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Based on the given scenario, provide details on the quantity that should be purchased...

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yacel0762 | (Level 1) Valedictorian

Posted August 28, 2013 at 11:00 PM via web

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Based on the given scenario, provide details on the quantity that should be purchased and why?

A 150-year-old Midwestern 400-store chain offers moderately priced ladies apparel. It serves the urban market and the average customer is 34 years old. The new sweater buyer for the store chain, Candy Kaslow, reviews last year's fourth-quarter sales and realizes that a then-emerging trend, cable knit sweaters, underperformed when compared with the planned numbers.
 
Candy's merchandise sales reports includes the following information:

Cable Knit Sweaters:

  • Cotton blend (40 percent cotton, 60 percent acrylic)
  • Made in the US
  • Dry clean only
  • Styles: Crew Neck and Turtleneck
  • ¾-length sleeve
  • Size: 10
  • Silhouette: Close fitting to the body, waist length
  • Retail selling price: $85.00
  • MU Goal: 60 percent and actual MU: 63 percent
  • GM Goal: 43 percent and actual GM: 38 percent

Candy has to start the planning process for next year's fall/winter product assortment plan. Carolyn Strong, the division's trend manager, urges her to include cable knit sweaters in the assortment for the next season because other retailers apparently experienced better sales performance on this merchandise during the prior year.

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted August 30, 2013 at 5:25 AM (Answer #2)

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There is no way to determine the number of sweaters that should be purchased from the information that is given here. 

If we are to determine the number of sweaters that should be purchased, we need to know about the size of the market and the amount of demand for those sweaters.  If the firm has sold the sweaters before, we could look at how many sweaters we had sold in the previous period and use that as a guide for how many to buy in the forthcoming period.  In the scenario given here, we would want to buy more of the sweaters since the trend manager says that other retailers have done well selling this type of sweater.

The information given in this question does not tell us what quantity to purchase.  It gives us no information about how many have been purchased in the past or about how many people there are in our target market.  The amount of mark up and the levels of gross margin do not tell us anything about how many sweaters to buy.

Therefore, there is not enough information here to allow us to answer this question.

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Kay Morse | College Teacher | (Level 1) Senior Educator

Posted August 29, 2013 at 9:29 PM (Answer #1)

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The factors to consider in determining quantity are the size of the overall market and the mark up (MU) expectations in relation to the gross margin (GM), which is the gross profits divided by the net sales.

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