Question

your company manufactures umbrellas, among other accessories. six months ago, you projected sales of 5,000 units of your $16 umbrellas over the course of a year, so you produced 5,000 umbrellas. but so far youve sold less than half. what does this mean, and what is the best way to address the situation?

supply of this product at this price is too great and competition too intense, so you should discontinue making umbrellas.

demand of this product at this price is less than anticipated, so you should produce fewer umbrellas in the future.

demand of this product at this price is less than anticipated, so you should drop the price.

demand of this product at a higher price must be greater, so you should start marketing your umbrellas as a premium product sold at a higher price point.

Explanation:

The company projected sales of 5,000 umbrellas but sold less than half. This indicates that at the current price, the demand is lower than expected. Discontinuing (first option) is extreme without exploring other options. Marketing as a premium product (fourth option) is unlikely as demand at the current price is low, not high. Producing fewer in the future (second option) addresses future production but doesn't deal with the current inventory. Dropping the price (third option) can increase demand (as per the law of demand - lower price, higher quantity demanded) and help clear inventory.

Answer:

C. Demand of this product at this price is less than anticipated, so you should drop the price.