Management Reflection - week 4

2 more weeks of uni left, the Mechatronics crew are basically just living in the computer labs these past few days, working on our 370 project. There is also the 322 test coming up on Friday, I got the feeling there will be some intense study during Friday's 6 hours gap.

Over the recent two weeks, we learned about cost. Cost is one of the most important aspect when running a business because the more you reduce it, the more profit you will make. We went over different type of costs, there are variable costs, fixed costs and contribution margin. Variable costs varies with the level of output eg. direct material. Fixed costs are constant eg. rent. It sounded basic when the lecturer was going through the notes but as he went deeper, I realised that these are the fundamental concept which you have to know very well in order to make the right decision for your business.

We were taught how to make a right decision when we went through Relevant Costs and Special Decisions and this really opened my mind. If it took my company requires $110 to produce a table. Another company orders a bulk and wants $100 a piece, before I heard the lecturer, I thought obviously deny the deal, whats the point if you are losing $10? But that was because I did not take into account the fixed cost factor. With proven maths examples, I soon realised that how wrong I was. The crucial point here was that the fixed cost does not rise therefore the more order you take, after paying off the fixed cost, you will still earn profit.