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Q16. Under what circumstances should a company’s management team…
Q16. Under what circumstances should a company’s management team give serious consideration to making price offers to supply private-label footwear to chain retailers in one or more regions?
When the company’s market share for branded footwear in a geographic region is below the industry average and all the sellers of private-label footwear in the prior year made money on their private-label contracts
When many chain retailers want to purchase private-label footwear with an S/Q rating that is more than 2-stars below last year’s industry average for branded footwear
When the data in the latest Competitive Intelligence Report indicates that all of the winning bidders for P-L contracts sold more than 500,000 pairs of P-L shoes
When the cost benchmarking data on p.6 of the latest FIR indicates that the company’s various costs of branded footwear compare quite favorably to the industry-average and industry-low cost benchmarks, such that it has a high probability of being able to increase its overall profits by winning contracts to sell private-label footwear to chain retailers
When company managers conclude that the company has more than enough production capacity to produce the needed pairs of branded footwear and, based on their projections, determine that the company’s profitability can be enhanced by making price offers to chain retailers and winning contracts to supply them with private-label footwear
Q17. Assume a company’s Income Statement for Year 12 is as follows:
Income Statement Data Year 12
(in 000s)
Net Revenues from Footwear Sales $ 530,000
Cost of Pairs Sold 340,000
Warehouse Expenses 40,000
Marketing Expenses 80,000
Administrative Expenses 15,000
Operating Profit (Loss) 55,000
Interest Income (Expense) (10,000)
Pre-tax Profit (Loss) 45,000
Income Taxes 13,500
Net Profit (Loss) $ 31,500
Based on the above income statement data and the formula for calculating the interest coverage ratio described in the Help section for p. 5 of the Footwear Industry Report, the company’s interest coverage ratio is
5.50.
2.20.
3.15.
4.50.
53.0.
Q18. Based on the industry-low, industry-average, and industry-high values that appear on p. 7 of each issue of the FIR, which one of the following suggests that one or more elements of your company’s costs are likely to be too high compared to those of rival companies?
Your company’s operating profit per pair sold in the Wholesale segment of the Asia-Pacific region is below the operating profit margin in the Internet segment of the Asia-Pacific region
Your company’s operating profit margin in the Wholesale segment of the North America region is below the industry average
Your company’s distribution and warehouse costs per pair sold are less than 20% below the industry average in the Asia-Pacific region
Your company’s operating profit per branded pair sold in the Wholesale segment in the North America region is equal to the industry low
Your company’s marketing expenses per pair sold in both the Internet and Wholesale branded footwear segments in the Europe-Africa region are about 10% above the industry average
Q19. The production benchmarks on p. 6 of each issue of the Footwear Industry Report
are especially helpful to company managers in determining whether they need to spend more/less on enhanced styling/features at each of the company’s production facilities.
provide valuable feedback to company managers regarding whether the prices being charged for the company’s branded footwear are too high or too low.
provide valuable feedback to company managers regarding the efficiency with they are managing production labor costs, reject rates, and branded manufacturing costs per pair produced at each of their company’s production facilities.
are especially helpful to company managers in determining whether their company is overspending on fringe benefits paid to production workers.
are primarily useful to managers in determining whether their company’s total production costs are low enough to enable the company to be profitable if the average wholesale price charged to footwear retailers is equal to (or perhaps slightly above) the prior-year regional average wholesale price.
Q20. A company opting to boost its sales of branded footwear by offering buyers in one or more regions 500 models/styles to choose from should definitely consider
boosting the use of superior materials to 70% or more at all production locations where 500 models are to be produced to help also boost the company’s S/Q rating on the branded pairs being produced.
instituting production improvement option B at all production locations where 500 models are going to be produced.
concentrating all production of 500 models at a production facility in Latin America.
instituting production improvement option A at each production location producing 500 models, so as to conserve on expenditures for TQM/Six Sigma programs.
building production facilities in Latin America and Europe-Africa to produce 500 models/styles and installing either production improvement options C or D at both of these locations.
