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The Bates Company Has Been Producing Tools for Over Fifty

question 51

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The Bates Company has been producing tools for over fifty years. In that time the company has been acknowledged as a producer of high quality tools at a reasonable price. Bates' competitive prices can be attributed to three factors. First, the company recognized early in its development that tools made from specific blends of various types of metal were less costly to produce and had superior performance compared to traditional metals. Accordingly, Bates made investments in developing tools made for specialty metals long before other competitors and has made a series of investments over its operating history that have put it far ahead of its competitors in terms of product development. Industry analysts believe that based on these investments it would be difficult and extremely costly, if it were even possible, for rivals to catch up with Bates. Second, in recognizing the importance of certain metals, Bates was able to sign long-term contracts with suppliers of the metals that have provided Bates with a lasting cost advantage. Finally, Bates maintains its cost advantages by using a thorough budgeting and reporting system that allows it to closely control costs, and these systems are supported by a frugal company culture and financial incentives that reward employees for finding ways to save money throughout the company.
-The budgeting and reporting activities that Bates uses are examples of

Definitions:

Discount Period

A set time period during which a discount is available, or the period between the issuance of a bill and its payment due date where a discount may be taken for early payment.

Credit Memo

A document issued by a seller to a buyer, reducing the amount the buyer owes to the seller under the terms of an existing invoice.

Sold Merchandise

Refers to the goods or products that a company has sold to its customers as part of its ordinary business operations.

Sales Tax

A tax levied on sales of goods and services, typically calculated as a percentage of the sale price.