read the scenario and answer the 4 questions below. maximum of 500 words per response.

1. What are the main arguments, reasons and rationalizations that Bill and Sarah need to address? 2. What's at stake for the key parties? 3. What is your most powerful and persuasive response to the reasons and rationalizations you need to address? 4. To whom should the argument be made? When and in what context? The case: Stefono Foods Mark Stefano is chief executive officer of Stefano Foods, Stefano Foods, a publicly- traded company, is a manufacturer of products containing tomatoes, including tomato sauce, diced tomatoes and wholepeeled tomatoes. Recently, Mark has been receiving pressure from some of the larger investors of Stefano Foods to increase profitability, otherwise, they will sell their ownership interests. Mark knows that the company is already profitable. He does not understand the reasons why investors are pressuring the company. Mark approached production manager Bill Brady about the situation. "Bill, Im getting a lot of pressure from some major investors right now. We need to figure out how to increase profitability, and fast. Im not sure how to do it, but since we are a manulacturer, we probably should cut production costs. I don't care what it takes from a manulacturing perpective, just increase profits." Bill responded, "I will see what I can do, but I can't guarantee that we can do this and still be socially responsible." Bill pondered this issue and decided to consult with the plant controller, Sarah volmer. "Sarah, I'm getting pressure from Mark to cut costs in production. Fm not sure how we can do that without cutting jobs or lowering the quality of the pro- ducts that we produce. Can you help me?' sarah started reviewing the accounting records immediately. Sarah knew that production was funning fairly lean already. Waste was being minimired as much as possible, and the productivity of the manufacturing process wos high. She started fint analyzing the difect costs of production, which are cutlined in the following table. Product costs After analyzing the data, Sarah found a few cost-cutting measures. First, they could investigate costcutting measures for some of their direct materials. The company could find a regional vendor to supply them with tomatoes or oregano, or potentially both. Another cost-cutting measure would be to improve efficiency of their employees, and require the company to lay off employees, that could have a positive effect on profitability. Sarah thought they were already running at high efficiency, however, laying off higher paid employees in the plant is an option but would hurt the local economy. Sarah proceeds to discuss the options with Bill. "II reviewed our records and have come up with a few options that may meet the investor's desire to increase profitability. First, we can get a new, lower cost vendor for the tomatoes and oregano. Second, we can see if our employees can become more efficient and layoff some of the higher paid workers to cut costs." Bill agreed these are options but told Sarah that "Stefano Foods has a long relationship with our current local vendors. Around five years ago, we tried out another vendor for the tomatoes and oregano to cut costs. The quality was just never right, and they could never match the local flavor to what we are known for:" After a long discussion, Bill and Sarah decide to approach Mark with these suggestions. Mark identified that these changes would take too long to implement Instead, can we lower our fixed overhead costs per unit by doubling our production capacity? Sarah confirmed Yes, this is true in the short-term, but it would lock cash up in inventory, and increase our inventories considerably above the demand that we have. If we don't have the demand, the goods will spoil as they have a limited shelf life. This would result in probable future quarterly losses." "Sarah, go back and check the numbers." Sarah checked her calculations and if they doubled production, it would reduce the cost of each batch by $33.33. This alternative would result in the greatest cost savings Initially. Mark said "I want to go ahead and double the amount of production. That seems to have the least impact and will increase profitability for this year and satisfy the investors. No matter what the consequences on future accounting periods, I need to make sure our investors are happy nowi" Bill and Sarah leave the meeting unsure that this decision is the best one for Stefano foods. They need to figure out how to effectively communicate to Mark that doubling production is not the best solution for this problem. 1. What are the main arguments, reasons and rationalizations that Bill and Sarah need to address? 2. What's at stake for the key parties? 3. What is your most powerful and persuasive response to the reasons and rationalizations you need to address? 4. To whom should the argument be made? When and in what context? 1. What are the main arguments, reasons and rationalizations that Bill and Sarah need to address? 2. What's at stake for the key parties? 3. What is your most powerful and persuasive response to the reasons and rationalizations you need to address? 4. To whom should the argument be made? When and in what context? The case: Stefono Foods Mark Stefano is chief executive officer of Stefano Foods, Stefano Foods, a publicly- traded company, is a manufacturer of products containing tomatoes, including tomato sauce, diced tomatoes and wholepeeled tomatoes. Recently, Mark has been receiving pressure from some of the larger investors of Stefano Foods to increase profitability, otherwise, they will sell their ownership interests. Mark knows that the company is already profitable. He does not understand the reasons why investors are pressuring the company. Mark approached production manager Bill Brady about the situation. "Bill, Im getting a lot of pressure from some major investors right now. We need to figure out how to increase profitability, and fast. Im not sure how to do it, but since we are a manulacturer, we probably should cut production costs. I don't care what it takes from a manulacturing perpective, just increase profits." Bill responded, "I will see what I can do, but I can't guarantee that we can do this and still be socially responsible." Bill pondered this issue and decided to consult with the plant controller, Sarah volmer. "Sarah, I'm getting pressure from Mark to cut costs in production. Fm not sure how we can do that without cutting jobs or lowering the quality of the pro- ducts that we produce. Can you help me?' sarah started reviewing the accounting records immediately. Sarah knew that production was funning fairly lean already. Waste was being minimired as much as possible, and the productivity of the manufacturing process wos high. She started fint analyzing the difect costs of production, which are cutlined in the following table. Product costs After analyzing the data, Sarah found a few cost-cutting measures. First, they could investigate costcutting measures for some of their direct materials. The company could find a regional vendor to supply them with tomatoes or oregano, or potentially both. Another cost-cutting measure would be to improve efficiency of their employees, and require the company to lay off employees, that could have a positive effect on profitability. Sarah thought they were already running at high efficiency, however, laying off higher paid employees in the plant is an option but would hurt the local economy. Sarah proceeds to discuss the options with Bill. "II reviewed our records and have come up with a few options that may meet the investor's desire to increase profitability. First, we can get a new, lower cost vendor for the tomatoes and oregano. Second, we can see if our employees can become more efficient and layoff some of the higher paid workers to cut costs." Bill agreed these are options but told Sarah that "Stefano Foods has a long relationship with our current local vendors. Around five years ago, we tried out another vendor for the tomatoes and oregano to cut costs. The quality was just never right, and they could never match the local flavor to what we are known for:" After a long discussion, Bill and Sarah decide to approach Mark with these suggestions. Mark identified that these changes would take too long to implement Instead, can we lower our fixed overhead costs per unit by doubling our production capacity? Sarah confirmed Yes, this is true in the short-term, but it would lock cash up in inventory, and increase our inventories considerably above the demand that we have. If we don't have the demand, the goods will spoil as they have a limited shelf life. This would result in probable future quarterly losses." "Sarah, go back and check the numbers." Sarah checked her calculations and if they doubled production, it would reduce the cost of each batch by $33.33. This alternative would result in the greatest cost savings Initially. Mark said "I want to go ahead and double the amount of production. That seems to have the least impact and will increase profitability for this year and satisfy the investors. No matter what the consequences on future accounting periods, I need to make sure our investors are happy nowi" Bill and Sarah leave the meeting unsure that this decision is the best one for Stefano foods. They need to figure out how to effectively communicate to Mark that doubling production is not the best solution for this problem. 1. What are the main arguments, reasons and rationalizations that Bill and Sarah need to address? 2. What's at stake for the key parties? 3. What is your most powerful and persuasive response to the reasons and rationalizations you need to address? 4. To whom should the argument be made? When and in what context