Costing of Zara Article Example | Topics and Well Written Essays - 500 words

Costing of Zara - Article illustrationEssentially, the main purpose of business is to generate profits. When the telephoner is in a position to generate to a greater extent revenue from its operations, that is if it is operating to potentiality, it is able to expand its operations. Growth of business in this particular case entails that the connection can employ more people which in turn helps to generate more revenue. This is very central in as far as sustainability in the unions long term operations are concerned.It can also be noted that for Zara to get going below capacity, it is a strong evil to its financial performance. Such companies invest large sums of money to set up manufacturing plants and they must operate higher up capacity to recover the money that has been invested in the first place. When the company has recovered the money that has been invested, it is in a position to generate surplus revenue commonly known as profit. Any viable company should be in a pos ition to generate profits from its operations. This can help the company to operate viably in the long run.The other disadvantage of operating below capacity is that the company may fount problems in terms of meeting the maintenance be of the equipment used in the manufacturing of fashionable clothes. A company that is operating below capacity is not able to meet all its operational costs as a result of the fact that it would be generating limited revenue. This means that the company may be strained to borrow from other financial institutions in order to sustain its operations in the event that the equipment has disjointed down. The company should be in a position to buy spares and meet other operational costs in the event that it has encountered some problems in its operations. This can only be possible if it is operating preceding(prenominal) capacity.To a certain extent, the only advantage that can be derived by Zara for operating below capacity is that it is in a