Question

Which one of the following is not of much significance to company managers in deciding whether profitable opportunity exists to install additional new or refurbished production equipment in the upcoming decision round?
A. How branded pairs available for sale in each geographic region in the past year compared with forecasted branded demand in each geographic region in the most recent year--as shown on p. 4 of each year's FIR
B. The growth in branded demand and private-label demand over the next three years (as reported in the Demand Forecast section on p. 4 of each year's FIR)
C. Information in the most recent FIR indicating that more than half of the companies in the industry have expanded their production capacity since Year 10
D. Whether the data on p. 4 of the most recent year's FIR shows that there is already more than enough production capacity worldwide to supply the forecasted demand for branded footwear and private-label footwear worldwide for each of the next three years
E. The size of beginning inventories of branded footwear in each geographic region reported in the most recent FIR

Answer 1

Answer:

The correct answer is C)

Explanation:

Whether or not companies in the industry expanded their capacity is really not of much concern. What should concern management are the other factors:

• Forecasted  Demand Vs Actual Demand: This tells us what has happened in the market
• Forecasted Growth in Demand: This tells us what might happen in the market
• Industry-wide capacity to meet demand is critical information: This tell us what other companies are doing and how it is shaping the market. That is, is the market saturated or not.
• If beginning inventories are very high, in each of the regions reported, installing additional production capacity is not a very sound business decision.

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