(23 Jan 2014, 11:02 pm)andreos1 wrote Haha, was it?
l suppose it depends what the fixed costs are and what the scenario or situation is.
In this example, you could increase the costs of product a and b, by increasing frequency, utilising the resources from product c - in the hope of making greater profits on the first two.
So product a has costs of 15k, product b has costs of 12k and product c has costs reduced to 3k.
The gamble then, is that a and b increase their profit, whilst c now makes a profit (or a lower loss).
In a factory environment, there is potentially less of a choice in reducing fixed costs or sharing the costs out - whereas in transport, there is the flexibility to adapt (which we see -possibly too often).
Yeah, one alternative for the whole Contribution thing is for businesses to look at reducing costs as much as possible to help increase the profitability of them by varying ways such as reducing labour, improving efficiency and so on. You may as well admit it, you are secretly qualified to teach A2 Level Business
Ah yeah, of course it depends on the situation as each business and scenario is different, but in a general sense it is a good approach for a business to adopt. It is certainly interesting to see how the change/removal of one product affects the whole situation of others. To completely contradict all of what I've said, it's probably a lot harder for businesses working in the service sector to use the power of Contribution than businesses of other sectors.