Cost reduction is the process of identifying and implementing the ways to reduce the operational expenses of a firm. Waste elimination, modernisation, increasing efficiency, productivity, and dematerialisation are some of the ways to reduce the cost of any firm. Ramees LLC is a leading producer of furniture in UAE. The Company produces computer tables and chairs. The fixed cost of the company is OMR 500.The total cost of the company at various level of output is given below.

Output. total cost

0, 500

10 600

25 720

40, 830

56, 980

70, 1090

Questions: [ Student has to write answer at least 125 words for each sub-question]

i) Differentiate between fixed cost and variable cost. (2 mark)

ii) Illustrate the total cost curve of RameesLLC in a graph and explain the behaviour and shape of the graph. ( 3 marks)

iii) What is the importance of cost reduction strategy of a firm in maximising the profit? Explain

(3 marks)

iv) How the economies of scale will affect the cost of a firm in the long run? (2 marks)