China
Africa
Explore chapters and articles related to this topic
What Is Cost Engineering?
Published in Chris Domanski, Cost Engineering, 2020
Marginal costing is a cost accounting method based on a concept that only costs that vary with any particular decision should be included in the decision analysis. For example, fixed costs are not relevant to a decision for cases that involve relatively small variations from existing practice and/or are for relatively limited periods of time. For a company producing 300,000 units that require $1,000,000 in variable cost and $2,000,000 in fixed cost to produce, adding another 10,000 units of production will only increase the variable cost by about $50,000, while the fixed cost remains unchanged, resulting in a cost of $5 per unit ($50,000/10,000 units) for those additional 10,000 units. If a typical full absorption method was used to assign unit cost, then the cost per unit would be $10 ($3,000,000 total cost/300,000 units), which would overestimate the unit cost because it would include fixed cost impact that is not real.
Prerequisite Concepts
Published in J. Lawrence, P.E. Vogt, Electricity Pricing, 2017
The basic economic theory behind marginal cost pricing is that it promotes the efficient allocation of resources. If the marginal cost-based price is high, consumers are more likely to respond by limiting their usage, which could help defer the need for the next increment. For example, if the existing production capacity is nearly fully utilized, additional load growth would ultimately require that a new unit of generation be added. Setting prices based on the marginal cost (e.g., $450/kW) rather than on the embedded cost (e.g., $200/kW) sends a much higher price signal for customers to respond. But if the marginal cost-based price is low, consumers are encouraged to utilize more. The marginal cost would be low in times when an abundance of generation capacity exists. Since the need for an additional increment of capacity would be far in the future, the net present value of the next generating unit could be much smaller than the embedded cost. Thus, a lower price based on the marginal cost of the next unit would encourage customers to increase their usage and thus make better use of the existing capacity.
Operational Optimization of Multigeneration Systems
Published in João P. S. Catalão, Electric Power Systems, 2017
Pierluigi Mancarella, Gianfranco Chicco
Further information of economic relevance can be gathered from calculating the marginal costs associated with the change of any operational constraint (Lozano et al., 2009b). The marginal costs are calculated as the dual prices (variations in the objective function resulting by changing a constraint of one unit of a resource) and can be used to identify the operational constraint that can be modified to improve the objective. The dual prices can be calculated by using linear programming solvers, or as Lagrangian multipliers expressing the first-order Kuhn–Tucker optimality conditions (Hemmes et al., 2007; Piacentino and Cardona, 2007). Considering cost minimization, the optimal solution is written as
An economic evaluation of operational decisions – an application in scheduling evaluation in fertilizer plants
Published in Production Planning & Control, 2021
Najat Bara, Frédéric Gautier, Vincent Giard
The marginal cost is that of producing an additional unit: the additional cost of satisfying an additional order. Marginal cost varies according to whether the production volume is increased momentarily by one unit, or whether it was decided to increase production sustainably by one unit (Boiteux 1951). In the first case, the additional unit is produced using the current capacity while, in the second case, capacity may need to be increased. Turvey (1969) distinguishes two types of marginal cost: short-term and long-term.Short-term marginal cost is estimated, assuming that the volume produced is obtained without additional investment; this cost does not include capacity costs. In the short term, already installed capacities enable production volume increases with constant resources. As a consequence, in the short term, the direct variable cost can be a good estimation.Long-term marginal cost includes the investment costs required to increase capacity.
Pricing strategy and tariff structure for a port authority: a case study of South Africa
Published in Maritime Policy & Management, 2018
Sanele Gumede, Mihalis Chasomeris
Lee and Lee (2012, 93) classify the various port pricing methods, principles and strategies, discussed in the literature, into six categories: ‘marginal cost pricing, cost-recovery pricing, congestion pricing, commercial pricing and Asian Doctrine pricing’. The most commonly discussed of these is marginal cost pricing, where the price of a good or a service is equal to its marginal cost (Talley 1994; Bandara, Nguyen, and Chen 2016; Santos, Mendes, and Guedes Soares 2016). However, actual marginal costs are often difficult to quantify, and thus limits its application in practice (Haralambides 2002). Ports are aware of the basic pricing approaches like price discrimination, cost-based pricing and market-based pricing, ‘but have limited knowledge of their application’ (Bandara, Nguyen, and Chen 2016, 830). There is consensus on the importance of cost recovery for port infrastructure. For example, a key finding of the analysis of the main Trans-European Network ports’ cost structures is that all European port authorities supported the adoption of full cost recovery (Haralambides 2002; Santos, Mendes, and Guedes Soares 2016). In the case of South Africa’s ports, in addition to full cost recovery, a risk-related return on investment is allowed (see Section 2.3). The way forward is simpler once cost recovery is accepted as a guiding principle (Haralambides 2002). Mirman et al. (in Talley 1994) developed a cost axiomatic pricing structure where cost allocations were restricted to adhere to the following cost axioms.
How to mend the dormant user in Q&A communities? A social cognitive theory-based study of consistent geeks of StackOverflow
Published in Behaviour & Information Technology, 2023
Sohaib Mustafa, Wen Zhang, Muhammad Mateen Naveed
The reputation point is an accumulated score of a user on a Q&A platform that represents a user's credibility. All the activities users perform on a Q&A community provide them with some points or deduct their points. Addition in points means the increase in social status and credibility of the user, while deduction in points is a vice versa phenomenon. Reputation points are a mechanism designed to motivate users to contribute quality knowledge so that they are socially praised and treated as credible sources of knowledge dissemination. A high reputation score does not always mean that contributed knowledge is authentic. Previous studies proved reputation as a significant control factor behind knowledge contribution (Cavusoglu, Li, and Kim 2021; Wang et al. 2021). According to the law of diminishing marginal utility, if everything else is constant, the marginal benefit that may be received from an extra unit decreases with increasing consumption. The incremental improvement in utility that comes from consuming one more unit is referred to as marginal utility. The economic concept of ‘utility’ refers to a feeling of contentment or well-being(Ormazabal 1995). For individuals with a greater reputation, the favourable impact of reputation gains on knowledge contribution reduces, such that the effect is less positive(Chen, Baird, and Straub 2021). With this discussion, we believe increased reputation can inversely influence the quantity and quality of knowledge contributed in Q&A communities. Hence we postulate H4. An increase in reputation negatively influences the knowledge contribution (quantity & quality).