Question

Discuss a way in which a company you work for or have worked for has increased fixed costs in an effort to decrease variable costs. Has the effort been successful? (If you don't have a good example from work, you can use an example from some other company you have heard or read about.)

Answer 1

This is an example of a company that provides machines for dialysis.

They had an incentive policy for the sales team. Different programmes and categories were defined by the management.
After a while they decided to fix a major part of the incentive and decided to give the variable part only if a very high target was achieved.

Example- For category A product, every successful sale would result in an incentive of $10 per unit. But the company changed it to fixed $ 100 for the activity done and then $ 5 per unit if the sales are 15 or more.

It worked in the company's favors.

It resulted in increase in sales since the sales team started putting in more efforts to bring in newer clients in order to reach their target incentives.