MARGINAL COST OF INDUSTRIAL PRODUCTION - Polish Journal of Management Studies

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MARGINAL COST OF INDUSTRIAL PRODUCTION

Abstracts > Vol 3

MARGINAL COST OF INDUSTRIAL PRODUCTION

Man M., Modrak V., Grabara J.K. *


Abstract:

One of the important issues of production management is the most efficient possible use of the production capacity as the global level of the production fixed expenses depends on the unit’s production capacity  and their level per product unit diminishes as the degree of employment of such a capacity tends to be optimum. Accordingly, to a certain volume of achieved production one may add or subtract, under certain circumstances, a certain volume (lot, stratum,  and margin) of products; at the same time, the increase or the decrease of production volume determines the change of the total production costs of the unit. As the level of the total costs corresponding to the production that is going to be achieved  until the adoption of the decision of increasing or decreasing production level already exists, and the sum total production costs are modified with is determined by the added or subtracted production volume (stratum, lot, and margin).

Keywords: Marginal cost, production, product volume

Introduction

The costs that correspond to the last production lot (stratum, margin) that is added (or subtracted) to its previous volume represent marginal costs which, unlike medium costs that regard the whole production of  the unit, are determined only by a part of the unit's production, that is the last volume (lot, stratum, and margin) that is added or subtracted. The newly added production volume determines the increase of the degree of employing the production capacity  and vive-versa. The sums received when selling the products primarily cover the costs determined by manufacturing the products and, in case the selling prices are higher, they also determine a gross profit that contributes to the covering of fixed production  expenses. Marginal costs are intimately connected with productivity optimum (PO) which is determined by the level of activity of the company where production achievement is done at the lowest medium cost, and both mathematical calculus and economic reasoning  show that this optimum appears when medium cost is identical with marginal cost.

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Summary


For the current administration period, the general manager of the unit takes the following decisions: acceptance of the order from abroad that determines the acquiring of a special equipment which would imply amortization expenses of 60,000 m.  u. / year as well as a decrease of the variable distribution cost of 3.5 m. u. / product units; the increase of the capital with 3, 000, 000 m. u.; the doubling of the percent the global result within the unit's own capital; the acquiring of a new, special  equipment of 7, 200, 000 m. u. that can be amortized within 10 years; the diminishing of the selling price with 5 %; the increase of advertising expenses with 300, 000 m. u.; amortization expenses for the old corporal immobilizations remain unchanged;  unitary variable production cost maintains the level of the previous period; unitary variable distribution cost decreases with 1 % as compared to the selling price.
The level of marginal result of 1,290,000 m. u. is positive as it corresponds to the difference between 1,830,000 m. u. and 540,000 m. u. that represents global results that would be achieved in case the order of 30,000 product  units proposed by the foreign customer were accepted, respectively refused.

References:

[1].   Calin O., Carstea Gh., Administration Accountancy and Costs Determination, GENICOD Publishing House, Bucharest, 2002.
[2].   Dima I.C., Man M., Administration Control, AGIR Publishing House, Bucharest, 2003.
[3].   Debrulle L., Administration Accountancy, Economic Publishing House, Bucharest, 2002.

MARGINALNY KOSZT PRODUKCJI PRZEMYSŁOWEJ

Streszczenie:

Jednym z ważnych zagadnień zarządzania produkcją jest jak najbardziej efektywne wykorzystanie mocy produkcyjnych jako globalnego poziomu dostosowanych wydatków produkcyjnych zależnych  od mocy produkcyjnej jednostki a ich poziomu według zmniejszenia jednostki produkcji jako stopnia zatrudnienia jaki wydaje się być optymalny.
W związku z powyższym, do pewnej wielkości osiągniętej przez produkcję może dodać lub odjąć, w pewnych okolicznościach, określonej wielkości (partii, warstwy, lub marży)  produktów, w tym samym czasie, wzrost lub spadek wielkości produkcji określa zmiany całkowitych kosztów produkcji jednostki. Ponieważ poziom całkowitych kosztów odpowiadającej produkcji, który ma zostać osiągnięty do dnia przyjęcia decyzji zwiększenie lub zmniejszenie poziomu produkcji już istnieje, a sumy kosztów produkcji są modyfikowane co ustalane jest przez dodanie lub odjęcie wielkości produkcji  (warstwy, partii, a marży).




 
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