In a service environment, a decrease in demand over the long term will most likely result in:
In a service environment, a decrease in demand over the long term will most likely result in:
In a service environment, a decrease in demand over the long term will most likely result in increased cost of service. This is because many service businesses have fixed costs that do not decrease with a reduction in demand, such as rent, salaries, and utilities. When demand drops, these fixed costs are spread over fewer customers, increasing the cost per customer. Hence, fewer customers mean higher per-unit costs, leading to an overall increase in the cost of service.
I vote for B In a service environment, a decrease in demand over the long term will most likely result in an increase in the cost of service. This is because the fixed costs of providing the service, such as rent, utilities, and staffing, will be spread over fewer customers, resulting in higher costs per customer. Additionally, a decrease in demand may also lead to decreased efficiency and productivity as the service provider may have less work to do, which can lead to increased costs to maintain the same level of service.
When demand decreases, the service provider is left with excess capacity, which means that they are not using their resources to their full potential. As a result, the cost of providing the service will increase since the provider is still incurring fixed costs such as rent, salaries, and maintenance expenses, but generating less revenue. In order to cover these fixed costs, the service provider may need to increase their prices or cut back on their service offerings, which can lead to a further decline in demand.
This explanation is spot on! A decrease in demand immediately translates into incurring huge fixed costs that do not match profitability.
The answer is C because with lower demand means less sales and therefore the rate of money coming back to the company will be lower. Thus decreasing the cycle time
why C but not D?