Abstract
In the international literature, the subject of the analysis of the cost of production is often confin ed to the analysis of short-term convenience. However, the quantification of the cost of production per unit of product h as a particular importance in the processing enterprises , especially in the initial phase of choice that co ncerns realization of investments in facilities and techno logies to improve productivity. About this general theme, the research applies the Life-Cycle Cost (LCC) approach to quantify the cost of production in the long-ter m operation in the processing of pig meat in the Parma PDO ham sector. The research considers not only the analysi s of a single good or service such as a plant or a buildin g, which is what frequently appears in LCC applicat ion, but also the quantification of the cost of an industrial pro duction, in its whole cycle, during a long-run peri od. The research applies the LCC approach to a sector with high capital intensity for a typical food productio n. In the research, the application of the LCC shows that inn ovative firms that have made investments to improve business efficiency, have lower production cost in the long run; these firms are able to gain efficiency in the production cycle, as result of the investments made to reduce production costs, calculated applying LCC approasch. It then can be stated that the LCC approach represents a us eful tool for analysis of convenience-cycle management of companies not only in the short period but even in the long run, particularly those operating in secto rs with high capital intensity and with a long payback period of investments in fixed capital, as considered in the research. Moreover, it could be useful to deep the analysis a pplying the suggested LCC approach to a larger sample, even in other sector, to verify the usefulness of the LC C application in quantifying whole life cost.
Highlights
System that produce food with long aging periods have to face problems related to the high level of capital
Parma PDO ham firms, as agri-food firms, often have to face problems related to the high level of capital requirement; often, the firms have difficulties relating to the duration of the financial cycle because the firms require large investments in start-up activity for the acquisition of industrial buildings, plants and equipment (Iotti and Bonazzi, 2014), even if this is more frequent incase of cooperative firms (Bonazzi and Iotti, 2014); the capital requirement is inherent with the typical production aging period, which requires large volumes of capital, expands the capital requirement for equipment
It is possible to proceed with the analysis of revenues and costs in a generic period (t), analyzing the level of profit (Πt) expressed as the difference between Total Revenue (TRt) and Total Cost (TCt); total costs are equal to the sum of the Fixed Costs (FCt) and Variable Cost (VCt) Equation 1: Π t
Summary
System that produce food with long aging periods have to face problems related to the high level of capital. Parma PDO ham firms, as agri-food firms, often have to face problems related to the high level of capital requirement; often, the firms have difficulties relating to the duration of the financial cycle because the firms require large investments in start-up activity for the acquisition of industrial buildings, plants and equipment (Iotti and Bonazzi, 2014), even if this is more frequent incase of cooperative firms (Bonazzi and Iotti, 2014); the capital requirement is inherent with the typical production aging period, which requires large volumes of capital, expands the capital requirement for equipment. Often made significant investments in industrial plants with a high component of industrial buildings and installations; these investments should be evaluated throughout the course of their useful life in order to calculate the cost of production of Parma PDO ham, taking into account all long-term costs
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