The companies incur the cost which makes a quick profit. The management, must choose a cost combination which will maximize the profit. In this way you would learn the ways to select the cost structure.
If the company incurs the different costs in order to manufacture its goods, then these costs can be classified as either variable costs or the fixed costs. The variable costs are those costs which change the cost of the production activity. The amount of the materials used and the amount of labor needed it manufacture the items would be the examples of the variable costs. The fixed costs do not change with the level of the production, such as the mortgage payment.