Brainstorming Ideas: Increase the Output Over Which a Fixed Cost Intermediate Cost Driver is Used
Increase the Output (O) over which a fixed cost ICD is used. This action reduces the quantity of a unique fixed cost ICD used to produce a unit of Output by increasing the units of Output. For example, a new product design, or a new process patent, are both ICDs that have virtually limitless capacity for use. These are fixed cost ICDs. You pay for them once and you can use them over a virtually unlimited amount of Output. Their ICD/O ratios are limited only by the current demand level for Output.
B. Use fixed cost ICDs with more customers
By using fixed cost ICDs with more customer volume, the unit cost of the ICD declines as a component of the final Output cost.
- Warnings and advice
- Use fixed cost ICDs with new customer segments
- COMBINE FIXED COST ICDs WITH COMPETITORS INTO A SEPARATE BUSINESS
. Combine ICDs from the major cost functions of the company.
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