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Break-Even Analysis
Published in S Kant Vajpayee, MD Sarder, Fundamentals of Economics for Applied EngineeringSecond Edition, 2019
Variable costs are expected to change accordingly with the level of activity within the company (Table 13.2). Variable costs tend to increase or decrease in direct correlation with the volume of production within the company. They are impacted by efficiency of operation, improved designs, quality, safety, and higher sales volumes. Examples of these costs include: Direct laborMaterialsIndirect costsMarketingAdvertisingWarranties
Break Even and Benefit Cost Analysis
Published in Anoop Desai, Aashi Mital, Production Economics, 2018
Variable costs, however, are directly related to the production quantity. Thus, a greater number of units produced results in a higher variable cost and vice versa. Examples of variable cost include direct material cost, direct labor cost, utility cost used for production, inventory carrying costs, etc. Direct material cost is defined as the cost of all material that is a direct component of the product. Hence, it is easy to recognize that direct material cost rises in a linear fashion with respect to the number of units produced. A similar reasoning can be extended to the definition of direct labor cost. Utility costs like water and electricity related expenses also rise in tandem with the production quantity.
Automation and Bottlenecks
Published in Wallace Garneau, The Way Forward, 2021
Fixed costs are those that are the same whether one item is produced, or a million items are produced. The CEO’s salary is not apt to change based on how many of something is produced, so the CEO’s salary is a fixed cost. Variable costs are those that change as more items are produced, such as the material costs of finished goods. Every business person knows that I can effectively reduce my fixed costs by producing more finished goods, and spreading my fixed costs out over more products. Every business person also knows that I can reduce my variable costs by reducing direct labor, by reducing material costs, or by doing anything else that makes a process cheaper to operate.
Cost Models and Cost Factors of Road Freight Transportation: A Literature Review and Model Structure
Published in Fuzzy Information and Engineering, 2020
Amir Izadi, Mohammad Nabipour, Omid Titidezh
The model distinguishes three types of costs: Operational costs – Operational costs are those expenses incurred in the daily running of a business. These are internal to the carriers and include both fixed and variable costs. variable costs are incremental costs that can go up or down based on the amount of business activity or consumption. By contrast, fixed costs do not change depending on the level of activity or consumption. Labour, fuel, vehicle maintenance, insurance, initial purchase of vehicles/rolling stock, handling costs, and a range of government taxes and charges, including fuel excise and vehicle registration are some examples of operational costs.Value of time– these factors are the value of non-monetary costs such as travel time and service quality costs. At the time of decision making, the value of time factors such as reliability and travel time will impact on shipping company selection and transportation modal choice.External costs –These costs are not directly borne by the exporter and can cause a divergence between the costs imposed on society and the decision facing the exporter. Environmental, congestion, and accident costs are external costs examples. Figure 4 illustrates the overall model structure and how each of the components sums to the total freight transportation costs.
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
The model distinguishes three types of costs: Operational costs – Operational costs are those expenses incurred in the daily running of a business. These are internal to the carriers and include both fixed and variable costs. variable costs are incremental costs that can go up or down based on the amount of business activity or consumption. By contrast, fixed costs do not change depending on the level of activity or consumption. Labour, fuel, vehicle maintenance, insurance, initial purchase of vehicles/rolling stock, handling costs, and a range of government taxes and charges, including fuel excise and vehicle registration are some examples of operational costs.Value of time – these factors are the value of non-monetary costs such as travel time and service quality costs. At the time of decision making, the value of time factors such as reliability and travel time will impact on shipping company selection and transportation modal choice.External costs – These costs are not directly borne by the exporter and can cause a divergence between the costs imposed on society and the decision facing the exporter. Environmental, congestion, and accident costs are external costs examples.
An exploration of ‘sticky’ inventory management in the manufacturing industry
Published in Production Planning & Control, 2018
James R. Kroes, Andrew S. Manikas
Traditional models examining relationships between firm resources and revenues assume that the many expenses and asset holdings change in proportion to changes in demand (Noreen and Soderstrom 1994). For example, if revenues are reduced by 50%, conventional wisdom holds that a cost or asset related to production should also be cut in half by management. However, an emerging body of behavioural accounting research has identified that some costs and assets that are assumed to vary proportionally with demand do not fit this paradigm. In actuality, research has found that for many costs and assets assumed to be proportionately variable, the magnitude of a change in a cost or asset in proportion to a change in revenue is smaller during periods when revenue decreases compared to the change in the cost or asset when revenue increases. Cost and assets which behave in this manner have been denoted as ‘sticky’ costs or assets (Anderson, Banker, and Janakiraman 2003; Guenther, Riehl, and Rößler 2014). In essence, as revenue increases by a certain amount, there is expected to be a corresponding proportional increase in a variable cost or asset. However, the concept of cost stickiness implies that when revenue decreases, the magnitude of the decrease in a variable cost or asset is less than it would be when revenue increases. Hence, cost or assets are sticky in that when revenues decline, the firm incurs an additional cost or retains a portion of an asset perhaps as a hedge for a future upswing in demand or as an artefact of manager inattention (Balakrishnan, Labro, and Soderstrom 2014; Guenther, Riehl, and Rößler 2014).