Free «Costs» Essay Sample
Different organizations adopt different methods of production. That is capital intensive or labor intensive. Capital intensive involve the use of machinery in the production process whereas labor intensive involve the use of human labor for production. Capital intensive production is associated with fixed costs while labor intensive involve variable costs expenditure.
In an automotive environment, machineries are essential to secure and sustain standardization. Nevertheless, human capital encrypted in professionals, specialists and technicians is crucial to man and operate the machines. These specialties will innovate, design, produce and maintain the necessary technology for use in the production process. It could be difficult to strike equilibrium between the cost of human production and technology. However, an organization could consider the level of technology it utilizes and figure out the labor resources requirements.
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Technological changes have shifted the equilibrium between fixed and variable costs. Innovations are bound to displace some human resources. However, a new level of expertise, skills and training accompanies the new technology. As a result, a company incurs other fixed and variable costs. Perhaps, communication is the most affected industry by technology. Innovations have shifted the level of technology and the normalcy in the communication industry. For example, innovation of computers and mobile phones affected communication and so did the innovation of websites.
A modern oil refinery company has a high fixed costs and low variable cost balance. It relies on automation for producing petroleum products from crude oil. The company could strike equilibrium by putting technology to its advantage. It can amalgamate the consumer’s needs with the cost of production. That is, produce high quality goods inexpensively.
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Joining a university program entails a lost investment opportunity. In addition, a student forgoes informal employment. Opportunity costs are considered at Toyota Company in making strategic decisions. They determine its competitiveness. Opportunity costs represent variable costs. They vary with the cost of the variable factor decided upon..