ohn Diaz is the President of Pacific Refrigeration. The company has 2,000 employees. It 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 has a subsequent decline in sales. John thinks the losses were particularly large because of the company's cost structure.

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

b. Identifypossible ways to mitigate this problem in the future.