Discuss this statement that blames the accounting system:
“As for the $1,000 hammer. In many cases this is the fault of the accounting system. When a vendor delivers an airplane to the military, there is a fixed cost and a variable cost assigned to each part. The variable cost is the actual cost of the item as delivered from a vendor (the hardware store). In the case of the hammer this would be $10. The fixed cost is calculated by dividing all of the overhead by the number of parts. If the overhead is $990,000,000 and there are 1,000,000 parts, each is ascribed a fixed cost of $990. Thus the $1,000 hammer.”