Writing

1. Production at Premexum 2011

Notice how the paragraph below uses information both from the bar chart illustrating the scheduled production at Premexum in 2011, and from the table which shows the actual production for this period and the reasons for deviations from the schedule. Pay attention to linking words.

The Premexum factory had been scheduled to produce 30,000 units in January; but, because of a strike at a components supplier, it was able to produce a total of only 10,000 units. In February, the number of units produced amounted to 30,000, i.e. 10,000 fewer than scheduled. This was due to a number of technical problems connected with the power supply to the factory. In the third month, production totaled 45,000 units, which was 5,000 more than the figure which had been planned. This was owing to the overtime which had been worked for the purpose of building up stocks.

Scheduled Production at Premexum 2011

Actual Production at Premexum 2011

Month	Actual Unit Production	Reasons for Deviations from Scheduled Production
Jan	10,000	Strike at components supplier
Feb	30,000	Technical problems over factory power supply
Mar	45,000	Overtime worked for stock building
Apr	45,000	Same as above
May	40,000	Production reduced owing to demand fall
June	33,000	Strike in toolroom
July	34,000	Strike by truck drivers
Aug	zero	Holiday shutdown
Sept	50,000	Overtime worked to meet demand
Oct	30,000	Number of machine breakdowns
Nov	45,000	Fire in warehouse
Dec	60,000	Overtime worked for stockbuilding

Now write a similar paragraph describing the situation from April to December. These words may help you: because of, owing to, due to.

2. Abstract writing

Read the text and decide which statements given below are true or false.

1. The study of production helps in solving problems that are crucially important to the company.

2. Production implies allocation of resources to different manufacturing companies.

3. Providing services has nothing in common with production.

4. All sorts of activities related to providing goods and services are referred to as production.

5. Auding is not a part of production process.

6. Production theory is an integral part of managerial economics.

7. To employ capital resources efficiently is one of the production objectives.

8. Production does not deal with such problems as interrelations among output/revenue and output/cost components.

Given the demand for its product, how does a firm determine the optimal level of output? Given several alternative production methods, how does the firm choose one? How will investment in new manufacturing equipment affect labor productivity and the unit costs of production? If the firm undertakes an expansion program to increase productive capacity, will its cost per unit be higher or lower after the expansion? These questions are critically important to the firm, and answers, or at least insights useful in analyzing the questions, are provided by the study of production.

Production is concerned with the way in which resources (inputs) are employed to produce a firm’s products (outputs). The concept of production is quite broad and encompasses both the manufacture of physical goods and the provision of services. In both cases, production theory focuses on the efficient use of inputs to create outputs. In other words, production analysis examines the technical and economic characteristics of systems used to provide goods and services, with the aim of determining the optimal manner of combining inputs so as to minimize costs.

It is worth emphasizing that the term, production refers to more than the physical transformation of resources. Production involves all the activities associated with providing goods and services. Thus, the hiring of workers (from unskilled labour to top management), personnel training, and the organizational structure used to maximize productivity are all part of the production process. The acquisition of capital resources and their efficient employment are also parts of production, as are the design and use of appropriate accounting control s systems.

In addition to providing an important foundation for the understanding of costs and cost/output relations, production theory enhances one's comprehension of the integrated nature of the firm. Perhaps no other single topic in managerial economics so clearly lays out the interrelations among the various factors employed by the firm and among the functional components (for example, the output/revenue and output/cost components) in our valuation model of the firm.