Factor cost analysis of a New Zealand meat processing company

Abstract

In this report, true factor costs for killing and processing are obtained and analysed for a typical company. From this analysis the authors are able to confirm and quantify the widely held belief that throughput flows significantly affect per unit costs. Further, an economic explanation is advanced to explain this phenomenon in terms of the particular nature of fixed and variable costs within a multi-chain system operating in the face of significant manning and seasonal constraints. Arising from these relationships several implications are drawn for the company itself and for the industry at large. Notable among these implications is the claim that, of itself, the conventional wisdom of "spreading the kill" as a means of reducing killing and processing charges is not only questionable in its effects but may also be deleterious to the development of "further processing" in the industry.