Ronald's has been in the fast-food business for five years. After struggling for two years, it finally broke even, and the french fries it offers are its most popular product. However, during the past year, its business has suffered because the farm that used to supply it with potatoes has increased its prices drastically. What should Ronald's do to control production costs?
A) Reorganize the organizational hierarchy to increase efficiency.
B) Buy out the farm and become its own supplier.
C) Open more distribution outlets.
D) Broaden the product range by introducing potato nuggets on its menu.
E) Hire more efficient outlet managers.

Question

Quizplus · Accepted Answer

By buying out the farm and becoming its own supplier, Ronald's can control the prices and supply of potatoes, thus reducing production costs. Reorganizing the organizational hierarchy or hiring more efficient managers may not necessarily result in cost savings. Opening more distribution outlets or introducing new products may increase revenue, but may not directly address the cost issue.

Ronald's Has Been in the Fast-Food Business for Five Years