Production and Cost Analysis

Productivity and cost are important concepts to any business owner or manager. I happen to run a medical facility for an individual doctor. My boss and I meet twice per week to discuss methods to increase productivity, increase revenue, and decrease costs. Of course other topics are discussed as well. Patient satisfaction, employee education, and patient treatments are often subjects as well. Whatever the purpose of a business, production must be greater than costs or the business will cease to exist.

This week we learned about the effects of long term and short term planning. For the purpose of performing sleep studies, our office needed to decide the equipment that would be used, the structure and layout of the office and other issues which would affect our “production” over the course of several years. Then there were short term decisions which would immediately impact production. Staff work schedules, hours of business, and marketing all affect our immediate production.

What I found troubling to comprehend completely is the difference between diminishing production and increasing costs. I understand that over the course of a long term plan, costs will eventually increase. This follows an inverse, but similar, pattern as production over the short term.

Initially, another term I found difficult to understand was that long term inputs are all variable while short term inputs are mostly fixed. The visual that helped me understand this better was to think about a boulder. If you sit and look at a boulder, you will see that it doesn’t change. It is in a fixed position and shape. However, if you were able to view that same boulder 100 years later, you would see that its shape, and maybe position, has changed. Over a long enough time span, all things change, even though in the short term, change seems impossible.

In reading the weeks work, the activities and assignments have not really changed my thought process on how I deal with things economically. However, the tasks have enlightened and educated me more perhaps on the aspect of how things come to be. I now realize the more something is demanded, the higher the price may be. I have also learned that consumers may not realize how much buying power they actually have and how the decisions they make affect what they actually pay for an item/product.

Trends are a great way to make money and companies set trends, advertise heavily (utilizing actors, rappers and the elite) in order to brand or sell the product. Smart advertising usually follows with significant financial gains. The simulation gave me much needed insight on how pricing is calculated in terms of housing. Location also plays a factor in the need for housing developments or the need to build more inventory to accommodate a growing society. Anyway you look at it; price is driven by supply and demand. How we deal with how prices are determined deals solely with our own economic capabilities and how