Production

1. Production

2. Definition of Term „Production“ Generally it is possible to characterize production as a process of a new product arising. Production is company's activity usually connected: • With the mining of raw materials • With the realization of products • With supplies of works • With delivering services Production in a building company is the activity connected wit following supplies: • Building up of new building objects • Repairs, modernizations and reconstructions of existing building objects Production is main activity of a company and it consists in the combination of productive factors in order to achieve the company's output. Production

3. Basic productive factors Productive process Company’s output The evaluation of the output Equipment Combination and consumption of the basic productive factors in order to produce The result of the firm’s production in the form of goods, services and work's delivery Other firm’s activities what make possible to evaluate the production (sale, transport etc.) Labour Profit Material The main idea of the productive process Production

4. Inputs That Enter Production – Basic Productive Factors Basic productive factors: • Material • Machines, machinery, equipment • Labor power Production

5. Material Basic characteristic of material in the frame of building production: • Material is in the building production volumetric the most important basic productive factor • On average it creates 60 % from the total costs for the production, except line constructions (higher costs for machines and machinery) Production

6. Classification of Material Material can be classified according to following aspects: • Cost management • Time of entering the production • Price and costs calculation • Amount of consumption assessment Production

7. Classification of Material Classification of Material according to the cost management: • Basic It becomes directly the essential part of the finished product • Auxiliary it enters the production • Directly, but it does not become the essential part • Indirectly as a material consumed for e.g. managing works and activities • Fueling It ensures production, but it does not become a part of finished products • Wrappings They serve for the protection of products e.g. during transport, storage, manipulation Production

8. Classification of Material Classification of Material according to the time of entering production: • Material enters directly the production • Material enters store and it is filed as inventory Inventory • Material and raw materials ensuring the fluent production in the company • The highest volume of inventory is created mainly by basic materials • Materials are bought sooner before their consumption in the production and they are stored • Acquisition of inventory evokes in the company the need of certain amount of financial resources • Expenditures connected with purchase (without VAT) expenditures for material purchase • Expenditures connected with the transport of materials • Expenditures connected with storage • Expenditures connected with paid 19% VAT from purchase price Production

9. Inventory Management Main objective of inventory management • To keep amount of inventory on the level that allows to ensure fluent production with minimal costs: • For material acquisition • For material storage • To soften impacts of casual variations in processes of inventory supply or processes of the production Characteristics of optimization requirements by the inventory management: • Minimization of total costs for acquisition and maintenance of inventory with respect of: • Full covering of expected needs • Assurance of production also in the case of some variances during supplies or during using of inventory (creation of reserves) • Finding of suitable regime of orders that is characterized by: • Duration of cycle of supply • Amount of supply Production

10. Classification of Material Classification of material from the aspect of costs and price calculation: Direct material • It enters directly the production • Its amount it is possible to calculate in the form of norm of consumption expressed in m.u. of material per m.u. of the product (e.g. number of bricks per 1 m3 of masonry) • it concerns mainly about the basic material Indirect material • its amount it is not possible to relate to certain outputs in m.u. of material consumption per m.u. of production • it is possible to allocate it to the certain part of production or to the production per certain time period • amount of this material and costs connected with its consumption it is possible to calculate indirectly with the help of calculated rates from defined basis • the rate expresses relationship between material (in CZK, m.u.) and basis (CZK, m.u.) Production

11. Classification of Material Classification of material from the aspect of the amount of consumption assessment: Determinable materials: • defined norm of consumption in m.u. of material per m.u. of production for that the material was intended • norm of consumptions defined only for volumetric considerable materials (monitored amount of their consumption) • norm of consumption serves for monitoring of amount of consumption • with the observance of the norm of consumption it is possible to avoid lost of material caused by its wasting and adulteration Indeterminable materials: • norm of consumption is not defined for low volume of consumption or for the technical difficulty or impossibility • amount of consumption is predicted from the consumption of past periods Production

12. Costs for Material CM = M x P CZK = m.u. x CZK/m.u. Amount of consumption assesment (M) • determinable material: M = NC x Q m.u. = m.u./m.u.* x m.u.* • indeterminable material: M = Ms x i m.u. = m.u. x index where Ms real consumption from past period i change index Production

13. Control of Consumption and Costs for Material Planned data  Real data They are compared: • per the amount of production • per time period • per an organizational unit of a company • per a company totally Detected variations from the plan are immediately repaired by realization of suitable operations Production

14. Control of Consumption and Costs for Material - index Index of material intensity = costs for material in CZK/amount of production in CZK • index expresses rate of costs for material consumption per amount of production • the higher value of index, the more material intensive the production is, and oppositely, the lower index, the lower material intensity Production

15. Machines and Machinery Machines and machinery in the frame of the company: productive • directly partake on the production • are volumetric considerable from the aspect of costs for production • it is necessary to monitor their utilization and their operating costs in the production nonproductive • used for the assurance of the company's operation Production

16. Lifetime of Machines and Machinery • machines and machinery are not consumed in one productive cycle, but during certain time – the lifetime Kinds of lifetime • technical lifetime • time, during that working machines offer technically perfect use • economical lifetime • time, during that it is efficient to use the machines (from the aspect of operating costs, possibility to use more efficient machine etc.) • it is usually shorter then technical lifetime Production

17. Value of Machines and Machinery Using of machines and machinery in the productive process implicates the decreasing of their utility value and market value • Utility value • value brought by using of machines and machinery for the purpose they were purchased • at the beginning it decreases slowly, later it decreases faster • Market value • value, for that it is possible to sell the machine or machinery • this value decreases fast immediately Production

18. Depreciation (Amortization) • expresses decrease of value or working machines and machinery • depreciation of the machine per a year it is possible calculate according to the following relation: Production

19. Capacity of Working Machines • performance ability of working machines and machinery in qualitative and quantitative sense Capacity can be: • technical • amount of production in required quality expressed in m.u. per time unit • economic • amount of production that is from the economic aspect optimal Production