What is likely reason xtrac persistently underforecasts sale

Assignment Help Managerial Economics

Reference no: EM13920885

The Xtrac Computer Company is organized into regional sales offices and a manufactur- ing division. The sales offices forecast sales for the upcoming year in their territories.

These figures are then used to set the manufacturing schedules for the year. Prices of the computers are determined by corporate headquarters, and the salespeople are paid a fixed wage and a commission on sales. The regional sales offices are evaluated as revenue centers. The regional sales manager is paid a small wage (about 30 percent of total pay) and a commission on all sales in her territory (about 70 percent of total pay) that exceeds the budget.

Xtrac has a notoriously bad track record for forecasting computer sales. Its budgets always underforecast sales, and then, during the year, manufacturing scrambles to produce more units, authorizes labor overtime, and buys parts on rush orders. This dri- ves up manufacturing costs. At first, management thought the underforecasting problem was due to high unexpected growth in the computer industry. But Xtrac even underfore- casts sales when the economy is slow and the industry growth is below its long-run average.

a. What is the likely reason Xtrac persistently underforecasts sales?

b. What are some likely explanations for the reason in part (a)?

c. Propose three likely solutions and critically evaluate each of them.

Reference no: EM13920885

Questions Cloud

What is the total variability in the dataset : This problem is aimed at helping you understand the PGA method using an idealized dataset Since you know the data you are generating. it should help you understand the capability of the method. Perform a principal component analysis on the dataset ..

What is the theoretically correct transfer price : How many units of the part should the company produce? What is the theoretically correct transfer price (should the company decide to transfer the part internally)? Explain.

Computer networking infrastructure : The annual maintenance cost for your company's computer networking infrastructure is $25,000 for the first year. This cost is expected to increase at the rate of 4% per year.

Prepare a table that computes the profit-maximizing quantity : A firm has a demand curve: P = 50 - Q. Its total costs are TC = 110 + Q + 3Q 2. Prepare a table that computes the profit-maximizing quantity. What quantity minimizes average cost?

What is likely reason xtrac persistently underforecasts sale : What is the likely reason Xtrac persistently underforecasts sales? What are some likely explanations for the reason in part (a)? Propose three likely solutions and critically evaluate each of them.

Describe some of the likely consequences that can arise : Describe some of the likely consequences that can arise if the firm tries to maintain two different accounting systems.

What are the benefits of the allocation : How is the decision making in this organization affected by the manner in which costs are allocated? Provide numerical support as needed. Clearly identify the company, the time period, and include the link to the report analyzed.

Analyze samples-power analysis and design sensitivity : Assume that the result is a sample size beyond what you can obtain. Use the compromise function to compute alpha and beta for a sample half the size. Indicate the resulting alpha and beta. Present an argument that your study is worth doing with th..

Segment elimination decision involves : A segment elimination decision involves a comparison between revenue that will e lost rough the elimination and

User Account

All Pages