discussing costs

CA=Cost accountant GM=General manager

CA Look, we’ve got to do something. Doing nothing is not an option. Our margins will just get squeezed more and more.

GM Ok. What do you suggest?

CA Personally,I’d recommend cutting the wage bill – either by laying some people off or by freezing salaries.

GM Neither of which are going to be very popular options.

CA No, but the alternatives are probably worse : reducing material costs will definitely have an impact on product quality and cutting back on advertising expenditure is only a short-term solution – it will hurt us in the long run.

GM No, I see that.What about administrative costs or other overheads ? Instead of cutting staff, we could try and do something about getting our energy bills down for example.

CA I’ve already done as much as I can in those areas. I have thought about this a lot and for me, the only real solution is to tackle labour costs. It may be painful, but the advantage of it would be that, once done, we could get back to concentrating on selling.

GM Ok, I hear what you’re saying, but I think it might create more problems than you think. I’m going to go away and think about it … see if there is an acceptable way of doing it.