Question

How would u as a manager control your fixed and variable cost and how it would impact profit

Answer 1

Fixed cost is the cost that does not depend on level of output produced. It has to be incurred at the beginning of production. I as a manager cannot control fixed cost, but can sureley control variable cost which increases with increase in output. Labor is an example of variable cost. I would hire that number of variable inputs where change in variable cost is equal to change in revenue from hiring the last unit of variable input or marginal cost is equal to marginal revenue.

By doing that profit will be maximised as all the profit opportunities are exhausted at the level where marginal revenue is equal to marginal cost.