Total, OPEX and CAPEX costs in the
- Operating expenditure plus tangible depreciation
where operating expenditure includes the following cost items: materials, services, wage costs and other costs.
Most of the uncontrollable cost items (e.g., charges to other network operators, or purchases of energy) were eliminated from the cost base and the level of remaining uncontrollable costs was minimal. The costs associated with the performance of transmission activities were removed from the analysis.
Outputs
Since model selection could not be based upon econometric tests, Frontier Economics employed combinations of the following output variables:
- Electricity distributed (kWh)
- Number of consumers (total, small and large)
- Network length
- Transformer numbers
- Network density.
Frontier Economics requested input from the businesses to identify environmental factors that may affect the efficiency scores and to provide relevant data on these so that the impact of environmental factors on the efficiency scores could be tested.
Frontier Economics noted that insufficient data were available to incorporate variables such as peak demand and service quality.
3.2. Models specification
This section describes the various DEA models estimated by Frontier Economics. All the models were estimated under both Constant Returns-to-Scales (CRS) and Variable Returns-to-Scale (VRS) specifications.
Model 1 is a simple model with only two potential cost drivers (units distributed and customer numbers). It was noted that these are key outputs for any distribution and supply business.
Model 2 is similar to Model 1, but attempts to capture differences in the composition of customer base by splitting the number of consumers into two groups...
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...nt very low DEA scores (which may have reflected positive cost shocks) from leading to very high X factors.
- The use of international comparators: Most regulators have tended to limit themselves to domestic comparators, particularly for distribution companies where the number of companies is generally greater, e.g. Norway where there are around 180 regional companies and Netherlands where there are 19, as this eases problems associated with data comparability. As is shown in the figure below the decisions of the Regulator authorities can vary a lot depending on all the context to measure the right remuneration.
Other real life problems with the use of DEA by the BTe can be shown somehow in the next figure.
http://www.accc.gov.au/system/files/Regulatory%20practices%20in%20other%20countries%20-%20Benchmarking%20opex%20and%20capex%20in%20energy%20networks.pdf
[4] Colin Drury, Management and Costing Accounting, (7th edition), Chapter 3, Cost Assignment, p. 54-59
Wood, Joel. "The Effects Of Environmental Regulation On The Competitiveness Of US Manufacturing." Fraser Forum (2012): 25. Business Source Complete. Web. 6 Mar. 2014.< http://eds.a.ebscohost.com.gatekeeper2.lindenwood.edu/ehost/pdfviewer/ pdfviewer?sid=232efdbd-1043-415b-af6f-5a75b828a29a%40sessionmgr4003&vid= 5&hid=4111>.
The Darby Company is re-evaluating its current production and distribution system in order to determine whether it is cost-effective or if a different approach should be considered. The company produces meters that measure the consumption of electrical power. Currently, they produce these meters are two locations – El Paso, Texas and San Bernardino, California. The San Bernardino plant is newer, and therefore the technology is more effective, meaning that their cost per unit is $10.00, while the El Paso plant produces at $10.50. However, the El Paso plant has a higher capacity at 30,000 to San Bernardino’s 20,000. Once manufactured, the meters are sent to one of three distribution centers – Ft. Worth, Texas, Santa Fe, New Mexico and Las Vegas. Due to the proximity of El Paso to Ft. Worth, they are only plant to ship to Ft. Worth. The costs associated with each shipment are described in detail in Appendix 2.2A. From these distribution centers, meters are shipped to one of nine customer zones. The Ft. Worth center services Dallas, San Antonio, Wichita and Kansas City, the Santa Fe center services Denver, Salt Lake City, and Phoenix, and the Las Vegas center ships to Los Angeles and San Diego.
If done right, I believe that all of the costs can be allocated to each of the three products through both direct and overhead costs. The only direct costs that are being included currently are labor and manufacturing costs. I broke up overhead into overhead based off direct labor and overhead based on units sold.
Companies. Retrieved July 4, 2008, from University of Phoenix, MMPBL-501 Web site. University of Phoenix . ( 2008). Economics for Managerial Decision Making
This segmentation variable combines the elements of the consumer’s demography and geography. These are the measurable characteristics of the consumer’s age, gender, cultural diversity, occupation, income level, family life cycle and their physical geographical location. (Gabbott, M., 2004, p. 159-160).
Operating budget is the most appropriate budget for managing unit cost. The operating budget is a financial plan that takes into consideration all of the day-to-day activities that involve taking care of patients. A units revenue, which is the actual charges, are based off of the total number of days patients spend on the unit or the average daily census. Expenses include all of the cost for paying nursing staff to work, the cost of all supplies that are necessary to provide patient care, and the cost of any additional resources that may be necessary for patient care. The unit expenses can be broken down into two main types of expenses. One, is the employment cost. The employment cost is the largest part of any units budget. This is due
The contained paper has been prepared with objectives of elaborating over the three different costing methods namely, Absorption/Full Costing, Variable/Marginal Costing, and Activity Based accounting. The first segment of the report seeks to define and illustrate the costing methods based on the personal understanding of the writer gained through the class room and the academic readings. Part two of the report takes a form of short essay, written critically to evaluate the application of standard costing and variance analysis to any size of business, and concludes with a verdict that whether or not standard costing and variance analysis is applicable to each business with consideration of its costs and benefits of the system.
Cost allocation is the process of identifying, aggregating, and assigning of cost to various separate activities. There is no overly precise method of charging cost to objects, hence resulting to approximate methods being used to do so. Amongst the approximation basis used includes square footage, headcount, cost of assets employed, and electricity usage amongst others. The main aim of cost allocation is to spread cost in the fairest possible method and also to impact the behavior pattern of the cost.
An organization costing system is a system that helps the management with the strategy planning while the system plays an important role in providing accurate cost information about the products and customers (Curtin, 2006). UPS utilizes the Activity-Based Costing (ABC) system. ABC assumes that activities cause costs and that cost objects create the demand for activities (Marx, 2009). The key to cost allocation under ABC is to identify the activities that are performed to provide a particular service and then aggregate the costs of the activities (Gapenski, 2012). This is a marked departure from the practice of sharing overheads costs equally or overheads becoming part of the overall profit-loss estimate instead of component product pricing (Nayab, 2011).
For example: with the increase of the number of products produced, the cost of operating a machine also increase. Second we have batch level costs which is associated with batches; producing a multiple units of the same product that are processed together is called a batch. The third type is product level costs which arise from any activity in order to support the production of products. The fourth and the last type is facility level costs, this costs cannot be determined with a particular unit, product or batch; this costs are fixed with respect to batches, products and number of units produced. A single measure of volume is used for allocating costs to each service or product in traditional method for example: direct material cost, machine hours, direct labor cost and direct labor hours. A cost driver is an activity that generate costs, it can be generated by two types of costs the first is a particular machine 's running costs where the costs is driven by production volume as machine hours; the second is quality inspection costs where the cost is driven by the number of times the relevant activity occurs as the number of
In the current market situation where the economy is constantly on a downfall and people are doing everything that is necessary to reduce cost and save money. Food products and daily essentials are one the major contributors of cost for everyone. Especially younger generation are willing to lead a simplistic and cost effective life style to save money. Despite being the second largest retail chain in the world, 2015. And also one of the cheapest retailer in the market it is finding very hard to attract the Millennials in to their stores. Costco is the largest retailer when it comes to membership only stores and it is estimated that the net income of the company to be around $2.38 billion US dollars (http://www.marketwatch.com/investing/stock/cost/financials).
The user requirements were not taken into consideration thus affecting the purchasing orders, poor management of inventory, the manufacturing and finance department were not integrated. This also required a lot of recoding thus costing AMP Canada further investment
The second way is to achieve low direct and indirect operating costs is gained by offering high volumes of standard products and offering basic no-frills products. Production costs are kept low by using less parts and using standard components. Limiting the number of models produced to ensure larger producti...
Distribution- work on alternatives of outsourcing the distribution network or transportation routes. Should focus on outsource this non-core business activities if it is non-profitable. It is costly by not understanding the multi distribution network in standard line delivery (Multiple drop off points through retail channel sales)