Question: (c) Firm B operates at a negative margin. Why may this be the case? Please identify 2 possible explanations. Table 1 Companies' operating profit Firm

(c) Firm B operates at a negative margin. Why may this be the case? Please identify 2 possible explanations. Table 1 Companies' operating profit Firm A Selling price/unit $5 Fully loaded costs/unit $2.9 Raw material $0.8 Labor $1.2 R&D $0.9 Operating profit/unit (i) $2.1 Operating margin 42% Production volume (ii) (in millions) 8.2 Operating profit in $Million (i*ii) $17.22 Firm B $3.2 $3.4 $0.8 $1.9 $0.7 -$0.2 -6.25% 20 -$4 Firm C $5.5 $3.8 $1 $1.3 $1.5 $1.7 30.9% 9.5 $16.15 Firm D $4.6 $3.5 $1.5 $1.5 $0.5 $1.1 23.9% 8 $8.8 Table 2 Companies' profiles Founding date Country headquarter Average salary/year Firm A Firm B 2010 2015 ES KOR $40,500 $32,400 Firm C 2007 JAP $48,700 Firm D 2011 USA $38,600

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