The influence of capacity management on the unit cost of production: a case study in a flexible plastic packaging company

Abstract

This article presents the relationship between capacity management and cost management in determining the unit cost. The objective was to show how the use of effective capacity decreases the unit cost of manufacturing. For this, follow these steps: 1) Knowledge and analysis of production process and PPPC; 2) Data Collection; 3) Application of the Method Cost Center; 4)Verification of the relationship between the Capacity Management and Cost Management. Through the company’s accounting reports, observations and interviews, the following results was possible: knowledge of the production process and functioning of PPCP, measuring the cost of each step of the production process and the unit cost of each product. Subsequently, we compared the unit cost using the effective capacity and normal capacity. The results showed that the unit costs decrease with the use of effective capacity, while increasing the margin for each product, even with the lower sale price, thus establishing a virtuous circle: effective capacity utilization, reduced unit cost, most competitive prices and increase in the number of requests.