Chapter 7Cost Theory and EstimationThe Nature of the CostsShort Run Cost FunctionsLong Run Cost CurvesPlant Size and Economies of ScaleMinimizing Costs InternationallyLogistic or Supply Chain ManagementCost-Volume-Profit Analysis & OperatingEmpirical Estimation of Cost Functions

Karakteristik BiayaFungsi Biaya Jangka PendekKurva Biaya Jangka PanjangUkuran Pabrik dan Skala EkonomisMinimalisasi Biaya Secara InternasionalManajemen Logistik atau Penawaraan BerantaiAnalisa Biaya, Volume, Laba & PelaksanaanPerkiraan Empiris terhadap Fungsi BiayaBab 7Teori Biaya dan Perkiraan

The Nature of CostsExplicit Costs: actual expenditures to hire, rent, or purchase the inputs (w; rental price of K, equipment, buildings; price of raw materials, semi finished products) = Accounting Costs: explicit costs = purchased or rented inputs Economic Costs: explicit + implicit costsImplicit Costs: the value of inputs owned & used = they are not free (they can be sold or rented out to other firms) Alternative or Opportunity Costs: using a resource, giving up the next-best of alternative use of the resource. Opp.costs > acc.costs Relevant Costs Concept: economic and opportunity costsIncremental Costs: the change in TC from implementing a particular management decision (introducing a new product line, a new advertising campaign)Sunk Costs are Irrelevant: the costs that are not affected by decision. Sunk cots = a cost that is forever lost after it has been paid fixed costs see: Baye p.184.

7-1 Karakteristik BiayaExplicit Costs: Pengeluaran aktual utk memperkerjakan, menyewa atau membeli inputs (w; Harga sewa K, perlengkapan, bangunan; Harga bahan baku, barang setengah jadi) = Accounting Costs=explicit costs = inputs yang dibeli dan disewaEconomic Costs: Explicit + implicit cots harus dipertimbangkanImplicit Costs: nilai inputs yg dimiliki & digunakan = inputs ini tidak gratis ( dapat dijual dan disewakan ke perusahaan lain) Alternative or Opportunity Costs: penggunaan sumberdaya dengan mengorbankan alternatif terbaik dari menggunakan sumberdaya tersebut.. Opp.costs harus dibedakan dengan acc.costs Relevant Costs Concept = Economic and opportunity costsIncremental Costs: perobahan TC karena menerapkan keputusan manajemen tertentu (memperkenalkan product baru, kampanye iklan baruSunk Costs/biaya terbenam=biaya tdk relevant: biaya yang tidak dipengaruhi oleh keputusan. Lihat hal 299. harga input turun

Opportunity costsExample: Costs of Education: The opportunity costs is much higher then costs of tuition fee and books; it also includes the amount of money you would earn had you decided to work rather than go to school.Opp.costs: the costs of the explicit and implicit resources that are forgone when a decision is made.Opp.costs of producing a good or service generally is higher than accounting costs because it includes both the dollar value of costs (explicit costs) and any implicit costs.

Biaya OportunitasContoh: Biaya Pendidikan: Opportunity costs lebih tinggi dari biaya pendidikan dan buku karena termasuk sejumlah uang yang seharusnya diterima jika anda bekerja karena tidak melanjutkan sekolah.Opp.costs: seluruh biaya explicit dan implicit yang hilang jika suatu keputusan dibuat :bekerja sekolahOpp.costs dalam memproduksi suatu barang dan jasa umumnya lebih tingg dari accounting costs karena termasuk nilai dari biaya explicit dan implicit.

Opportunity Cost in the EconomyOpportunity Cost of any action is the best alternative forgone, i.e., the best thing that you reject (the forgone alternative) is the cost of the thing you choose.

The opportunity cost of an action is the highest valued alternative forgone.

A relative price is the ratio of one price to another. A price change means that the price one a certain good changes relative to the price of other good.

A relative price is an opportunity cost

Biaya Oportunitas di dalam EkonomiOpportunity Cost dari suatu kegiatan adalah alternatif terbaik yang hilang, yaitu: suatu yang terbaik yang anda ditolak (alternatif yang hilang) adalah biaya dari sesuatu yang anda pilih (pekerjaan baru yg akan diambil). The opportunity cost dari suatu tindakan adalah nilai alternatif tertinggi yang hilang (gaji yg diterima sekarang = opportunity cost)Suatu harga relatif adalah rasio dari suatu harga terhadap harga lainnya. Suatu harga berobah berarti bahwa harga dari suatu barang tertentu berobah terhadap harga barang lain.

Suatu harga relatif = opportunity cost Harga impor = opp cost harga dalam negeri

Short-Run Cost FunctionsTotal Cost = TC = f(Q)Total Fixed Cost = TFCTotal Variable Cost = TVCTC = TFC + TVCTFC: i of K, rental expendtr of plant & equipment, property tax, top mgt salariesTVC: raw materials, fuels, depreciation of used plant & equipmnt, labor costs, axes

TFC: i modal, sewa pabrik, peralatan, pajak perusahaan, gaji manejer

TVC: bahan baku, BBM, depresiasi pabrik & alat, tenaga kerja.Biaya Total = TC = f(Q)Biaya Total Tetap = TFCBiaya Total Tidak Tetap = TVCTC = TFC + TVC7-2 Fungsi Biaya Short-Run

Short-Run Cost FunctionsAverage Total Cost = ATC = TC/QAverage Fixed Cost = AFC = TFC/QAverage Variable Cost = AVC = TVC/QATC = AFC + AVCMarginal Cost = TC/Q = TVC/Qsince d(TFC)/dQ = 0

Fungsi Biaya Jangka PendekBiaya Total Rata-rata = ATC = TC/QBiaya Tetap Rata-rata = AFC = TFC/QBiaya Tdk Tetap Rata-rata = AVC = TVC/QATC = AFC + AVCBiaya Marginal = TC/Q = TVC/Qdimana d(TFC)/dQ = 0 karena d(TFC) = 0

Short-Run Cost FunctionsMC = TC/Q = TVC/Q

Short Run and Long RunShort Run: is a period of time in which the quantity of at least one input is fixed (fixed input) and the quantities of other inputs can be varied (variable inputs)

Long Run: is a period of time in which the quantities of all inputs can be varied

Short Run dan Long RunJangka Pendek: adalah suatu periode waktu dimana paling tidak jumlah dari satu inputnya tetap (input tetap) dan jumlah inputs yg lainnya dapat berobah (variable inputs)

Jangka Panjang: adalah periode waktu dimana jumlah dari seluruh inputs dapat berobah.

Short-Run Cost FunctionsAverage Variable CostAVC = TVC/Q = wL/Q = = w/APLMarginal Cost MC = TC/Q = TVC/Q = (wL)/Q = =

p. 278w(L)Q wQ/LwQ/L = w/MPL See: Figure 7-1

Fungsi Biaya Short-Run Biaya Tidak Tetap Rata-rataAVC = TVC/Q = wL/Q = = w/APLBiaya Marginal MC = TC/Q = TVC/Q = (wL)/Q = =

p. 278w(L)Q wQ/LwQ/L = w/MPL See: Figure 7-1

p.277MC = ATCFigure 7-1U-shape of ATC, AVC, MC = $60

Prepared by Robert F. Brooker, Ph.D. Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.Slide *p.277MC = ATCFigure 7-1Bentuk U dari ATC, AVC, MC = $60Biaya TetapTotal Biaya Tdk Tetap

Long-Run Cost CurvesLong-Run Total Cost = LTC = f(Q)Long-Run Average Cost = LAC = LTC/QLong-Run Marginal Cost = LMC = LTC/Q

7-3 Kurva Biaya Long-RunBiaya Total Long-Run = LTC = f(Q)Biaya Rata-rata Long-Run = LAC = LTC/QBiaya Marginal Long-Run = LMC = LTC/Q

Lihat Figure 7-3:Pada ttk A utk memproduksi 1Q digunakan 4L dan 4K jika w = $10 dan rental price of K = r = $10 maka TC utk memproduksi 1Q = 4L($10) + 4K($10) = $80

Figure 7-3. Derivation of Long-Run Cost CurvesTC = wL + rK = 10x4 + 10x4 w = $10r = $10 p.280LAC = LTC/Q

Gambar 7-3. Pembentukan Kurva Long-Run TC = wL + rK = 10x4 + 10x4 W =upah = $10r =bunga= $10 p.280LAC = LTC/Q

Relationship Between Long-Run and Short-Run Average Cost CurvesAssumption: the firm can build a very large or infinite number of plants in the long run. to minimize costOnly 4 scales of plantsFigure 7-4p. 283

7-4 Hubungan Antara Kurva Biaya Rata-rata Long-Run dan Short-Run Assumption: the firm can build a very large or infinite number of plants in the long run. Hanya 4 skala pabrikFigure 7-4p. 283Asumsi: perusahaan dapat membangun sebuah pabrik yang sgt besar atau jumlah yg tdk terbatas dalam jangka panjang. untuk menekan biaya

Possible Shapes of the LAC CurveElectricity generationp. 285In the case ofnatural monopoliesFigure 7-6p. 287

Kemungkinan Bentuk dari Kurva LAC Pembangkit Listrikp. 285Kasus Monopoli umumFigure 7-6p. 287Semakin besar skala usaha biaya akan semakin rendah sebesar apa skalanya ???

Learning CurvesAverage Cost of Unit Q = C = aQbEstimation Form: log C = log a + b Log QMore efficient as they gain production experience b = the slope of the learning curve

log C = 3 0.3 log Qp. 289Figure 7-7

Learning CurvesBiaya Rata-rata dari Q = C = aQbBentuk perkiraan: log C = log a + b Log QLebih efisien jika mereka mendapat pengalaman memproduksi b = slope kurva pembelajaran

log C = 3 0.3 log Qp. 289Figure 7-77-5 Kurva Pembelajaran

Minimizing Costs InternationallyForeign Sourcing of Inputs: a requirement to remain competitive: US firms spend $100 billion on outsourcing, by doing so they cut costs 10-15%. Ford 26 industrial sites/countries (201000 abroad n 181000 in US). p.293 New International Economies of Scale: integrating the entire system of manufacturing around the world to take advantage of intl econ of scale. p.294Immigration of Skilled Labor: National Science Foundation (NSF) predicted a hortage of 675.000 scientists & engineers in US. Hospitals?; Math & comp science? p.294/5Brain Drain: a number of skilled L go abroad. Singapore with intl manpower program. Brain gain in India

7-6 Minimalisasi Biaya Secara InternasionalSumber Inputs Asing: suatu persyaratan utk tetap mempunyai daya saing: US firms mengeluarkan $100 billion thd outsourcing, dg melakukan itu mereka dapat menekan biaya 10-15%. 26 lokasi industri Ford (201000 abroad n 181000 in US). p.293 Skala Ekonomi Internasional Baru: integrasi seluruh system manufaktur di seluruh dunia utk mendapat manfaat dari skala ekonomi internasional. pusat produksi pd negara tertentu p.294Imigrasi Tenagakerja Terdidik: National Science Foundation (NSF) memperkirakan kekurangan 675.000 ilmuan & insinyur di US. Rumah Sakit?; Math & comp science? p.294/5Pelarian Tanaga Ahli: sejumlah TK terampil pergi ke lN. Singapore dg program intl manpower . Brain gain di India & China

Logistics or Supply Chain ManagementMerges and integrates functions inPurchasingTransportationWarehousingDistributionCustomer ServicesSource of competitive advantage: a trend toward globalization of production n distribution in todays worldRather than dealing with each ofthem separately at division levels A way of reducing costs: increasing efficiency & profitability

Logistics or Supply Chain ManagementPenggabungan & integrasi fungsi dalamPembelianTransportasiPergudanganDistribusiPelayanan PelangganSumber dari Keuntungan Komperatif: suatu kecendrungan globalisasi produksi dan distribusi di dunia saat iniRather than dealing with each ofthem separately at division levels A way of reducing costs: increasing efficiency & profitability7-7 Manajemen Logistik atau Penawaran BerantaiDari pada dilakukan sendiri secara ter-pisah diantara mereka pd tingkat devisi Penurun biaya : Peningkatan efisiensi dan keuntungan

Reasons for the growth of logisticsAdvances in computer technologyDecreased cost of logistical problem solvingGrowth of just-in-time inventory managementIncreased need to monitor and manage input and output flowsGlobalization of production and distributionIncreased complexity of input and output flows

Alasan Berkembangnya Manajemen LogistikMajunya teknologi computer Berkurangnya biaya pemecahan masalah logistikBerkembangnya manajemen penyediaan tepat waktuMeningkatnya kebutuhan memonitor dan mengelola arus input dan outputGlobalisasi produksi dan distribusiMeningkatnya Keruwetan arus dari input and output

Cost-Volume-Profit Analysis or Breakeven (BE) AnalysisTotal Revenue = TR = (P)(Q)Total Cost = TC = TFC + (AVC)(Q)Breakeven (BE) Volume TR = TC(P)(Q) = TFC + (AVC)(Q)QBE = TFC/(P - AVC)p. 296(P)(Q) - (AVC)(Q) = TFC Q (P AVC) = TFCThe relationship among TR, TC, Total profits at various levels of output

Cost-Volume-Profit Analysis or Breakeven (BE) AnalysisPenerimaan Total = TR = (P)(Q)Total Cost = TC = TFC + (AVC)(Q)Titik Impas (BE) Volume TR = TC(P)(Q) = TFC + (AVC)(Q)QBE = TFC/(P - AVC)p. 296(P)(Q) - (AVC)(Q) = TFC Q (P AVC) = TFCHubungan antara TR, TC, Total Laba pd setiap tingkat produksi 7-8 Analisa Biaya-Volume-Laba atau Analisa Titik Impas (BE)

Linear Cost -Volume- Profit ChartFigure 8.12

Linear Cost -Volume- Profit ChartGrafik Biaya, Volume & Laba LinearTitik ImpasBiaya variabelKeuntungan bersihBiaya TetapKerugianJumlah diproduksi dan dijual dlm waktu tertentu (000)

Linear Cost-Volume-Profit or Breakeven Chart P = $10 TFC = $200 AVC = $5 QBE = 40 units TR = TC = $400p. 298QBE = TFC/(P - AVC) = 200/(10 5) = 40Figure 7-8TCBTC DecreasedTC TC B B

P = $10 TFC = $200 AVC = $5 QBE = 40 units TR = TC = $400p. 298QBE = TFC/(P - AVC) = 200/(10 5) = 40Figure 7-8TCBTC DecreasedTC TC B BLinear Cost-Volume-Profit atauGrafik Titik ImpasTC turunTC TC B B

Breakeven analysis to determine the Target Output (QT) at which a Target Profit (T ) can be achieved.

QT = TFC + T P - AVC$200 + $100 $10 - $5 = 60 units= = TR TC = 60x$10 $200 60x$5 = $100 Total Cost = TC = TFC + (AVC)(Q) = $200 + $5 x 60 = $500p.299

Breakeven analysis to determine the Target Output (QT) at which a Target Profit (T ) can be achieved.Analisis Titik Impas utk menentukan Target Output (QT) pada saat manaTarget Profit (T ) dapat dicapai

QT = TFC + T P - AVC$200 + $100 $10 - $5 = 60 units= = TR TC = 60x$10 $200 60x$5 = $100 Total Cost = TC = TFC + (AVC)(Q) = $200 + $5 x 60 = $500p.299Target keuntungan = $100

Operating LeverageOperating Leverage = TFC/TVC The higher is this ratio = more leveraged (semakin tinggi tuasan) the firm is said to be a higher overhead costs & QBE increases Degree of Operating Leverage = DOLDOL = the sensitivity of the firms total profits to a change in its output (Q) = sales elasticity of profit p.301elasticiy

Operating LeverageOperating Leverage = TFC/TVC Semakin tinggi rasio ini = semakin tinggi tuasan, perusahaan dikatakan menjadi mempunyai biaya tetap yg tinggi & QBE meningkatDegree of Operating Leverage = DOLDOL = sensitifitas laba total perusahaan terhadap perobahanproduksinya (Q) = elastisitas penjualan dari laba p.301elastisitasTuasan OperasiDerajat Tuasan Operasi = DOL

Operating LeverageTC has a higher DOL than TC therefore a higher QBE 40 45More highly leveragedFigure 7-9p. 301AVC = $5 AVC = $3.33QBE will rise to 45DOL: 3 4 p. 302 DOL increases: the firm becomes more leveraged or K intensive

TUASAN OPERASITC has a higher DOL than TC therefore a higher QBE 40 45Tuasan lebih tinggiFigure 7-9p. 301AVC = $5 AVC = $3.33QBE will rise to 45DOL: 3 4 p. 302 DOL increases: the firm becomes more leveraged or K intensive TC mempunyai DOL yg tinggi dari TC lebih tingginya QBE Q dari 40 45

Empirical EstimationData Collection IssuesOpportunity Costs Must be Extracted from Accounting Cost DataCosts Must be Apportioned Among ProductsCosts Must be Matched to Output Over TimeCosts Must be Corrected for Inflationp.304Short run cost function: C = f(Q, X1, X2, .., Xn)Q = output; X1 = Costs of fuel/ Costs of material, X2 = quality of inputs; X3 = technology used; X4; weather conditions

7-9 Estimasi Empiris:Pengumpulan Data Opportunity Costs harus dikeluarkan dari data Accounting Cost Costs terbagi secara adil diantara ProdukCosts harus selalu cocok dengan Output Costs harus dikoreksi dengan inflasip.304Fungsi biaya Short run : C = f(Q, X1, X2, .., Xn)Q = output; X1 = Biaya BBM /biaya material, X2 = mutu input; X3 = technology digunakan X4; kondosi cuaca

Empirical EstimationFunctional Form for Short-Run Cost FunctionsTheoretical FormLinear Approximation

Estimasi EmpirisBentuk Fungsi Short-Run Cost Bentuk TeoritisPendekatan Linear

Empirical EstimationTheoretical FormLinear ApproximationAVC becomes quite flat, approaching the value of b (MC) p.306L shapedFigure 7-10S-shapedU-shaped

Perkiraan EmpirisTheoretical FormLinear ApproximationAVC becomes quite flat, approaching the value of b (MC) p.306L shapedFigure 7-10S-shapedU-shapedAVC menjadi lebih mendatar, Mendekati nilai b (MC)

Empirical EstimationLong-Run Cost Curves

Cross-Sectional Regression AnalysisEngineering Method: uses knowledge of physical relationship between inputs and output expressed by the production function to determine optimal input combination : Figure 7-3.Survival Technique: if large n small firms coexist in the same industry, in the LR scale economies must be constant or nearly so leaving only large firms in the LR the presence of significant economies of scale. p.309

Empirical EstimationLong-Run Cost Curves

Cross-Sectional Regression AnalysisEngineering Method: uses knowledge of physical relationship between inputs and output expressed by the production function to determine optimal input combination : Figure 7-3.Survival Technique: if large n small firms coexist in the same industry, in the LR scale economies must be constant or nearly so leaving only large firms in the LR the presence of significant economies of scale. p.309Estimasi Empiris Kurva Long-Run Cost

Analisa Regresi Cross-Section Metoda Rekayasa : menggunakan pengetahuan hubungan fisik antara inputs & output dijelaskan dengan fungsi produksi utk menentukan kombinasi input yang optimal : Figure 7-3.Teknik Bertahan: jika industri besar & kecil berada pada industri yang sama, dalam jangka panjang skala ekonomi harus konstan atau mendekati konstan meninggalkan hanya perusahaan besar dlm jangka panjang akibat kehadiran skala ekonomi yang besar. p.335

Empirical Estimation Efficiency of Operation in Estimating the LAC curveActual LAC versus empirically estimated LACFigure 7-11

Estimasi Empiris Efisiensi Operasi dalam Estimasi kurva LAC LAC aktual lawan perkiraan empiris LACFigure 7-11

ReviewKeuntungan Maksimum

Prepared by Robert F. Brooker, Ph.D. Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.Slide *Profit Maximization(MPL)(MR) = MRPL = w(MPK)(MR) = MRPK = r = TR TC = P.Q wL rK Q = f (K,L)

= P. f (K,L) wL rK P is constant P = MRp. 270p.248

Prepared by Robert F. Brooker, Ph.D. Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.Slide *Maksimalisasi Laba(MPL)(MR) = MRPL = w(MPK)(MR) = MRPK = r = TR TC = P.Q wL rK Q = f (K,L)

= P. f (K,L) wL rK P tetap P = MRp. 270p.248

Optimal Use of Laborp. 236MRPL = (MPL)(MR)MVPLOptimal amount of LMaximum profitsTR = P.Q

TRMR = Q

Optimal Use of Laborp. 236MRPL = (MPL)(MR)MVPLOptimal amount of LMaximum profitsTR = P.Q

TRMR = QPenggunaan Tenaga Kerja yang OptimalUpah Minimum masalah internal & eksternal

Managerial Economics: Ch. 7 Cost Theory Managerial Economics: Ch. 7 Cost Theory January 2012Improved by Nurzaman Bachtiar*Improved by Nurzaman BachtiarManagerial Economics: Ch. 7 Cost Theory Managerial Economics: Ch. 7 Cost Theory January 2012Improved by Nurzaman Bachtiar*Improved by Nurzaman BachtiarManagerial Economics: Ch. 7 Cost Theory Managerial Economics: Ch. 7 Cost Theory January 2012Improved by Nurzaman Bachtiar*QImproved by Nurzaman BachtiarManagerial Economics: Ch. 7 Cost Theory Managerial Economics: Ch. 7 Cost Theory January 2012Improved by Nurzaman Bachtiar*QImproved by Nurzaman BachtiarManagerial Economics: Ch. 7 Cost Theory Managerial Economics: Ch. 7 Cost Theory January 2012Improved by Nurzaman Bachtiar*Improved by Nurzaman BachtiarManagerial Economics: Ch. 7 Cost Theory Managerial Economics: Ch. 7 Cost Theory January 2012Improved by Nurzaman Bachtiar*Improved by Nurzaman Bachtiar