Reduced variable costs result in lower unit costs. Allows manufacturers to continue to earn a workable per unit profit margin.
Economics meets cost accounting
Economic theory will tell us how long this strategy is sustainable.
Yes, I know. I was putting it simply. I can read a Balance Sheet and a Profit&Loss statement. Other than big companies, I've always thought the Balance Sheet is not as important as the Profit&Loss statement that shows the total revenue and total expenses and the bottom line net profit over the gross income.
Of course, things like "administrative expenses" and "marketing expenses" and others on P&L's can be padded, until the IRS audits. Owning 3 small companies, I always kept every receipt for expenses. Also, it helps to have a good tax accountant.