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Economies of Scale
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The theory of economies of
scale derives from the reduced
cost of production increases.
Generally, as production
increases, cost per unit
decreases. A company already has
the equipment and building space
necessary to produce a given
product, so these costs stay the
same as production increases.
Multiplying production returns
without an equivalent growth in
expense results in a lower price
per unit.
Purchasing in
volume also creates economies of
scale. Buying and producing
2,000 items at 10% more than I
acquired and delivered 1,700
items achieves economies of
scale. I increased production by
15% while increasing my expenses
by only 10%.
Balanced
production can also produce
economies of scale. For example,
I have one plant working
overtime to deliver 2000 units.
I have another plant working
under capacity and manufacturing
1500 units. If we balance
production, so each plant
fabricates 1800 units, we
increase production and
eliminate overtime expenses,
reducing the price per unit.
Lowering interest rates on
loans creates an economy of
scale. More money is available
when interest rates are low, so
many businesses borrow more. A
Business can use the additional
funds to purchase in bulk,
reducing expenses and increasing
production.
Marketing
that covers a larger area at the
same price creates an economy of
scale. The increased market
reach lowers the cost per view
resulting in a lower conversion
cost.
When we take
advantage of economies of scale,
we can increase production while
lowering our price per unit.
Watch for opportunities to take
advantage of this economic
theory. Putting the theory in to
practice may be different in
each industry, but it is worth
the effort. |
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Just For Grins
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- Every woman's dream
is that a man will take her in his arms, throw her
in to bed...and clean the whole house while she
sleeps.
- I have found that if
you tuck one part of your pant leg in to your sock,
people expect less of you.
- To old for Snapchat,
to young for Life Alert.
- I wish more people
were fluent in silence.
- Losing weight does not
seem to be working for me...so, from now on I am
going to focus on getting taller.
- I always carry a knife
in my purse. You know, in case of cheesecake or
something.
- Today's interpretive
dance is brought to you by "OMG, there's a spider
on my shirt!!!"
- Ever notice how much
exercise and extra fries sound alike?
- I get most of my
exercise these days from shaking my head in
disbelief.
- Waiting to see how
long it takes this police sketch artist to realize
I am describing him.
- If my body is ever
found dead on a jogging trail, just know I was
murdered somewhere else and dumped there.
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Monthly Tip |
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or "Auto save only in these applications".
You can set AutoSaver to run when Windows starts.
Please follow the instructions on the download page
for the best experience.
Visit the AutoSaver Homepage
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