S_Session 02 - Cost Concepts - Post Class.pdf

Examples direct costs fixed indirect eg teslas

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Examples Direct Costs Fixed & indirect: e.g., Tesla’s battery R&D - Fixed: R&D spending is pre- committed, doesn’t change with # cars - Indirect: R&D benefits all Tesla models Variable & direct: e.g., iPhone components - Direct: we know how many screens an iPhone needs - Variable: making one more iPhone requires one more screen Variable & indirect: e.g., machine power of plant that makes several car types - Variable: producing one car less leads to less power usage - Indirect: electricity costs are metered to plant, not to product line Fixed Costs Indirect Costs Variable Costs Direct & fixed: e.g., Marketing for Samsung Note7 - Direct: advertisements for Note7 only, not for Samsung Galaxy - Fixed: spending is pre- committed, doesn’t change with # phones Costs 13
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