Essay Example: Production and Cost of Bananas at Wal-Mart

In economics, production is the process of input utilization to get an output. In other words, production can be described as the process of converting raw materials into finished products that can be used by consumers. The finished products can be services or goods, but the transformation process is what is referred to as production. Production correlates with cost, which comes as a result of the inputs required for the process. Factors of production are also known as inputs due to the significant influence they have in the process of production (Shepherd, 2015). Although numerous factors affect the costs of production, this paper will describe the three key inputs and fixed and variable cost involved in the production of bananas at Wal-Mart. Additionally, it will analyze the factors that influence the choice of inputs to produce the bananas thus showing the relationship between costs and production.

Key Inputs and Fixed and Variable Costs Involved in the Production of Bananas at Wal-Mart

A significant input or factor of production, in the case of Wal-Marts banana production is land. Taking into consideration that land is natures gift together with all other natural resources such as water, air, wind, and the sun, they fall under the category of fixed costs of production. This is because the rates charged when leasing a piece of land depends on the duration of Wal-Mart plans on leasing. Considering this, the initial cost of the land as a production factor remains the same even when the bananas it yields exceed the expected output. To decrease its cost of banana production, Wal-Mart can procure land and use it to grow bananas that are then supplied to several of its outlets, which, in turn, means an increase in their total profits. Use the other properties that come with land such as water, air, wind, and the sun falls within the cost of the land and can therefore without incurring any additional costs apart from initial cost incurred (Salomon, 2016).

Another factor of production involved in the production of bananas at Wal-Mart is labor, which directly affects the number of bananas produced. Therefore, labor is categorized under variable costs since the scale of production depends. Supposing Wal-Marts decides to increase the scale or rate of banana production, they will have to increase the amount of labor required to meet the expected harvest. Working hours is the measurement used in calculating labor. Labor involves a certain number of people who play a significant role in the process of production. As such, the more people Wal-Mart employs, the more wages it will have to pay them depending on the number of hours they work. The number people and the hours are directly proportional to the unit production of bananas produced. Being a significant factor in the process of production, the input of labor applies to the output produced regardless of the machines used. This is because machines are never perfect and thus a human monitor is required to control the production process (Morillo, McNally, and Block, 2015).

Capital is the third key input that is involved in Wal-Marts banana production. Capital can be described as the resources used or applied to enable the success of the production process. It can be quantified or measured regarding machine hours or even money is given that all of these variables cannot be recovered once used in the process of production. Capital is also referred to as raw materials and falls under the category of variable cost. This is because of capital, in whichever form, increases proportionally to increase the rate of production. For instance, the amount in units of bananas yielded by Wal-Mart is directly relative to the raw materials used lest the raw materials are used in an uneconomic way (Salomon, 2016).

Analysis of the factors influence the inputs to produce Bananas at Wal-Mart

Numerous factors impact the above-described inputs and play a significant role in the attainment of Wal-Marts normal production of bananas. For a start, labor is a major factor that influences the production of bananas. This is because bananas require being handled and monitored by a person as opposed to a machine, which can negatively affect the end product regarding the quality produced. However, in other cases, the production process of different varying products would require machines as opposed to human beings given the fact that machines work faster than people and thus capable of producing more units within a specified duration of time. Besides, machines are cheaper regarding costs when compared to actual people. For instance, in a shoe factory where shoes are designed as well as produced, machines would appear to be a better option since they can produce a lot of shoes compared to people. However, even in such cases, people employing people would be much better than using machines since machines can affect the quality of the shoe causing a decrease in the number of shoes purchased compared to if it was handcraft. As such, the quality of the product is vital in choosing the input of production. The time factor is also an aspect as far as labor is concerned. For instance, machines use a lesser time to peel, dice, and fry potatoes compared to a person. However, a person has to be present to facilitate the whole process (Brauner and Ziefle, 2015).

Another factor that equally contributes to Wal-Marts banana production is a price. This is because the price determines whether the business operates at a profit or loss and if the cost of production of the bananas can be reduced to maximize the amount of profit Wal-Mart makes. For instance, the price of the bananas ought to be greater than the cost of raw materials used in the process of production including the cost of land and labor used regardless of cost type; fixed or variable. Wal-Marts objective is making a profit, which means costs of inputs have to be minimized where possible for profit to be maximized (Salomon, 2016).

Production Decisions to Make

Based on this analysis, several production decisions can be made. The first decision would be to minimize the cost of production while ensuring that the quality of the product remains uncompromised. For instance, in most, if not all, organizations, there is much time spent by employees idling around. Such time can be used productively as compensation for the total cost of labor by increasing work breaks but with shorter times so that employees can be much productive since they become well rested. Another production decision would be adequately optimizing land to maximize the output. For instance, the use of greenhouses and proper use of land space to ensure a larger production and harvest of bananas. As a result, a piece of land will be able to increase the amount of profit made.

References

Brauner, P., and Ziefle, M. (2015). Human factors in production systems. In Advances in production technology (pp. 187-199). Springer, Cham.

Morillo, J., McNally, C., and Block, W. E. (2015). The Real Walmart. Business and Society Review, 120(3), 385-408.

Salomon, R. (2016). Economic Institutions and Globalization. In Global Vision (pp. 69-91). Palgrave Macmillan US.

Shepherd, R. W. (2015). Theory of cost and production functions. Princeton University Press.