Average unit costs

The cost of the first batch is 120 X 21 = 2520, and that of the second batch is 75.81 X 80 = 6065. The total cost of the first 101 units is therefore 8585, with a cumulative-average unit cost of 85. We substitute as before to give... 

Battery-limit costs (range of factors iu percent of basic equipment) average unit cost of main-plant item (MPI)... 

NOTE The average unit cost of the main-plant items is the total cost of the MPI divided by the total number of items. Figures include up to 3 percent for BL outside lighting, which is not covered in building services. 

A distinguishing characteristic of the pharmaceutical industry is that its annual fixed costs (including an annual allocation of the cost of R D) tend to be high relative to its variable costs in the sense that the variable or incremental cost of producing and packaging an additional batch of product tends to be quite small relative to the fully allocated average unit cost per unit of output, including the allocation of fixed costs. 

Estimated annual production Explosive average unit cost Taggant concentration Encapsulated/ unencapsulated (total pounds) Taggant cost per pound Increased cost per unit of explosives Increase in explosive cost Annual cost for taggant materials (dollars in thousands)... 

Average-cost pricing, also known as markup pricing or cost-plus pricing, is where a markup is added to the average unit cost of production. This appears to be particularly common in the retail sector, where the proliferation of products implies that a careful study of demand for each product is uneconomic. 

If necessary, utilization function costs are to be identified which will serve both to satisfy Requirement 2 above and to yield accost function T such that the marginal cost 3F/3S (with all decision variables of that component held constant) is equal to the average unit cost f/ (with an arbitrary constant subtracted from f)to within an accuracy bounded by the percentage degree of flatness of the minimum of f prescribed by Requirement 2. 

The cost of the product of an energy conversion system must equal the sum of fuel expenses and capital (and labor.) charges. It is often convenient to express the product cost in terms of the average.unit cost of product, Ap, and the total amount of product, Pp,.or prc(duct = pp Similarly the fuel costs may be expressed as fuel = A-fPf- Equation 25 may now be written as... 

The average unit cost, Cp, of the product is the total cost, Sroduct divided by the output power c e Cprod/P d. Similarly, tne fuel cost can be expressed as Cfuei = cfP uel where Cf is the unit cost of fuel and Pfuei is the power input to the converter. 

Thus, the average unit cost of high pressure steam leaving the boiler is... 

Up to this point the methods discussed involve only average unit costs of flow streams. A different problem is one in which, for example, an economic study has the purpose of ascertaining the... 

Cost accounting for direct costs is accomplished in terms of unit cost and quantity. The product of these two is the cost. For example, an existing process may have used 11.2 million kg/yr of a raw material with an average unit cost of 0.52/kg. The cost is then 5,824,000/yr. At the beginning of the year, a standard cost and a standard quantity are established for the year, for example, 10,500,000 kg and 0.51/kg. The budgeted cost for the year is 10,500,000 X 0.51 = 5,355,000. The differences between the actual and standard unit costs and quantities are called variances. Accountants can set variance flags to warn process managers of possible cost overruns. In the example, the quantity variance is 11.2 — 10.5 or 0.7 million kg/yr. This is a % variance of 0.7/10.5 X 100% = 6.7%. The cost variance is SO.Ol/kg or a % variance of 0.01/0.51 X 100% = 2.0%. 

The capacity utilization curve is also illustrated in Figure 6.5. The capacity utilization curve represents the amount of the existing capacity that is actually being used. The average unit cost of a product increases if the utilization is not within the planned region. 

Economies of scale are achieved when the facility is being constructed or the equipment is being installed. It is due to the design of the equipment and facilities and the creation of an organization structure that can effectively operate these that firms achieve economies of scale. This decision determines what the average unit cost of production will be. The utilization of the capacity in the... 

The layout of a firm s facilities determines a significant portion of how competitive the firm is. The layout determines both the ability of the firm to respond to change quickly and the material handling costs. Balancing the material handling costs are the costs of capital. A product layout requires more capital investment than a process layout. But, a product layout allows for faster response and for higher volume at a lower average unit cost. 

Table 21.7 Impact of Capacity Utilization on Average Unit Costs ... 

Average Unit Cost with All Unit Quantity... 

Volume-based quantity discount Observe that the two-part tariff is really a volume-based quantity discount whereby the retailer DO pays a lower average unit cost as it purchases larger quantities each year (the franchise feeffis amortized over more units). This observation can be made explicit by designing a volume-based discount scheme that gets the retailer DO to purchase and sell the quantity sold when the two stages coordinate their actions. 

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