App. B—Commissioned Background Papers
Thus , the preceding example of a five per cent reduction in unit wage costs would tend to reduce total unit costs by only one per cent if wages accounted
for only 20% of total unit costs. at all if the assumed ten per cent engendered by increased investment processed and hence more expensive
And total unit costs need not have declined increase in output per man-hour had been in machinery,or by purchasing more highly material inputs.
FIG. 3 Productivity network, cost structure and managerial control ratios.
Management tends to be even more concerned about the effects of prospective
innovations on profitability than on costs.
account must be taken of the
fact that such effects involve not only the direct impact unit costs, but also the indirect effects of any changes product-mix on product prices and capacity utilization
of changes ‘on total
in product quality