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A company's total costs are too high - OCR - GCSE Business - Question 4 - 2020 - Paper 1
Question 4
A company's total costs are too high. The finance manager advises that this is being caused by increasing wage costs as the company expands. Which one of the follow... show full transcript
Worked Solution & Example Answer:A company's total costs are too high - OCR - GCSE Business - Question 4 - 2020 - Paper 1
Step 1
Which one of the following actions would provide a long-term solution to this problem?
Answer
To address the escalating wage costs effectively, the best option among the listed choices is B. Automating the production process.
Explanation:
Automating the production process can lead to increased efficiency and reduced reliance on labor, which in turn helps to control and lower operational costs over the long term. This solution directly addresses the wage cost issues by minimizing the number of employees needed for production tasks, thus alleviating the burden of rising wage costs as the company expands.
- A. Applying for an overdraft: This is a short-term financial solution and does not address the root cause of the high costs.
- C. Employing a finance assistant: While this may help with financial management, it does not tackle the core issue of rising wage costs in production.
- D. Switching to job production: This method may not necessarily control costs effectively and can sometimes increase them depending on the production requirements.
Thus, automating the production process is the most effective strategy for long-term cost management.