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Sem 5 Prep
← OperationsWhat operations management is

Formulas for this chapter

Value added

Value added = Value of outputs - Cost of inputs

Any time you are asked what a transformation process is worth. Take every input the process consumed, including labour.

Value of outputs
Units produced x selling price, or the amount billed
Cost of inputs
Materials, labour, energy and facility charges consumed

Value added per unit

Value added per unit = Value added / Units produced

To compare two days, two shifts or two plants fairly, because it removes the effect of how busy the period was.

Value added
Output value minus input cost, for the period
Units produced
Good output for the same period
Step 2 of 27
The real wordsTheory

The transformation process

Transformation processThe sequence that converts inputs into outputs and adds value along the way.

The class draws it as three boxes with two arrows:

Inputs -> Transformation / Conversion -> Outputs land, labour alter, inspect, goods capital, store, transport, services information plan, organise, coordinate, control

The word that matters over the middle box is value added. Everything else in this course is a way of adding more value for the same input, or the same value for less input.

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