The following appeared as part of an annual report sent to stockholders by Olympic Foods, a processor of frozen
foods:
"Over time, the costs of processing go down because as organizations learn how to do things better, they become
more efficient. In color film processing, for example, the cost of a 3-by-5-inch print fell from 50 cents for five-day
service in 1970 to 20 cents for one-day service in 1984. The same principle applies to the processing of food. And
since Olympic Foods will soon celebrate its 25th birthday, we can expect that our long experience will enable us to
minimize costs and thus maximize profits."
Discuss how well reasoned . . . etc.
The cost of processing goes down as a result of increased knowledge and experience which in turn makes the company more efficient. Olympic company is a 25 year old company and expects to reduce the cost of its production facility and in turn maximize its profit from the increased efficiency.
One cannot question the reason behind the decrease in the processing cost that is enabled by an organizations gain in experience, however it is a intriguing to find an example of a color film processing cited to compare the cost reduction expected by Olympic foods.
Color film processing industry is very different from the food industry. While it is true that the in both the efficiency gained due to increased experience is valid, there could be other reasons contributing to the 30 cent and 3 day processing reduction in the film processing as against the food processing industry. The technological advancement in film processing and increased competition with the sudden popularity of color films, could be one of the contributing factor to see such a reduction in the price for a print. The price of the raw materials in the film processing has reduced much, unlike the prices of food processing, which still relies primarily on raw agricultural goods.
Also to be noted is that with the fall in price of the print processing, the price of the prints itself has reduced. Even though the food processing industry can reduce processing cost, the price quotes of the products and its whereabouts is missing in the report. This does not throw light to the investors on the profit expected by Olympic Foods.
To show the investors how the companys experience will yield better results, the report could have added some practice within the company that has reduced or will reduce the processing costs. The report could have also stated the net increase in revenue expected after the new processing is put in place.
foods:
"Over time, the costs of processing go down because as organizations learn how to do things better, they become
more efficient. In color film processing, for example, the cost of a 3-by-5-inch print fell from 50 cents for five-day
service in 1970 to 20 cents for one-day service in 1984. The same principle applies to the processing of food. And
since Olympic Foods will soon celebrate its 25th birthday, we can expect that our long experience will enable us to
minimize costs and thus maximize profits."
Discuss how well reasoned . . . etc.
The cost of processing goes down as a result of increased knowledge and experience which in turn makes the company more efficient. Olympic company is a 25 year old company and expects to reduce the cost of its production facility and in turn maximize its profit from the increased efficiency.
One cannot question the reason behind the decrease in the processing cost that is enabled by an organizations gain in experience, however it is a intriguing to find an example of a color film processing cited to compare the cost reduction expected by Olympic foods.
Color film processing industry is very different from the food industry. While it is true that the in both the efficiency gained due to increased experience is valid, there could be other reasons contributing to the 30 cent and 3 day processing reduction in the film processing as against the food processing industry. The technological advancement in film processing and increased competition with the sudden popularity of color films, could be one of the contributing factor to see such a reduction in the price for a print. The price of the raw materials in the film processing has reduced much, unlike the prices of food processing, which still relies primarily on raw agricultural goods.
Also to be noted is that with the fall in price of the print processing, the price of the prints itself has reduced. Even though the food processing industry can reduce processing cost, the price quotes of the products and its whereabouts is missing in the report. This does not throw light to the investors on the profit expected by Olympic Foods.
To show the investors how the companys experience will yield better results, the report could have added some practice within the company that has reduced or will reduce the processing costs. The report could have also stated the net increase in revenue expected after the new processing is put in place.
