Global Shipping Routes Are About to Change Everything in the Industry

Perhaps you are aware that the Panama Canal is adding new locks which will allow it to take much bigger ships including ships with as many as 12,600 containers. Before they can only take large cargo ships with just under 4500 containers. So when the new locks open in the Panama Canal in 2014 it will change the flow of goods and products around the world. Some have said it will change the US rail industry quite substantially. Indeed I tend to agree with that, but I’d also like to shed some light on some other issues that need to also be considered.

Now then, there was a very interesting article in the Wall Street Journal on 11-11-11 which I suppose is an omen in itself, the article was titled “Ripples Likely from Wider Canal” by John Bussey. In this article he noted that Warren Buffett did buy Burlington Northern railway and that;

“Right now, about 70% of US imports from Asia arrived by ship on the West Coast, and much of that gets transferred to rail lines like Burlington Northern for transit to the rest of the country,” and, “the ship to rail routes can cost 10% to 25% more than if a ship were to take it and unloaded on the East Coast where its final destination might be.”

To Producing Profits – Pitfalls of Absorption Cost Systems

Manufactured goods are When There Are Two Types of Costs Typically That included the “total cost” of manufacturing the product. Fixed Costs Are The Costs Associated doing business, Such as lease of the land IS That the production facility is built, the building Itself, marketing, administrative, and Other overhead are all combined Into a “Fixed Cost”. A Variable Cost Is The incremental cost to Produce one more unit of output, for example the Amount of Electricity needed to Produce Another unit, the Additional materials required, and the Additional Labor hours required to assemble it. Costs are variable thesis Directly tied to the production of the good, while the fixed Costs are shared Produced Among all units.

In year cost absorption system the variable cost of the Manufactured good is added to a fixed share of the Costs for That unit.

For example in a factory That Produces 1000 Costs Could Be Their cars broken down like this:

Fixed Cost: $ 100,000
Time & Materials: $ 100,000
Units Produced: 1,000
Variable Cost Per Unit: $ 100
Fixed Cost Share Per Unit: $ 100
Total Cost Per Unit: $ 200
Sale Price $ 1000
Profit Per Unit $ 800
Total Profit: $ 800,000