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Dell Attempted to Maintain Its Long-Standing Low-Cost Position by Reducing

question 3

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Dell attempted to maintain its long-standing low-cost position by reducing the number of technicians in its customer call centres.As a result,an increasing number of customers spent 30 minutes or more on hold before they found a technician to solve their problem.This affected Dell's customer satisfaction rating in the United States and its sales and profit growth stagnated.This scenario highlights:

Definitions:

Operating Income

The profit realized from a business's operations, calculated by subtracting operating expenses from gross profit.

Absorption Costing

An approach to pricing that incorporates all production-related costs such as direct materials, direct labor, along with variable and fixed overhead expenses, into the product’s cost.

Variable Costing

An accounting method that includes only variable production costs (costs that vary with output) in product costs, while fixed costs are charged to the period they occur.

Operating Income

The financial gain obtained through the main functions of a firm, without considering the reductions for interest and taxes.