Suppose that an unforeseen supply chain disruption is anticipated to affect the availability and cost of raw materials, leading to a 15% increase in the Cost of Goods Sold (COGS) for 2017. The company is considering two strategies to address this challenge: 1) Secure large upfront sourcing, which will correspondingly raise inventory carrying costs. 2) Leverage existing information technology to enhance production and warehousing automation, subsequently reducing inventory carrying costs. If the company aims to maintain the same Return on Assets (ROA) as in 2016, which strategy would you recommend? And, please determine the allowed percentage increase or decrease in inventory carrying costs to ensure that the ROA remains same as 2016?

Answer rating: 100% (QA)

To determine which strategy to recommend and the allowed percentage increase or decrease in inventory carrying costs to maintain the same Return on As... View the full answer