This is a very gloomy report suggesting that if sales fall and natural disasters occur then company profits are almost certain to be vulnerable. But from this chapter’s perspective one reason given in the report for more profit warnings in 2005 than in 2004 was ‘increasing costs and overheads’. It is suggested that there will be no opportunity to raise selling prices, so with rising employee costs companies will have to ‘manage costs’ and ‘increase volumes’.
1 What do you think is meant by the phrase ‘manage our costs’?
2 How can ‘volumes’ be increased if trading conditions are difficult?
3 What can the retail trade do to control an overhead such as rents?
4 What do you think is the main overhead in each of the following sectors:

(a) engineering,

(b) general retailers,

(c) insurance,

(d) software and computer services?
5 How should each of these types of overhead be absorbed into product costs?