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"I'm making my payments, and the insurance company will lend me more money."
Cynical? I wonder sometimes.
What information do we use to make equipment addition decisions? There isn't any industry capacity data, to my knowledge, or that of the investment banker who called. It must be on "gut" feeling. We tell ourselves that, with more volume, we'll spread the overhead costs further. But an inner voice hollers, "Wait a minute. Volume creates its own overhead." If added volume doesn't generate excellent margins, it's quicksand. Volume is "activity" and activity consumes resources. That's why "activity-based costing" has become popular. Do we have any objective information to provide support for our capacity decisions?
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