For the Last Decade, KayJay Toys Has Been Using an Overseas

question 32

Multiple Choice

For the last decade, KayJay Toys has been using an overseas factory to make their hard plastic toys. However, the quality of the products has been in decline for the last several years. In addition to using cheaper materials, the factory uses an assembly process that is very quick but often results in uneven quality, with retailers returning 5 out of every 100 units as detective. The decreased quality is beginning to negatively impact KayJay's bottom line. What is KayJay's best course of action in order to save money and increase their profits?

• A)KayJay should keep the manufacturer, but use a different method of packaging and shipping the toys.
• B)KayJay should switch to a different factory that uses better materials and processes, improving quality.
• C)KayJay should close their brick and mortar shops and switch to an online-only shopping model.
• D)KayJay should consult with the factory about using a different assembly method for the products.

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Definitions:

Purely Competitive

A market scenario where numerous producers and consumers participate, making the individual impact on price negligible.

Average Total Cost

The total cost of production divided by the number of units produced, representing the average cost per unit of goods or services produced.

Allocative Efficiency

A state of resource allocation where it is not possible to make any one individual better off without making at least one individual worse off.

Average Variable Cost

The total variable cost divided by the quantity of output produced; it represents the variable cost per unit of output.