Spacely Sprockets buys sprockets at about $9.50 and sells them at $10.
Cogswell Cogs makes cogs from scratch for $5 and sells them at $10.
If these companies are "the same size" meaning they generate roughly the same profit, then SS is selling 10x the volume of CC. If they can both cut costs by 10%, then SS's profit almost triples, while CC's only increases by 20%.
This cuts the other way too -- if you are operating at thin margins, a small change can push you into unprofitable. If you have fat margins, your profits just decline.
Can anyone give an argument for why the cost to reduce costs by 1% should be a function of profits rather than of revenue or assets?