Variable and Fixed Factors Affecting Cost: Coca Cola and Pepsi Case Study
Variable/Fixed Factors
Variable costs include the cost of labors and cost of materials. Coca-Cola and Pepsi are two of the most successful soft drink companies across the world. Factors affecting variable costs, including productivity, include the stevia sweetener that is used to make the soda product at Coca-Cola. Stevia sweetener is the number one variable cost to produce the new product. If the demand for stevia increases for the stevia sweeteners, then this could cause the price of materials to go through the roof. When it comes to labor, a decrease in productivity for training laborers or employees about the new formula could change the supply and demand with a decrease, but not enough to notice a big difference. The labor for the new product remains same as the plants are fully automated. The research and development cost for scientists and chemists could affect the variable costs because the sweetener is coming under fire for potential health risk with long term use. Adjustments may need to be done as more research is done and told to consumers. When it comes to materials, a change in bottling could be a factor to affect the variable cost. Both companies in the past have developed a new bottle and design when they introduce new products to the market.
Fixed costs include building, equipment, and rent. Introducing a new formula with the stevia sweeteners would not affect Coca Cola or Pepsi much because both companies already have large manufacturing buildings and equipment that can handle the change.
Variable costs include the cost of labors and cost of materials. Coca-Cola and Pepsi are two of the most successful soft drink companies across the world. Factors affecting variable costs, including productivity, include the stevia sweetener that is used to make the soda product at Coca-Cola. Stevia sweetener is the number one variable cost to produce the new product. If the demand for stevia increases for the stevia sweeteners, then this could cause the price of materials to go through the roof. When it comes to labor, a decrease in productivity for training laborers or employees about the new formula could change the supply and demand with a decrease, but not enough to notice a big difference. The labor for the new product remains same as the plants are fully automated. The research and development cost for scientists and chemists could affect the variable costs because the sweetener is coming under fire for potential health risk with long term use. Adjustments may need to be done as more research is done and told to consumers. When it comes to materials, a change in bottling could be a factor to affect the variable cost. Both companies in the past have developed a new bottle and design when they introduce new products to the market.
Fixed costs include building, equipment, and rent. Introducing a new formula with the stevia sweeteners would not affect Coca Cola or Pepsi much because both companies already have large manufacturing buildings and equipment that can handle the change.