PROFITABILITY

Question 1

COST CONTROL (Fixed and Variable Costs)

Answer 1

• Can reduce costs in 2 areas: labour and inputs
• Outsourcing is a popular method. E.g:
  - Contracting a call centre to handle customer inquiries
  - Hiring specialist firm to handle payroll/cleaning

Fixed costs: do not change when a business produces more goods
Variable costs: vary as output and sales change

Strategies to cut cost →
- Discounts with suppliers
- Reduce number of suppliers
- Switch to cheaper suppliers
- Reduce staff

Question 2

COST CONTROL (Cost Centres)

Answer 2

Expenses associated with each business function
Budgets help monitor their expenses → minimize waste and achieve max use of resources

Question 3

COST CONTROL (Expense Minimisation):

Answer 3

Used to identify where lowering expenses would have the greatest effect
Strategies →
- Decrease packaging costs
- Increase efficiency
- Downsize middle management
- Substitute machinery for labour (de-skilling)