Passage 42
Excess inventory1, a massive problem for many businesses, has several causes, some of which are unavoidable.Overstocks may accumulate through production overruns or errors. Certain styles and colors prove unpopular. Withsome productscomputers and software, toys, and bookslast years models are difficult to move even at huge discounts. Occasionally the competition introduces a better product. But in many cases the publics buying tastes simply change, leaving a manufacturer or distributor with thousands of items that the fickle2 public no longer wants.
One common way to dispose of this merchandise is to sell it to a liquidator, who buys as cheaply as possible and then resells the merchandise through catalogs, discount stores, and other outlets3. However, liquidators may pay less for the merchandise than it cosplayt to make it. Another way to dispose of excess inventory is to dump it. The corporation takes a straight cosplayt write-off on its taxes and hauls the merchandise to a landfill. Although it is hard to believe, there is a sort of convoluted4 logic5 to this approach. It is perfectly6 legal, requires little time or preparation on the companys part, and solves the problem quickly. The drawback is the remote possibility of getting caught by the news media. Dumping perfectly useful products can turn into a public relations nightmare. Children living in poverty are freezing and XYZ Company has just sent 500 new snowsuits to the local dump. Parents of young children are barely getting by and QPS Company dumps 1,000 cases of disposable diapers because they have slight imperfections.
The managers of these companies are not deliberately7 wasteful8; they are simply unaware9 of all their alternatives. In 1976 the Internal Revenue Service provided a tangible10 incentive11 for businesses to contribute their products to charity. The new tax law allowed corporations to deduct12 thecosplayt of the product donated plus half the difference between cosplayt and fair market selling price,with the proviso that deductions14 cannot exceed twice cosplayt. Thus, the federal government sanctionsindeed, encouragesan above-cosplayt federal tax deduction13 for companies that donate inventory to charity.
1. The author mentions each of the following as a cause of excess inventory EXCEPT
production of too much merchandise
inaccurate15 forecasting of buyers preferences
unrealistic pricing policies
products rapid obsolescence16
availability of a better product
2. The passage suggests that which of the following is a kind of product that a liquidator who sells to discount stores would be unlikely to wish to acquire?
Furniture
Computers
Kitchen equipment
Baby-care products
Childrens clothing
3. The passage provides information that supports which of the following statements?
Excess inventory results most often from insufficient17 market analysis by the manufacturer.
Products with slight manufacturing defects may contribute to excess inventory.
Few manufacturers have taken advantage of the changes in the federal tax laws.
Manufacturers who dump their excess inventory are often caught and exposed by the news media.
Most products available in discount stores have come from manufacturers excess-inventory stock.
4. The author cites the examples in lines 25-29 mostprobably in order to illustrate18
the fiscal19 irresponsibility of dumping as a policy for dealing20 with excess inventory
the waste-management problems that dumping new products creates
the advantages to the manufacturer of dumping as a policy
alternatives to dumping explored by different companies
how the news media could portray21 dumping to the detriment22 of the manufacturers reputation
5. By asserting that manufacturers are simply unaware , the author suggests which of the following?
Manufacturers might donate excess inventory to charity rather than dump it if they knew about the provision in the federal tax code.
The federal government has failed to provide sufficient encouragement to manufacturers to make use of advantageous23 tax policies.
Manufacturers who choose to dump excess inventory are not aware of the possible effects on their reputation of media coverage24 of such dumping.
The manufacturers of products disposed of by dumping are unaware of the needs of those people who would find the products useful.
The manufacturers who dump their excess inventory are not familiar with the employment of liquidators to dispose of overstock.
6. The information in the passage suggests that which of the following, if true, would make donating excess inv entory to charity less attractive to manufacturers than dumping?
The cosplayts of getting the inventory to the charitable destination are greater than the above-cosplayt tax deduction.
The news media give manufacturers charitable contributions the same amount of coverage that they give dumping.
No straight-cosplayt tax benefit can be claimed for items that are dumped.
The fair-market value of an item in excess inventory is 1.5 times its cosplayt.
Items end up as excess inventory because of a change in the publics preferences.
7. Information in the passage suggests that one reason manufacturers might take advantage of the tax provision mentioned in the last paragraph is that
there are many kinds of products that cannot be legally dumped in a landfill
liquidators often refuse to handle products with slight imperfections
the law allows a deduction in excess of the cosplayt of manufacturing the product
media coverage of contributions of excess-inventory products to charity is widespread and favorable
no tax deduction is available for products dumped or sold to a liquidator
