Australia Post

"A total of 36,000 people work for (Australia) Post, 23,000 of them in the old-fashioned letters business, which has seen mail volume plunge (from) 5.2 billion letters a year in 2008 to just 3.9 billion this year.....Last year the mail business lost $328 million against a profit of $337.5miilion in the booming parcels division and $175.6miilion in the retail division. Parcels profits will no longer balance the letter losses as shown by the group's $98 million first-half profit, down from $222 million."

- by John Durie, the Australian's senior business commentator

The above comments summarise perfectly the grim financial prospect that Australia Post is currently facing. Continue to read the article below written by Richard Gluyas and answer the following questions:

1. Identify three major operating costs for Australia Post to run its traditional letter mailing business and classify them either as variable cost or fixed cost. For variable cost, please also point out the most appropriate cost driver.

2. Based on the information from this article, identify external factors and internal factors that demonstrate why it is difficult to make a profit out of the letter mailing business. Briefly explain each factor.