West Coast Unlimited Is a Wholesaler That Carries Close to 20

question 5

Short Answer

West Coast Unlimited is a wholesaler that carries close to 20 000 products. The company has close to 3000 suppliers and sells its products mostly to business and institutional customers. The company markets its products by relying mainly on sales promotion and advertising. Faced with increasing costs, the company is looking at various ways to reduce expenses. West Coast Unlimited's vice president feels that the company should shift one of its major distribution centers to a low-rent, low-tax area.
A critic claimed that a business that neither manufactures nor sells directly is doomed because it is forced to compete exclusively on price. Which of the following is the best criticism of this argument?
It ignores the fact that improvements in wholesaler efficiency are relatively easy to duplicate.
It fails to demonstrate that traditional retailing businesses are also in jeopardy.
It fails to recognize the possibility that wholesalers can add value to different partners in the supply chain.
It does not specify how wholesalers can reduce costs most effectively.
It does not account for the fact that wholesalers need to be large in order to take advantage of economies of scale.

---

Definitions:

Periodic Inventory System

An inventory accounting system where updates to the inventory accounts occur at specific intervals, such as monthly or yearly, as opposed to continuously.

Inventory Cost

The total cost associated with buying and preparing items for sale, including purchase prices, shipping, handling, and storage.

Perpetual Inventory Account

A method of recording inventory that updates inventory records in real-time with every transaction, sale, or purchase.

FIFO

An inventory valuation method (First In, First Out) where the costs of the earliest goods purchased are the first to be recognized in determining cost of goods sold.