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Airline Capital Budgeting
Published in Bijan Vasigh, Ken Fleming, Liam Mackay, Foundations of Airline Finance, 2018
Bijan Vasigh, Ken Fleming, Liam Mackay
Break-even analysis is an accounting concept that is typically used for manufacturing projects. It determines the minimum production level required to meet the costs of the project. Therefore, by definition, the break-even point is the point at which a company sells enough units of its product to make neither a loss nor a profit. The key to understanding break-even analysis is being aware of the difference between fixed and variable costs. Variable costs directly relate to varying levels of production while fixed costs exist for all levels of production. However, there are two different break-even points; the accounting break-even point and the economic (present value) break-even point (Ross, Westerfield and Jaffe, 2008). Most individuals are familiar with the first one but not very familiar with the second break-even point. Both break-even points are analyzed below so that we can be familiar with the strengths and weaknesses of each approach.
Cost Management for Profitability
Published in John Stewart, The Toyota Kaizen Continuum, 2018
Just as decreasing fixed costs increases the profit of a business when sales levels fluctuate, increasing fixed costs decreases the profit of a business, thus increasing the level of sales necessary to cover the cost of doing business, effectively raising the break-even point (Figure 7.8). Increasing fixed costs in an organization should only be investigated when there is sustained revenue growth. Increasing costs should also be a part of the strategic plan, or hoshin, for the organization and should not be done in response to short-term fluctuations in the market.
Introduction
Published in Robert C. Creese, M. Adithan, B. S. Pabla, Estimating and Costing for the Metal Manufacturing Industries, 1992
Robert C. Creese, M. Adithan, B. S. Pabla
Costs are generally classified as to whether or not they vary with the quantity being manufactured or level of production. A fixed cost is a cost that is unaffected by the level of production. Some examples of fixed costs are plant security, property taxes, insurance, and administrative salaries. A variable cost is one that varies with the level of production. Some examples of variable costs are direct material costs and direct labor costs.
Integrating optimal process and supplier selection in personalised product architecture design
Published in International Journal of Production Research, 2022
Changbai Tan, Kira Barton, S. Jack Hu, Theodor Freiheit
Fixed cost, , refers to the expenses that are not directly associated with a unit production of products, such as depreciation of machine tools and manufacturing systems, insurance, rent, and utilities. The fixed cost is divided into OEM (Original Equipment Manufacturer) fixed cost, , and outsourcing fixed cost, . The OEM fixed cost is related to the expenses of adopting product modules, such as project set-up, administration, and infrastructure (software, hardware) for module design, test, and prototyping, while outsourcing fixed cost is related to the expense of adopting suppliers, such as the cost of negotiation, communicating, contract-signing, and quality assurance.
Back-shoring or re-shoring: determinants of manufacturing offshoring from emerging to least developing countries (LDCs)
Published in International Journal of Logistics Research and Applications, 2019
Muhammad Mohiuddin, MD. Mamunur Rashid, MD. Samim Al Azad, Zhan Su
A fixed cost refers to an expenditure that does not vary as a function of production size. Like capital investment, reductions in fixed costs are also important considerations when a firm decides whether to engage in an outsourcing strategy. Generally, fixed costs indicate the degree to which offshore outsourcing can effectively reduce operating costs, such as some human resources, fixed assets, and utility costs. Lau and Zhang (2006) found that outsourcing, as a strategy, has been successfully used to convert a business characterised by fixed costs to one that is characterised by variable costs that can change in accordance with the business trend. As a result, offshore outsourcing can be used to reduce a firm’s quantity of fixed assets that are subject to depreciation (e.g. machinery). Reduced consumption associated with reduction in fixed costs could also reduce utility costs (Murray and Kotabe 1999). H1b) There exists an inverse relationship between fixed costs and the extent to which a manufacturing firm engages in offshore outsourcing.
Cost Models and Cost Factors of Road Freight Transportation: A Literature Review and Model Structure
Published in Fuzzy Information and Engineering, 2019
Amir Izadi, Mohammad Nabipour, Omid Titidezh
Operational costs are those expenses incurred in the daily running of a business and are internal to the carriers and include both fixed and variable costs [3]. Fixed costs are defined as the costs of having a vehicle standing and available for work, and are not subject to frequent change and are not generally affected by the amount that the vehicle is used. Examples of fixed costs include vehicle excise duty, vehicle insurance, operator's license fee, drivers’ guaranteed wages, depreciation, and overheads. Variable costs are factors which their level depends on the actual use of the vehicle. The costs of fuel, lubricants, tires and repairs and maintenance are examples of running or variable vehicle operating costs [4].