Non-linearity and cost functions
Step-fixed costs maybe hard to affect. Consequently, a major means of cost management is to utilise each level as fully as possible, within the constraints of prediction and sales capacity. For example, in Exhibit 9.10, the manager’s goal would be to have about 7,500, 15,000 or 22,500 hours of furnace time in order to fully utilise 1, 2 or 3 furnaces.
Learning curves and nonlinear cost functions
Emphasis on the continuous improvement management theme (introduced in Chapter 1) has prompted companies to develop experience curves that target continual cost reductions. These experience curves yield information useful in preparing budgets, developing continuous improvement standards and performance evaluation.
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