Saturday, August 10, 2019
Production and Cost Term Paper Example | Topics and Well Written Essays - 750 words
Production and Cost - Term Paper Example The article "Production and Cost" talks about the cost minimization and why it enhances the smooth operation of the organization and reduces raw materials wastage. Production should always be based on the best optimal way that emphasizes on customer value maximization. More importantly, proper controls on the production process and insistent of manufacturing only what is deemed necessary significantly reduces the cost of production. Natural resources and labor costs are the major expenses incurred in creating the final product. The optimum ordering levels should be maintained including the Economic Order Quantity (EOQ) to enable smooth flow of production process. The natural resources, work in progress, and final goods must be honestly accounted for. Integration of organizational departments plays a pivotal role in minimizing the cost of production. Arguably, there is great need to reduce costs by considering both variable and fixed costs. Variable expenses can always be regulated to minimize the resulting cost of production. These are costs that increase as the output goes up and decreases when output reduces. Variable costs may comprise of natural resources and direct labor costs. They include costs such as electricity and overtime wages paid to workers involved in the direct production of goods. A company may, therefore, regulate its variable cost to minimize the cost of production. Fixed costs are exogenous hence unconnected with the output. The total fixed cost always remains independent for a long time.