Which of the following statements about cost reductions is true?
A. Cost reduction often requires improvements in the delivery of care.
B. Cost reductions can occur when services are being expanded.
C. Decreases in revenue result in automatic cost reductions.
D. None of the above
What Is Cost Control:
Companies nowadays invest millions of dollars annually on Cost Control systems with the advent of artificial intelligence. Cost Control refers to the series of initiatives undertaken by a company to minimize cost while maintaining quality.
Answer and Explanation:
The answer is C. Decreases in revenue result in automatic cost reductions.
- This is because a portion of the costs are purely variable (i.e. they are a function of the amount of revenue generated). For instance, fewer sales mean that companies will have to pay out less commission (i.e. cost reduction) to their salespeople.
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from Business Management: Help & ReviewChapter 9 / Lesson 1