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The Effects of Experience on Product Quantity and Batch Decisions
Liu, Victor W.
|Issue Date:||2017-11-15 14:53:08 (UTC+8)|
Setup Experiences are referred to as reductions in the setup time, which depend on the number of preceding setups that has occurred. This paper intends to introduce the factor of setup experience into an activity-based costing model to analyze product decisions. We study how, under capacity constraints, reduction in setup time through experiences affects the optimal production quantity decision and batch decision. This paper links market demand, setup experience and batch decisions and establishes an analytical model to be reapplied for other batch level activities. Other variables being equal, production costs will decrease as experience rate increases, and a firm will then increase product quantity. Experiences reduce setup costs which induce setup number to be increased. This chain reaction is referred to as the cost effect. The results indicate that the effects of setup experiences on the optimal production batch number depend on the relative size of the cost effect. However, the size of the cost effect is contingent on the cost per setup and the setup time of producing the first unit. When the cost per setup is high, the cost effect will be great; an increase in the setup experience rate will cause the number of production batches to be increased to fit increased demand. Furthermore, comparing to a tight capacity condition, the firm would obtain relatively greater profit in a loose capacity condition when the number of production batches increases as the rate of setup experience increases.
|Relation:||會計評論, 33, 57-75|
|Appears in Collections:||[會計評論] 期刊論文|
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