Arbeitspapier

Levelized Product Cost: Concept and Decision Relevance

This paper examines a life-cycle cost concept that applies to both manufacturing and service industries in which upfront capacity investments are essential. Borrowing from the energy literature, we refer to this cost measure as the levelized product cost (LC). Per unit of output, the levelized cost aggregates a share of the initial capacity expenditure with periodic fixed and variable operating costs. The resulting cost figure exceeds the full cost of a product, as commonly calculated in managerial accounting. Our analysis shows that the LC can be interpreted as the long-run marginal product cost. In particular, this cost measure is shown to be the relevant unit cost that firms should impute for investments in productive capacity.

Sprache
Englisch

Erschienen in
Series: CESifo Working Paper ; No. 4590

Klassifikation
Wirtschaft
Business Economics: General
Accounting
Production, Pricing, and Market Structure; Size Distribution of Firms
Monopoly; Monopolization Strategies

Ereignis
Geistige Schöpfung
(wer)
Reichelstein, Stefan
Rohlfing-Bastian, Anna
Ereignis
Veröffentlichung
(wer)
Center for Economic Studies and ifo Institute (CESifo)
(wo)
Munich
(wann)
2014

Handle
Letzte Aktualisierung
20.09.2024, 08:20 MESZ

Datenpartner

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Objekttyp

  • Arbeitspapier

Beteiligte

  • Reichelstein, Stefan
  • Rohlfing-Bastian, Anna
  • Center for Economic Studies and ifo Institute (CESifo)

Entstanden

  • 2014

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