Noble Company Case

Given the situations for Noble Company and Dator Company, Noble's profits for ‘This Year' were lower than that of Dator's profit despite its sales having been higher because Ms. Oscar Noble concentrated on paying variable salaries to his employees (hourly-paid + incentives and small salaries + commissions). Because of this, his cost of goods sold and expenses became so high to the point that the difference between the selling price (where the expected profit will be based) with the cost of goods sold and expenses became too slim.

Further, basing from the concept of net sales (represent all the revenue generated from the sale of products and/or services); when net sales increase, cost of goods sold will also increase, which affects the gross profit. The ideal situation is to decrease cost of goods sold and expenses while still increasing sales of the products/services. This could be done by simplifying the products and the processes involved so that the personnel who are paid on an hourly-basis will not be able to spend so much time in its manufacture. Reducing the number of parts or the number of variants or models of a product can also save significantly on material costs and thus increase profitability. A company can also redesign their products to reduce unit costs. Moreover, they can also reduce the cost of goods sold by increasing outsourcing.

However, one should bear in mind that the quality of the products and its safety to the users must not be compromised just to cut the cost and other expenses in exchange of getting high profit for the company.