(23 Jan 2014, 10:50 pm)Adam wrote That is the exact flip side of the argument that cropped up in the lesson
Haha, was it?
l suppose it depends what the fixed costs are and what the scenario or situation is.
In this example, you could increase the costs of product a and b, by increasing frequency, utilising the resources from product c - in the hope of making greater profits on the first two.
So product a has costs of 15k, product b has costs of 12k and product c has costs reduced to 3k.
The gamble then, is that a and b increase their profit, whilst c now makes a profit (or a lower loss).
In a factory environment, there is potentially less of a choice in reducing fixed costs or sharing the costs out - whereas in transport, there is the flexibility to adapt (which we see -possibly too often).