assignment

Exercise 4.1 ( LO3 )  Operating Leverage John Diaz is the president of Pacific Refrigeration. The company has 2,000 employees and manufactures and sells a variety of refrigeration units for commercial use. Recently, the company experienced large losses due to a downturn in the economy and a subsequent decline in sales. John thinks the losses were particularly large because fixed costs are too high.

Required

1. Expand on John’s thought. How are the large losses related to fixed costs?

2. Identify a way that John can turn potential fixed costs into variable costs.

The initial response must demonstrate effective communication skills and analysis that is thoughtful and objective. You must support your responses by searching beyond the chapter (i.e., managerial accounting literature and/or any other valid external source). Include examples, as appropriate, to evidence your case point. Your response must also include proper American Psychological Association (APA) citation and referencing with working web links. Further, it must include 350 words. Refer to discussion board rubric for grading details.