One of ValuTech's objectives for the year is to bring down the firm's production costs by 5 percent. To meet this objective, managers have suggested the following alternatives:
(1) Use alternate suppliers who can provide raw materials at a lower cost.
(2) Adopt cutting-edge technology that makes the production process more efficient.
-What is the underlying assumption in the first alternative?
A) Customers associate high prices with high quality and vice versa.
B) Customers are more quality conscious than price sensitive.
C) Low-cost raw materials will not affect the overall quality of the final product.
D) The company's relationship with its current suppliers is strong.

Question

Quizplus · Accepted Answer

The underlying assumption in the first alternative is that low-cost raw materials will not affect the overall quality of the final product. This assumption is necessary to justify the idea that switching to alternate suppliers who offer lower costs would actually lead to a reduction in production costs without compromising quality.

One of ValuTech's Objectives for the Year Is to Bring