs, the number of which is
associated with the level of output
Watch expended labor,
electricity consumption
11

12.

The efficiency of production depends on the
balance that is achieved between fixed and variable
factors of production
12

13.

Assume
that this
firm
has
two
butof
only
Lackthan
of
manpower,
oron
direct
labor
(variable
factor
production)
ЕХ:
depending
if a certain
firm,
theworking
particular
inmachines,
three
circumstances,
shifts,
requires
thefour
levels
one will
operators
formachine
all three
shifts.
lead to insufficient
use ofperformance
equipment
(fixed
factor
of production).
of specific
operator
per
willper
be
shift,
different.
13

14.

Inthis
thissame
case,
lack
of
equipment
leads to
suboptimal
use
of
And
only
if youfirm
canhas
balance
constant
and
variable
factors
eightthe
operators,
but
still
has only
two
Now
consider
another
case:
direct
labour.
of production, the firm will
achieve
maximum production
machines.
efficiency
14

15.

The behavior of the production function with one
variable input factor of production providing all other
inputs are constant
15

16.

To understand the mechanism of changes in the level of
production it is useful to assess the impact of one input changing
while preserving all other inputs unchanged
16

17.

Mathematically this functional dependence can be represented by the
following equation:
Q
f(
X
|X
,X
,...,
X
)
1
2
3
n
17

18.

Along with fertilizers, harvest depends on a number of input factors, such
1st
plot is
on the
other eight
plots
will be
that
Suppose
acontrol;
farm 9plans
to conduct
a study
offertilizers
the influence
ofmade
fertilizers
on
farmers
created
experimental
plots
and in
each
of them
threw
theso
same
as soil,
water,
sunlight,
temperature,
direct
labour
Later
But
in
the
this
grapes
study
from
onlyeach
fertilizer
plot used
will beas
weighed
a variable
separately
factor of production
each
of of
thegrape
subsequent
plot will have an increased amount of fertilizer
the production
of
grapes
amount
seed
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калейдоскоп событий и впечатлений.
18

19.

the number
of bags of
fertilizer
Total production
(pounds)
Average production
(pounds/bag)
Marginal product
(pounds)
19

20.

Total production or output
The
point
of
decreasing
yield=certain
25;
On
the
curve
of the
total
production
it is
reflected
Marginal
Provided
The
figure
product
that
shows
youincreases
change
the relationship
only
inXf
aone
of
between
the
interval;
inputs,
total
after
while
production,
a all
certain
other
TR,
point
inputs
marginal
remain
product,
Q
(
X
|
X
,
X
,...,
X
)
1
2
3
n
in
the
point (feature
concave
upward
moves in
aEp
concave down)
on
unchanged
MP,
theinflection
average
curve it production,
begins
to decrease
AP,from
and and
the
elasticity
eventually
ofbecomes
production
negative
Phase 1
Phase 2
irrational
rational
increasing yield
point of inflection
decreasing yield
Phase 3
irrational
negative yield
Graphical representation of the production function,
AP x = Q / X
MP x = dQ / dX
One variable input
What conclusions can be drawn based on the analysis of
20
these curves?

21.

The law of diminishing returns
holds true for all types of
production functions!
21

22.

Total production or output
Function
The
average
ofthe
thecurve
output
average
output
reaches
up untilreaches
its
the
maximum
value
marginal
value
product
the
value
Responding
to this
event
point
corresponds
to when
the
maximum
When
ofincreases
total
production
itsof
maximum,
the
value
of of the
marginal
exceeds
product
the efficiency
corresponding
and the average
average
output
value
are of
equal
the output
the marginal
product
is equal
to zero
production
Phase 1
Phase 2
irrational
rational
increasing yield
decreasing yield
Phase 3
irrational
negative yield
point of inflection
One variable input
22

23.

Total production or output
Three stages of production
Phase 1
Phase 2
irrational
rational
increasing yield
point of inflection
decreasing yield
Phase 3
irrational
negative yield
Stage 1 - Irrational: from X = 0 to the
maximum average output. Constant factors
are entered in excessive quantity, if we
consider them in relation to the variable factor
One
inputtotal output.
Stage 2
3 is
- Irrational:
from
thevariable
maximum
Rational from
the
maximum
average output
Variable
factor is introduced
the production
process
up
to a maximum
total output.into
Achieved
the acceptable
in excessbetween variable and fixed factors of
balance
production
23

24.

Total production or output
Три стадии производства
Phase 1
Phase 2
irrational
rational
increasing yield
decreasing yield
Phase 3
irrational
negative yield
point of inflection
One variable input
Stage 3 - Irrational: from
the maximum total output.
Variable factor is introduced into the production process
in excess
24

25.

From the graph you can clearly get an idea about what “elasticity of production“ means
The elasticity of production
is the ratio of the relative change in total output to slight relative
change in a variable input factor of production
Q
Q
= MP
Q
X
Q
X
p
X
XQ Q
X
X =AP
MP
p
AP
The elasticity of production is the ratio of the marginal
product and average product
25

26.

Total production or output
Phase 1
Phase 2
irrational
rational
increasing yield
decreasing yield
Phase 3
irrational
negative yield
point of inflection
Changing in value of the variable input
With little change in magnitude of a variable
factor of production by 1% leads to a
input, there is no change of the output
change of
in output by more
1% than 1%
One variable input
26