Posts Tagged ‘Capacity’


Fixed and Variable Costs — The Dilemma

Back in my college days, the university required two courses in economics: Macro Economics and Micro Economics. It was hard to reconcile the two courses. What is hard fact in one was flakey in the other – and vice-versa. As a student it drove me crazy.

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Financial Reporting versus Costing: Which is Right?

When attempting to calculate the cost of products and services, people often cite practices used for external financial reporting. Then they attempt to use these practices for internal decision making. Perhaps in an ideal world, this may be a valid path. However, we live in a world far from this ideal. In our world, external […]

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Standard Cost: Setting Stretch Performance Targets

When setting performance targets, is it best to stretch the target so that everyone has a lofty, almost unattainable goal. Many would say that this is the best way to drive quantum leaps in performance management.

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Standard Cost: Setting Overhead Cost Standards

When it comes to setting cost standards, overhead is the biggest problem. Why? Today, aside from material costs, overhead is the largest component of product cost and the least understood. Historically, overhead cost averaged 20% to 40% of labor cost. It was a minor consideration to product cost and was not significant in management decisions. […]

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Dynamic Business Modeling for Management Decision Making

Modern computer technology gives us the ability to model our businesses in computer software. These models enable us to view, understand and explore relationships that would otherwise be unknown or unclear. A variety of modeling techniques enables a range of possible results but also requires a range of work effort to create and maintain a […]

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Teams Have Responsibility for Idle Capacity

Years ago, I joined an established semiconductor firm. The firm was constructing a new manufacturing facility. In the industry, this is a wafer fab in which to make electronic circuits on silicon wafers. Wafer manufacturing facilities are enormously expensive. The decision to build the facility was made when times were good and wafer manufacturing capacity […]

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