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TOWARDS A NEW SYSTEM FOR ALLOCATING THE COST OF CAPACITY
RAND CORP SANTA MONICA CA
A concept of capacity cost is presented. In this new capacity cost system a requirement for an additional unit of capacity does not lead either to no cost if the unit is already avail able or to the full cost of building an addi tional unit if it is not already available. The former event implies a cost because it advances the time when we should expect to construct an additional unit of capacity. The latter event offers a savings to offset the full cost of constructing a unit of capacity in the form of probability that the unit we construct now would have been needed for the next genera tion anyways. We use the term capacity inctional sense thus we include in capacity, facilities, support equipment, support organiza tions, and personnel which have significant initial costs and to which the concept of capacity therefore appertains.
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