The Senior Manager at a fiRm Sets a Sales Target

question 22

Multiple Choice

The senior manager at a firm sets a sales target of 20 000 units for the month. Most other firms in the market also have similar targets. However, the maximum possible sales in the market was found to be 35 000 units per month. This suggests that:

• A) growth maximization is the firm's goal.
• B) the firm does not have principal-agent problems.
• C) the senior manager exhibits satisficing behaviour.
• D) salaries at this firm are linked to profits.

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Definitions:

Holding Gains

Profits resulting from the increase in value of an asset held over time, not realized until the asset is sold.

Merchandise Inventory

Merchandise Inventory consists of products that a company buys to resell at a profit. It is often one of the largest current assets for businesses that sell physical goods.

Goods In Process Inventory

Items that are partially completed in the production process; not yet finished goods but not raw materials.

Raw Materials Inventory

Raw Materials Inventory is the stock of materials that are on hand and available for use in the production process.