Lowering costs by finding more affordable suppliers can decrease variable costs and increase profits in a business.
Seeking suppliers who offer lower costs but maintain high quality is a strategy to decrease variable costs. By negotiating better rates or finding more cost-effective sources, businesses can reduce the expenses associated with producing goods or offering services.
For instance, a company that buys raw materials in bulk can benefit from economies of scale by lowering the per-unit cost, leading to cost savings and potentially higher profits.
However, increasing production levels excessively can raise average variable costs, for example, by incurring overtime wages or machine maintenance expenses, highlighting the balance needed in cost management strategies.
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