1. Assume a company's Income Statement for Year 12 is as follows:
Income Statement Data
Net Revenues from Footwear Sales
Cost of Pairs Sold
Operating Profit (Loss)
Interest Income (expenses)
Pre-tax Profit (Loss)
Net Profit (Loss)
Based on the above income statement data (assume interest income is zero), the company's interest coverage ratio is
Which of the following statements about striving to reduce labor costs per pair produced at each of the company's plants is true?
The most cost effective way for a company…show more content… pursue a strategy of selling fewer pairs in Europe-Africa than rival companies, which will then keep the company's costs for import tariffs in Europe-Africa lower than those of rivals and give the company a competitive advantage based on low tariff costs on its sales in Europe-Africa.
simply stop selling footwear in Europe-Africa.
If a company decides to help differentiate its branded footwear by offering buyers 500 models/styles to choose from, then company managers should evaluate the merits of trying to reduce the $14 million annual costs for production run setup costs associated with producing 500 models/styles at each plant by
investing in plant upgrade option B at one or more of the company's plants (but most especially its smallest plants where the savings on production run setup costs are big enough to allow quick recovery of the associated capital costs).
instituting plant upgrade options C and D at all of the company's plants.
investing in plant upgrade options A and C and also consolidating the production of 500 models/styles of branded footwear in a single 12-million pair plant in the Asia-Pacific (to only incur the payment of $14 million in production run setup costs one time).
building plants in all four geographic regions and producing 500 models/styles at all four plants.