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Scenario 6.1 In 2003, Managers at Bambino, a National Retailer of Baby

question 30

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Scenario 6.1
In 2003, managers at Bambino, a national retailer of baby products, noticed that sales and profits were slumping. Store managers were ordered not to fill any vacant positions, which saved some money. However, by January of 2004, it was essential that Bambino cut expenses further. The firm decided to offer incentives for early retirement to some of the more senior top managers. Many of them decided to voluntarily leave for retirement or other jobs. Expenses still remained high, and in May, the firm asked store managers to reduce staff by laying off 10 percent of their workers (about two workers per store) . When those cuts were still not enough, management called for store closings in some locations. For example, in Phoenix the store closing was announced to employees on August 1 and accomplished by December 1. In locations where stores were not closed, managers were ordered to terminate any underperforming employees, identified by low performance appraisal scores on the last two evaluations.
-Refer to Scenario 6.1. What was the FIRST reduction strategy that Bambino tried?

Definitions:

Simple Rate Of Return

A method to calculate the profitability of an investment by dividing the annual incremental net operating income by the initial investment cost.

Straight-Line Depreciation

A method of calculating the depreciation of an asset by evenly spreading its cost over its useful life.

Salvage Value

The estimated resale value of an asset at the end of its useful life, taken into consideration for depreciation calculations.

Net Present Value

A financial metric that calculates the value of a projected income stream in today's dollars, net of the initial investment.