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and finance Allah shmoop What is a load factor All

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right people You know those wide load trailer's right know

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and not the NFL linemen These wide loads they're just

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like normal trucks on ly wider like maybe twenty percent

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thirty percent wider If you're moving this fine two bedroom

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with a den from here to here well you'd better

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figure in plenty of room for the extra with it'LL

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take during the mountain pass turns Okay well that's sort

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of how load factors factor into proper cost allocations in

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a company you have to add in the load will

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load Factors generally measure how much a given system can

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handle like it's used a lot in airlines The load

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factor measures how full airplanes are when they fly Like

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if you have three hundred seats on a plane and

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it flies with two hundred passengers Welcome Your load factor

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is about sixty six point seven percent That's two hundred

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divided by three hundred The term also gets used in

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energy output Like the load factor measures How much energy

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is getting used now compared to the maximum output possible

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Well the key factor in both these common examples how

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much are we using Our resource is that's key question

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Can we get Mohr out of what we have Okay

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you have this airplane you flight with a hundred empty

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seats The fuel costs the cost for the pilots the

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flight attendants the peanuts the thin foam pillows They're all

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essentially the same with two hundred passengers as they are

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with three hundred So whatever you can do to get

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a plane full well that's probably worth it Cut prices

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have ticket raffles for publicity whatever it takes Or you

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own the grill factory not a barbecue joint A dental

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office Yeah these bad boys you've purchased five Ortho bought

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five thousand units the latest in robot dental implant technology

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They fully replaced those pesky human orthodontist You had to

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pay two hundred grand a year The Ortho Baht can

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install five grills in a typical eight hour day It

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costs five hundred bucks a day to operate the machines

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and that includes power maintenance appreciation and the grill itself

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Meanwhile the office costs one hundred grand a month and

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overhead and that includes renting the office space insurance magazines

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for the waiting room WiFi marketing Free grill work for

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your family salary for the receptionist and so on Though

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you've been looking at the possibility of getting the robo

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receptive about X nine The current receptionist is your cousin

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Jenny though so well you can't pull the trigger just

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yet anyway All that stuff rolled together two hundred grand

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a month all in You have to pay that amount

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no matter what Plus the costs of powering up the

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ortho bots comes to fifty Grand Mohr a month That's

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five hundred a day times five days a week and

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four weeks a month Time Five robots Yeah that's fifty

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grand so the office costs hundred fifty thousand dollars a

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month to run Meanwhile you have the capacity of five

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hundred grilling and plants a month That's a five a

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day for each of the five bodies Time Five days

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a week times four weeks In a month we'LL a

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grill implant costs two thousand dollars to perform raw materials

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on that implant or seven hundred fifty bucks Each one

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has a gross profit of twelve hundred fifty dollars ignoring

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all the other load factors there So if the machines

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run at full capacity you'LL have gross profit of six

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hundred twenty five thousand dollars or twelve hundred fifty times

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five hundred procedures Then you subtract one hundred fifty grand

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overhead and you're netting four hundred seventy five grand a

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month before taxes and such Yeah not bad But that

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figure only counts if you're at full capacity a load

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factor of one hundred percent Well it gets trickier if

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that load factor is lower So let's say the load

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factor for a month comes in at only twenty percent

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Like you only do one hundred procedures in a month

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We'LL then gross profit is only one hundred twenty five

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grand and you gotta subtract out there in the one

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hundred fifty grand in fixed overhead And oh now you're

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twenty five thousand bucks in the red Well at that

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point you might think about taking some steps to increase

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the load Factor lowering prices toe fifteen hundred procedure But

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note that the gross profit if you lower prices on

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each one well then that drops to seven hundred fifty

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bucks But if it pushes the load factor from twenty

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percent tough fifty percent well then it might be worth

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making the change Two hundred fifty procedures times seven hundred

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fifty equals one hundred eighty seven thousand five hundred dollars

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and you subtract the overhead of one hundred fifty and

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then you're back in the black of thirty seven five

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a month Well on the other end if your load

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factor gets too high it might be time to expand

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capacity So say your typical month runs at ninety percent

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Load factor Then prom season comes up in A bunch

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of teenagers want grills for their prom pictures Demand is

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twenty percent higher than normal but you can't absorb all

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that demand You have to turn people away And wow

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that's expensive to dio So if load factor starts to

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get too high might be time to add another ortho

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bod Just don't get tempted by the Recep Toba Next

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time you're browsing it Robot Corp We'LL never hear the

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end of it at Thanksgiving If you give your cousin

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the boot Yeah no

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