The presence of economies of scale allows industries and companies to have better profits.\nIn the present study, the translog cost function of a manufacturing company in Mexico is\nestimated during the period January 2013 to September 2016 to know the type of returns to\nscale that the company has. The results indicate that elasticity of production with respect to\ncost is one, where increases in production lead to increases in the same proportion in costs.\nThe theory indicates that there are 3 possible ways in which a company could operate with\neconomies of scale and minimize cost: the first is to analyze if the number of workers is\noptimal and we conclude that the number of employees is optimal. The second reason\nconsists of the ability to manage the costs of the company. Actually this company uses a\nstandard cost system which is proposed to analyze whether the management of the\ncompany is more effective to consider a new form of cost, so an analysis is done through\nActivity-Based Costing (ABC). The results indicate that for models that are manufactured in\nsmall and medium assembly lines, considering ABC costing would be beneficial. The third\nreason a company can operate with economies of scale is that the company must have\nflexibility in the use of inputs and thus organize its production process more effectively.\nAccording to the results, it is observed that there is very little substitution between labor\nand freight (-0.075) and between labor and administrative cost (-0.057).
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