Question

Are production and productivity correlated?

(b)Provide examples of internal and external failure costs relevant to a university.

Answer 1

Correlation between Production and Productivity

Production:

Production can be defined as the method of converting raw materials or inputs into finished goods or products in a manufacturing process that has some economic value .

Productivity:

Productivity can be defined as a measure articulated as the ratio of cumulative output to a single or cumulative input, in a defined period of time.

Typically the degree of productivity, in the production, demonstrates the profitability, efficiency and performance of an organization.I.e higher the productivity , higher the production and higher the profit .Thereby there is a direct Correlation between production and productivity .

To conclude , Production is an organized process of step by step conversion of raw materials into finished output in a stipulated time where value addition happens at every stage and whose values are measured in absolute terms, whereas productivity is a indicator of efficiency that highlights the ratio of output to input consumed.It is basically a quantitative ratio between resources consumed and the output generated .

Internal and external failure costs relevant to a university

Internal Failure Costs:

• Internal failure costs can be defined as the cost that are incurred due to the defects discovered before the product leaves the company or service is delivered to the customer. The internal failure costs can include:
• Failure analysis activities:Action required to explain the causes For the failure of the product or service.
• Product rework costs:Cost involved in rectification of defective material or errors.
• Product scrapped, net of scrap sales:The product or material is defective and is considered a junk which cannot be repaired or reused.
• Throughput lost:Performance of futile work as a result of errors, insufficient organization, or communication.

External Failure Costs:

External failure costs can be defined as costs that are incurred due defects discovered by customers. External Failure Costs include:

• Legal fees corresponding to customer lawsuits.
• Loss of future sales from dissatisfied customers:All work and costs associated with handling and servicing customers’ complaints.
• Product recalls:Handling and investigation of rejected or recalled products, including transport costs.
• Product return costs:Of both returned products and those in the field.
• Warranty costs:Replacing ,failed products or services that are claimed under a guarantee.

Internal failure costs that occurred in a popular University Laboratory is as follows

• Old or obsolete reagents , due to Expired reagents, due to hapless inventory management.
• Repeated calibration tests.
• Correction of data entry errors, specimen processing and cost of re educating staff.

External failure costs that occurred at a popular university laboratory is as follows

• Correction of laboratory errors that occurred before the samples were analysed.
• Correction of analytical errors occurring at the testing stage.
• Correction of deciphering the wrong results.

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