Unit Costing in the Shipyard Environment
NAVAL POSTGRADUATE SCHOOL MONTEREY CA
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Unit costing is the latest initiative to achieve savings in DoD. Shipyards, which operate on a cost per unit system, illustrate the potential gains and hazards of unit costing. Economic theory is applied to provide a basis of comparison for shipyard operations. Unit cost theory is illustrated along with definitions of controllability, scale and efficiency. A model of shipyard operations is proposed and compared to theory. Questions of output measure and quality are addressed under the model. Dangers of output comparison are illustrated by example. The validity and limits of unit cost theory are established by applying the shipyard model. A practical investigation into the applicability of the unit cost system to government operations focuses on elasticity, budget variability and performance evaluation. This study concludes that unit costing alone is not sufficient to meet stated objectives. Additional incentives and increased autonomy are required to meet efficiency goals.
- Economics and Cost Analysis