The Case Method at the Harvard Business School: Papers by Present and Past Members of the Faculty and Staff

By Malcolm P. McNair | Go to book overview

ior of costs. The basic concept that in a given situation some costs are fixed while others are variable in relation to output is a reasonably simple one. To apply this concept in a particular situation, recognizing that the fixed or variable character of costs is related to time as well as to magnitude of changes in the output rate, and to understand that for decision-making purposes the concepts of fixed and variable costs must be geared to the particular proposal under consideration--such analysis, if the student is to master it, requires intensive training by means of a series of differing case situations, all revolving around the concept of fixed and variable costs. At various times one of the cases used in such a series has been that of the Conmay Company. This case was originally written for the course in Public Utility Management; subsequently it was used for a number of years in the course in Business Economics; more recently it has appeared in the course in Control.


CONMAY COMPANY

The Conmay Company furnished local transportation for Hampton, Ohio, an industrial city with a population of about 100,000. The company's system, with 70 miles of track, used 9,300,000 kilowatt-hours of electricity annually. This was generated in the company's plant at a total annual cost of about $179,000. In 1922, the company was beginning to lose patronage because of the growing ownership of automobiles. The general manager, with a view to lowering expenses, suggested that the cost of power might be reduced by scrapping the power plant and purchasing energy from the station of the Hampton Power Company, which was less than a mile away.

The Hampton Power Company offered to enter into a cost-plus contract on terms which are described below. The general manager of the Conmay Company then undertook to determine the highest price at which the Conmay Company could afford to purchase its power.

On the basis of a coal cost of $6 a gross ton, a Conmay Company engineer computed the cost of power at the company's plant to be as shown in Exhibit 1.

The output of the Hampton Power Company's station, which supplied the city of Hampton and several neighboring communities, was about twice that of the Conmay Company. The generating equipment of the Hampton Power Company was ample to supply the Conmay Company's power needs, and was believed to be as reliable as that of the railway company. The average age of the Conmay Company's generators was 20 years.

The Conmay Company's load would increase the Hampton Power Company's output 50% and would lower its unit cost of production even if an additional generator had to be installed. The Hampton Power Company offered to take the Conmay Company's load at switchboard cost plus 20% for overhead and profit. Switchboard cost was defined as the actual average

-50-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Project items

Items saved from this book

This book has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this book

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited page

Bookmark this page
The Case Method at the Harvard Business School: Papers by Present and Past Members of the Faculty and Staff
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen
/ 296

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.