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The Fixed Energy Cost Trap: How Lower Output Drives Up Unit Costs
Submitted as: The Wasmer Company
In manufacturing, energy costs don't always decrease when production slows. Many expenses — such as facility lighting, compressed air systems, HVAC, and control equipment — remain constant regardless of output. These fixed energy costs can significantly increase the cost per unit when production levels drop.
For example, a plant producing 100,000 units at a monthly energy cost of $100,000 spends $1 per unit on energy. If output falls to 50,000 units but energy use stays the same, the cost per unit doubles to $2. This “Fixed Energy Cost Trap” can erode margins, especially during seasonal slowdowns or market disruptions.(read
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