1. Suppose that you work for a merchandiser who sells printers and other compute
ID: 1193911 • Letter: 1
Question
1. Suppose that you work for a merchandiser who sells printers and other computer equipment. Suppose further that your company typically purchases large quantities of printers from the manufacturer so that it can satisfy rush orders. However, a problem arises. Over time, your firm finds itself carrying extremely high inventories, especially on some lines that the manufacturer no longer produces and will not repurchase. You suggest running a sale to reduce the inventory of the discontinued lines. However, Jeanine, your competition for the next big promotion, objects to the firm’s managers and points out that even in the best of times the margins on these products barely covered their overhead, and by cutting price, the firm would be unable to cover the cost of goods sold. Defend your suggestion and find the flaw in Jeanine’s reasoning.
Explanation / Answer
Since product is becoming obsolete and there is scant expectations of demand to let up in future. Furthermore producer is not ready to repurchase either. It is clear that firm is going to suffer the loss if it does not get rid of inventory. Further, firm can sell at lower rate and win the loyalty of customers. It would help to establish competitive edge in market.
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