ECONOMICS

Detailed explanation-1: -Inventory is a variable cost that can be reduced by finding other suppliers that may offer more competitive prices. It may take longer to reduce fixed costs, such as a lease payment, because these costs are usually fixed in a contract.

Detailed explanation-2: -Negotiate Discounts with your Providers The same way that you offer discounts to your buyers, ask your providers for discounts by volume of purchase. It is important to know how to negotiate with your suppliers to reduce your variable expenses.

Detailed explanation-3: -Key Takeaways A variable cost is an expense that changes in proportion to production output or sales. When production or sales increase, variable costs increase; when production or sales decrease, variable costs decrease.

Detailed explanation-4: -The cost of production supplies is a variable cost, though, because the amount of production supplies that a company uses depends on how much demand there is for the company’s product. Companies can reduce the cost of their production supplies.