Answer
A manager can decrease variable costs while increasing fixed costs by investing in automation. For instance, in a manufacturing facility, replacing manual labor with automated machinery (increasing fixed costs for equipment and maintenance) can reduce variable costs associated with labor wages. While the initial capital outlay raises fixed costs, the long-term benefits include consistent production efficiency, cost savings, and reduced reliance on labor. This strategic shift optimizes cost structures and enhances overall profitability.
Work Step by Step
A manager can decrease variable costs while increasing fixed costs by investing in automation. For instance, in a manufacturing facility, replacing manual labor with automated machinery (increasing fixed costs for equipment and maintenance) can reduce variable costs associated with labor wages. While the initial capital outlay raises fixed costs, the long-term benefits include consistent production efficiency, cost savings, and reduced reliance on labor. This strategic shift optimizes cost structures and enhances overall profitability.
