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Process-Based Cost Model for a Print and Copy Firm

production volume

40000000

reject rate

0.05

equipment price ($)

722000

paper price ($/1250 sheets)

83.7

toner price ($)

2684

labor price ($/hour)

	Materials Cost
	Labor Cost
	Equipment Cost

A process-based cost model is used to inform technical decisions. This cost model, for a print copy firm, shows how the unit cost and cost distribution vary as a function of materials, labor, equipment cost, reject rate, and production volume. A cost model can be used to identify cost drivers and to address the implications of change in a process or product. Vary the different inputs to see the different relevant costs and their effect on unit cost. The spikes in the cost model represent production volumes beyond which another printing press has to be bought.

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