An illustration of variable cost We will use the following scenario throughout this section as a…

An illustration of variable cost We will use the following scenario throughout this section as a running example for important concepts. Lambchops is an organisation that processes wool, which is subsequently sold to manufacturers of fine suits for $1000 per bale. To process each bale of wool, the following costs and consequences are incurred or arise:

• cost of acquiring each bale of unprocessed wool (including transportation) – $450

• cost of (resources used in) processing (in practice there would be many more costs than shown here, but we are limiting them to keep this relatively straightforward): – labour – four hours per bale at $30 per hour – detergents – $10 per bale – water – 1000 litres per bale (at the present time, this water is extracted from a bore on the property at no financial cost – bore water is groundwater accessed by drilling a bore into underground aquifers – although there are concerns that the amount of water being taken is impacting the quality and quantity of water available to other local properties) – electricity – $30 per bale (50 kilowatt hours) – wastewater – 850 litres per bale (at the moment, this wastewater is released directly into a local waterway at no financial cost, but it is unclear what the environmental impacts are).

• costs of making sales – $40 per bale (packaging and transportation to buyer). Let us now consider what is the variable cost associated with the production and sale of each processed bale of wool.

Financial costs If we only consider the financial costs, then the answer is: $450 + (4 x $30) + $10 + $30 + $40 = $650 per bale. This means that for every additional bale of wool that is processed, the cost to Lambchops will increase by $650. Social and environmental implications In practice, we also need to consider the social and environmental implications of the planned activity and how the impacts might vary as production varies. Relevant here would be the use of water, including how the amount used might impact water availability for other stakeholders living or working nearby. Also, the impacts of wastewater on local waterways would require careful analysis, as would the types and quantities of detergents being used and whether those amounts represent an environmentally safe level of output. Some organisations would also consider the potential for reducing the amount of energy being used by the production processes, or the possibility of using energy from renewable sources. The actual variable cost The variable cost of $650 shown above only relates to the variable financial costs being incurred by the organisation. It does not reflect any social and environmental factors. As such, when we subsequently consider the profit of the organisation – which is almost always reported in financial terms – then we must remember that it will not necessarily take into account some of the environmental and social impacts of the organisation. Hence, profit is not the only thing to be considered by managers when looking at the success of an organisation, or of a planned product or service. This is something we have stressed a number of times already within this book, including earlier in this chapter when we emphasised the necessity for managers to consider sustainability in managing an organisation. A focus just on financial profits is not a long-term view of managing an organisation.

Place your order
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
The price is based on these factors:
Academic level
Number of pages
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more
error: Content is protected !!