but you do have to be careful with such detail numbers.
Many cost accountants come out with figures like that, then everybody assumes that each letter sent must be carefully considered because they each cost $50, which is a huge mistake.
It doesn't include the spare time factor - it assumes that the workers are working at perfect peak efficiency at that one task.
In fact, if it's costing a company that much to send a letter - it almost proves they're not working at peak efficiency.
If the people who send the letters are ALREADY a cost - the cost of sending an ADDITIONAL letter is the cost of sending an additional letter.
In simple terms:
Say you have a letter sending department that costs $100,000 per year to operate.
They send out 2000 letters per year. Dividing $100,000 by 2000 letters means each letter cost $50 per year.
Say that department came upon a decision point to resolve a $35 mistake that would require sending a letter.
Armed with the knowledge that letters cost $50 each, it wouldn't be worth sending it.
However - in reality the department will not be operating at peak performance levels. There's room for them to send an extra letter without hiring new employees or paying overtime.
So that letter would most likely cost only the additional postage, paper, and ink.
In fact, sending the extra letter could LOWER the annual per letter costs.
You're now dividing that $100,000 (plus a stamp and peice of paper) by 2001 instead of 2000.
And somewhere a manager will be proudly presenting his per letter cost savings to his superiors - and they'd be right - but in a very misleading way.
This post was edited by JRSutton at 08:54:55 11/27/12.
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Today's Featured Article - Hydraulics - Cylinder Anatomy - by Curtis von Fange. Let’s make one more addition to our series on hydraulics. I’ve noticed a few questions in the comment section that could pertain to hydraulic cylinders so I thought we could take a short look at this real workhorse of the circuit. Cylinders are the reason for the hydraulic circuit. They take the fluid power delivered from the pump and magically change it into mechanical power. There are many types of cylinders that one might run across on a farm scenario. Each one could take a chapter in
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