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How Elasticity Indicators support Cost Management

Hinrichsen, S.: How Elasticity Indicators support Cost Management. In: Villmer, F.-J.; Padoano, E. (Hrsg.): Production Engineering and Management. Proceedings 6th International Conference. 29.-30.09.2016 in Lemgo, Germany, Publication Series in Direct Digital Manufacturing, Volume 01/2016, S. 123 - 131. 

Against the background of rising overhead costs in manufacturing companies the application of methods of overhead cost management is of increasing importance. Within this article existing approaches of cost management are explained in principle. Based on these approaches a new complementary approach of managing costs with the help of costs elasticity ratios is described by a case study. The method is based on the hypothesis that there are no fixed personnel costs, but personnel costs with different elasticity with respect to the volume of orders. Personnel costs elasticity (ε) is derived from the quotient of the relative change in personnel costs (k) and the relative change of the order volume (q) of a billing month (i). The method aims to increase the flexibility of overhead costs, but can also be applied with respect to so-called direct costs. In this case, the question arises as to what extent the direct costs actually develop proportional elastic over time.

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