This 4 page paper shows the student how a company needs to understand how costs are determined in order to develop a viable strategy. The paper starts by explaining what is meant by marginal cost, with reference to fixed and variable costs as well as the model of diminishing returns, also known as law of diminishing marginal productivity. The theory is then applied to a real world example; British Airways, where an understanding of costing can be seen to support the strategies that have followed since 2001.
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