Abstract
Cost Reduction is always, not in a certain situation, one of the most important business considerations. In this paper, I try to study several cost reduction policies in fixed cost and variable cost and compare their effects using the financial model which has been introduced in the Business Seminar held on May 18, this year, hosted by IAP2M. Their effects are verified in view of profit/loss, return on investment. For reference, the cases of reduction of same amount in fixed cost and variable cost are studied. I can conclude that in cost reduction policies the reduction of fixed cost can pull down the break-even point of sale amount but in case of certain level of sale amount the reduction of variable cost surpasses the case of fixed cost. Then the cost reduction of fixed cost without outflow of cash, for example, reduction of depreciation is considered to disadvantage in cash flow management. The management of P2M requests to verify even cost reduction policies by using financial model.
