COMM 200 Chapter Notes - Chapter 12: Profit Margin
16 Apr 2015
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Document Summary
Having a good understanding of cost base information will enable managers to better assess their financial options in the event of unexpected changes in market dynamics, unanticipated reductions in revenue, and strategic positioning shifts that the organization is planning. Total costs associated with delivering the organization"s product to the marketplace. Variable costs (direct): directly tied to the manufacturing of a product or the delivery of a service (eg. material, direct labor, delivery of products) Fixed (indirect): not directly tied to the manufacturing, but exist as a result of conducting business and operating the company (eg utilities, admin costs, debt, marketing which is considered a committed cost) Manufacturing operations often have a large percentage of their cost base as variable, therefore they can respond quickly to a reduced demand by making less product. In retail, the ability to reduce costs when there is reduced demand is more difficult because they have a higher percentage of fixed costs.
