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Unit 7

Unit 7. Cost Issues. Why Are variable cost low and fixed costs high?. Examples: Movie theatres Doctor’s office/hospitals Hotels Others?. Definitions. Capacity: maximum sustainable input or output rate for a facility

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Unit 7

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  1. Unit 7 Cost Issues

  2. Why Are variable cost low and fixed costs high? • Examples: • Movie theatres • Doctor’s office/hospitals • Hotels • Others?

  3. Definitions • Capacity: maximum sustainable input or output rate for a facility • Capacity cushion: extra unscheduled capacity held in reserve for contingencies • Productivity = output/input • Utilization =actual output/potential output (measures absence of idle time)

  4. Efficiency vs Customers • Efficiency = output/time • Potential efficiency is a function of • 1-cust content/service creation time • More customer content = less efficiency • What to do: • Delay customer inputs (localization) • Restrict options (“structure” inputs) • Service manufacturing

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