John Diaz is the President of Pacific Refrigeration. The company has 2,000 employees. It manufactures and sells a variety of refrigeration un for commercial use. Recently, the company experienced large losses due to a downturn in the economy and has a subsequent decline in sa John thinks the losses were particularly large because of the company's cost structure.

a. Exapand on John's thought How are large losses related to the cost structure?

b. Identify possible ways to mitigate this problem in the future