Please see the attached file.
1. As stated, reductions in direct materials may result in inferior components leading to reduced sales in the future. In addition, getting a lower price on direct materials may result from sourcing from a single, foreign source resulting in huge supply chain problems if they run low on inventory.
Reductions in direct labor could result in poorly educated and trained staffers leading to inferior products and reduced sales in the future.
Reductions in insurance could result in higher deductibles and lower coverage, catastrophic in the event of a fire or other emergency.
Reductions in depreciation could result from either lower investments in capital assets or changes in depreciation ...
The problem deals with several possible ways to reduce costs and the resultant impacts upon production and quality control.