Reduce the Rate of Cost for the Input Used to Produce the Output

Use the same type of input and the same activities, but pay less for the unit of input employed in producing the output. A reduction in rate is equivalent to a reduction in the number of inputs for the same ICD. For example, if a person who makes $10 per hour could produce the same amount of output as a person making $20 an hour, the substitution of the $10 person for the $20 person in the process would be equivalent to cutting the number of people required to do the work by 50%.

C. Change the components of the rate of costs to reach a lower total rate:

Sometimes it is possible to break the price of a purchase into its component parts. Then the company may seek to substitute a less expensive component for a more expensive component to reduce the effective rate the company pays on its purchases.

Optional components of the rate paid

No. Industry SIC Year Notes
1 0 2008 Companies are offering stipends to workers who buy their own health coverage in the individual market, such as eHealthInsurace Services Inc. This strategy shields employers from premium increases and reduces administrative burdens, while providing employees with help toward their medical expenses.
2 1041 1993 While top executives at Barrick receive salaries 5-10% below the industry norm, they can qualify for lucrative stock options if the company does well. The program has already made a number of Barrick executives wealthy.
3 2711 2007 As insurance costs rise, some companies are penalizing workers for their unhealthy habits. Employees who are overweight, smoke or have high cholesterol or who do not participate in wellness programs will pay more for health insurance. Tribune Co. will apply a monthly surcharge of $100 to family premiums of workers or dependents who use tobacco.
4 4512 2004 Delta has beefed up its trans-Atlantic routes and has been developing its Atlanta hub as a gateway into Latin America. Delta had to beg its vendors, creditors, and pilots union for the concession that allowed it to avert a planned bankruptcy court filing.
5 5699 2006 Built NY, an accessories maker based in New York, is stopping product imitators in patent infringement cases. Globally, Built NY has relied on two U.S. lawyers who have a network of attorneys in other nations. It tells attorneys “Here is the budget.” These lawyers then hire associates in Denmark, Australia, and other countries, and those lawyers only spend the budgeted sums to do their legal work. This keeps costs from spiraling.
6 6324 2008 Centers for Medicare & Medicaid Services and other private insurers are starting to refuse payment for hospital errors. Hospital Tenet Healthcare recently signed contracts with United Health and WellPoint to get bonus payments for better patient outcomes.
7 7372 1997 IdeaMarket is wooing publishers and individual authors with royalties of 25% to 50% each time access to a piece is sold, rather than paying them.

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