What Are Cost Structures Used By Home Depot?

Business operates with the only intention to make profit. The structure of how they manage their costs, will determine their net or loss income. According to Edmonds (2011, p. 56) “operating leverage magnify small changes in revenue into dramatic change in profitability”. In the case of Home Depot, they had a small change in revenue (3 percent lower) for the first six months of 2006; consequently, their earnings was (21 percent lower) than the same period in the prior year.

They are different types of cost structures uses by companies they are: fixed cost, fixed cost and variable cost, and variable cost. According to this case, it seems like home depot operates their business with a significant portion of fixed cost; the higher their sales,