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  #1  
Old 01-03-2017, 11:23 AM
Kris10vee Kris10vee is offline
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Default EOM4 task 3 quickwich

Why would COGS (costs of good sold) increase after the shock (food poisoning) if less people are buying the product?
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Old 01-04-2017, 05:01 PM
PassionVoid PassionVoid is offline
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I'm working on this task at the moment, so I don't have an MMR to cite, but here's my line of thinking.

I don't think that less people are buying the product. Think about it in the context of the specific task: the impact of additional marketing after the shock. What is the purpose of marketing? Also notice how COGS went up a bunch, but revenue still went down. Intuitively, if we sold more goods, then revenue should have gone up, as well, right? What might that imply?
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Old 01-05-2017, 02:13 PM
Kris10vee Kris10vee is offline
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Thank you for your reply!
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Old 01-05-2017, 04:36 PM
Hartke Hartke is offline
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I thought maybe the company had to dispose of a lot of its current food stock after they found some to be contaminated.
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Old 01-06-2017, 10:23 AM
PassionVoid PassionVoid is offline
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Originally Posted by Hartke View Post
I thought maybe the company had to dispose of a lot of its current food stock after they found some to be contaminated.
That's also possible. The fact that it's cost of goods sold implied to me that the marketing dollars coincided with some sort of series of specials or something, similar to Chipotle's plethora of buy one get one frees after their incident.
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Old 01-19-2017, 09:20 AM
oswaldcobblepot oswaldcobblepot is offline
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Quote:
Originally Posted by PassionVoid View Post
That's also possible. The fact that it's cost of goods sold implied to me that the marketing dollars coincided with some sort of series of specials or something, similar to Chipotle's plethora of buy one get one frees after their incident.
I'm working on this one now and this thought had crossed my mind. However, I think with this risk scenario by definition you have to assume a large chunk of the COGS increase has to be due to the need for replenishing food products. I realize this is a very super simplified financial snapshot of the situation, but I have hard time believing the COGS expense line item wouldn't take into account a large repurchasing of supplies (as this action wouldn't appear on any other line items). I just don't see how you can throw away some large portion of tainted food, which we really have no idea how to assign a $ amount to, and not reflect a replenishing of said food.

There is little information here so I suppose you can draw a variety of conclusions, part of the reason why I am struggling with trying to figure out what makes the most sense.
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Old 01-19-2017, 05:00 PM
PassionVoid PassionVoid is offline
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Quote:
Originally Posted by oswaldcobblepot View Post
There is little information here so I suppose you can draw a variety of conclusions, part of the reason why I am struggling with trying to figure out what makes the most sense.
Always remember, making the most sense on modules isn't as important as appropriately defending the nonsense we choose.
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Old 05-20-2017, 07:25 PM
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Quote:
Originally Posted by oswaldcobblepot View Post
I'm working on this one now and this thought had crossed my mind. However, I think with this risk scenario by definition you have to assume a large chunk of the COGS increase has to be due to the need for replenishing food products. I realize this is a very super simplified financial snapshot of the situation, but I have hard time believing the COGS expense line item wouldn't take into account a large repurchasing of supplies (as this action wouldn't appear on any other line items). I just don't see how you can throw away some large portion of tainted food, which we really have no idea how to assign a $ amount to, and not reflect a replenishing of said food.

There is little information here so I suppose you can draw a variety of conclusions, part of the reason why I am struggling with trying to figure out what makes the most sense.
If they had to throw out a bunch of tainted product it should show up in shrinkage. If it was enough product it is also possible that insurance would cover the cost above the deductible (note that insurance costs went from 20M to 24M). In the problem statement it says that the tainted product was provided to Quickwich by the provider. This means they sold a bad product and would be on the hook to replace it with a fresh order. This is all standard practice from my experience working in retail grocery. A "rash of food poisonings" from one source would also trigger a state and FDA investigation. There could also be a lot of law suits from consumers. Both of these would lead to an increase in legal fees which we see listed in the data (1M to 1.9M).
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Old 05-30-2017, 08:32 PM
aaggh2003 aaggh2003 is offline
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Quote:
Originally Posted by sandwich View Post
If they had to throw out a bunch of tainted product it should show up in shrinkage. If it was enough product it is also possible that insurance would cover the cost above the deductible (note that insurance costs went from 20M to 24M). In the problem statement it says that the tainted product was provided to Quickwich by the provider. This means they sold a bad product and would be on the hook to replace it with a fresh order. This is all standard practice from my experience working in retail grocery. A "rash of food poisonings" from one source would also trigger a state and FDA investigation. There could also be a lot of law suits from consumers. Both of these would lead to an increase in legal fees which we see listed in the data (1M to 1.9M).
This is very helpful!
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  #10  
Old 06-30-2017, 04:18 AM
hyphis hyphis is offline
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What do we base our decision on?

Yes - because the company is still worth 50M (and not bankrupt) - additional marketing is a sufficient mitigation strategy?

or

No - because we lose 25M over the next 10 years we should do more to mitigate potential losses?

Should I be referencing some reading or something for a more textbook approach?

Either way I argue it, this seems very much like a *licks finger and puts it in the air* response ...
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