Chapter 11, Problem 1CS

Fraud in Purchasing. Consider the following scenario:Adam worked for the local hardware store as an outside sales representative. His job wasto visit local companies and contractors in an attempt to identify their needs for tools andmaterials and provide a bid to supply those items. When a local contractor accepted a newjob, Adam would get its material requirements, come back to the store, and prepare and submit a proposal for the items. After some initial success with Big Builder, a large contractor,the number of jobs awarded to Adam had decreased dramatically.One day, Adam was back at the store after losing a bid to Big Builder when he noticedsomeone in the store purchasing the exact items and quantities that were in the specificationfor that bid. The combination of items was unusual, and it would be an unlikely coincidencefor someone else to want such a combination in that exact quantity. The customer paid theretail price for the merchandise and left.Adam decided to contact Big…

Marketing: Abercrombie​ & Fitch, once the favorite of loyal​ teens, is considering lowering prices on all items it sells in an effort to win them back after several years of sales declines.​ A&F's total sales were ​$3 billion last​ year, but they have been declining in the face of a weak economy and an intensively competitive retail environment. Price reductions are often effective in increasing​ sales, but marketers need to analyze how much sales must go up before a price reduction pays off and increases revenue enough to make the it worth doing. Assuming​ A&F's gross profit margin is 45% and cost of goods sold represents the only variable​ cost, by how much must sales increase to maintain the same gross profit margin in terms of absolute dollars if​ A&F lowers prices by 55%? The current gross profit is $___ billion.

Marketing: Abercrombie​ & Fitch, once the favorite of loyal​ teens, is considering lowering prices on all items it sells in an effort to win them back after several years of sales declines.​ A&F's total sales were ​$5 billion last​ year, but they have been declining in the face of a weak economy and an intensively competitive retail environment. Price reductions are often effective in increasing​ sales, but marketers need to analyze how much sales must go up before a price reduction pays off and increases revenue enough to make the it worth doing. Assuming​ A&F's gross profit margin is 55% and cost of goods sold represents the only variable​ cost, by what percentage must costs decrease to maintain the gross margin percentage of 55% if​ A&F lowers prices by 10%? Set the initial price equal to​ $1.00. Then the new price is ​$_____

In department and specialty store retailing, a common markup strategy is to double the cost of an item to arrive at the selling price. This strategy is known as keystoning the markup and is widely used in apparel, cosmetics, fashion accessories, shoes, and other categories of merchandise. The reasoning for the high amount of markup is that these stores have particularly high operating expenses. In addition, they have a continuing need to update fixtures and remodel stores to attract customers. You are the buyer in the women's shoe department of the Roma Grande Department Store. You normally keystone your markups on certain shoes and handbags. This amount of markup allows you enough gross margin so that you can lower prices when "sales" occur and still have a profitable department. (a) If you are looking for a line of handbags that will retail for $180, what is the most you can pay for the bags (in $)? $   (b) At a women's wear trade show, you find a line of handbags that you…

Carpetland salespersons average 8,000 per week in sales. Steve Contois, the firms vice president, proposes a compensation plan with new selling incentives. Steve hopes that the results of a trial selling period will enable him to conclude that the compensation plan increases the average sales per salesperson. a. Develop the appropriate null and alternative hypotheses. b. What is the Type I error in this situation? What are the consequences of making this error? c. What is the Type II error in this situation? What are the consequences of making this error?

FORECASTING THE FUTURE PERFORMANCE OF ABERCROMBIE FITCH Use online resources to work on this chapters questions. Please note that website information changes over time, and these changes may limit your ability to answer some of these questions. Clothing retailer Abercrombie Fitch enjoyed phenomenal success in the late 1990s. Between 1996 and 2000, its sales grew almost fourfoldfrom 335 million to more than 1.2 billionand its stock price soared by more than 500%. However, in 2002, its growth rate had begun to slow down, and Abercrombie had a hard time meeting its quarterly earnings targets. As a result, the stock price in late 2002 was about half of what it was 3 years earlier. Abercrombies struggles resulted from increased competition, a sluggish economy, and the challenges of staying ahead of the fashion curve. From late 2002 until November 2007, the companys stock rebounded strongly; however, its stock price declined during the 2008 economic downturn. Its stock price rebounded until late October 2011, when it began a downward trend again. Questions remain about the firms long-term growth prospects. However the company has been cutting costs and trying to improve productivity with its focus on the supply chain. In addition, it has been actively repurchasing shares, indicating that management believes its shares are undervalued. The company continues to steadily expand stores abroad while closing under-performing domestic stores. Given the questions about Abercrombies future growth rate, analysts have focused on the companys earnings reports. Financial websites such as Yahoo! Finance, Morningstar, and MSN Money (www.msn.com/en-us/money/markets) provide information on the companys recent earnings history along with a summary of analysts earnings forecasts. DISCUSSION QUESTIONS Based on analysts forecasts, what is the expected long-term (5-year) growth rate in earnings?

Cost Structure of Retailers; The Internet; Operating Leverage Today’s retailers are findingthat online sales and service are a necessary ingredient of their overall marketing and selling strategybecause of increased competition. In certain retail sectors, consumers are moving to the Internet inlarge numbers for convenience and selection. Unfortunately, the investment in resources, both equipment and labor, can be huge. Some studies show that less than a third of online retailers are profitableon internet sales. As a result, some new consulting firms, software firms, and service providers havebegun to provide e-commerce solutions for retailers.Required1. How does a consulting firm, service provider, or software firm help a retailer reduce costs and becomemore competitive for internet sales? What is the role of operating leverage in the retailer’s decision tooutsource online sales and service?2. Cost structure is not the only thing management should be concerned about when moving in to…

Every day, businesses have to make decisions that affect their bottom line. One such decision pertains to valuing inventory. Imagine that you have decided to open a new electronics store. As one of your first tasks, your accountant has asked you to adopt an inventory cost assumption for inventory valuation. Explain which method you would adopt and why.

Kelly Company uses FIFO. It has experienced rising costs for the last 5 years and expects that trend to continue. King Company increased the number of LIFO pools it uses to account for its inventory. Explain why you think each company follows its policy. Does either practice create ethical issues?