Tag: Range of Production
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Business Principles – A Pyramid of Levels
There is no universal finite set of business principles. In the aggregate, there are over several hundred of them.
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Mixed Costs
Mixed costs are a more advanced business concept. Mixed costs refer to a combination of both a fixed and variable component. A common error made by most small business entrepreneurs is the misapplication of the formula. Many small business owners understand the textbook definition but rarely exercise the concept in reality.
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Cost Drivers in Small Business
The textbook answer defines cost drivers as those factors that determine the overall cost of operations. As an example, in manufacturing the cost drivers may be processing time or number of steps to produce the product. With service, the cost drivers could be the actual ratio of billable to non-billable time.
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Operate Within Your Range of Production
One of the basic business concepts is range of production. It means maximizing the capacity (range) of the assets in your operation. When the business operation goes beyond the maximum production range, costs associated with the marginal production generally exceed the revenue generated with the marginal increase. To maximize profit in any business, operate within your range of…
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Find the Bottleneck
In every business no matter production or service, there exists a bottleneck. Your job as the owner or manager is to find it and fix the problem. Once this one is found and resolved; move onto the next one. There is always a bottleneck to find and fix. What is important is to find the problem,…
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A Story About Great Production
What I learned was that equipment didn’t call in sick, it didn’t back talk me, it never got upset about how much it was paid and it just kept on humming. It was making us money and I didn’t have to deal with personnel issues. Boy, if only all production could be like this. Turn it on…