Journal article
Is assigning capacity costs to individual products necessary for capacity planning?
Accounting horizons, Vol.10(3), pp.1-11
09/01/1996
Abstract
A study examines the value of assigning costs of capacity resources to products for capacity planning. Numerical examples are used to demonstrate that when capacity once installed cannot be increased in the short run, the decision of how much capacity to install initially is a portfolio-level problem and does not generally decompose into product-level problems. Intuitively, unless product demand is constant, the product-mix problem differs across periods when capacity constraints are hard. Consequently, the opportunity cost of a capacity resource also varies across periods because it is determined at the portfolio level. Therefore, using full costs to measure individual product profitability and planning initial capacity levels on a product-by-product basis is sub-optimal.
Details
- Title: Subtitle
- Is assigning capacity costs to individual products necessary for capacity planning?
- Creators
- Ramji BalakrishnanK Sivaramakrishnan
- Resource Type
- Journal article
- Publication Details
- Accounting horizons, Vol.10(3), pp.1-11
- Publisher
- American Accounting Association
- ISSN
- 0888-7993
- eISSN
- 1558-7975
- Language
- English
- Date published
- 09/01/1996
- Academic Unit
- Accounting
- Record Identifier
- 9984380550602771
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