Q. John Diaz owns Pacific Electric, a large electrical contracting industry that provides services to building construction projects. The organization has 2,000 employees also operates in three western states. Recently the organization experienced large losses due to a downturn in the economy also a slowdown in construction. John thinks the losses were particularly large because his organization has too much fixed cost.

a. Expand on John's thought. Explain how are the large losses related to fixed costs?

b. Identify a way that John can turn potential fixed costs into variable costs.