Your company currently produces footwear at 2 plants—a 2 million-pair plant in North America and a
newer 4 million-pair plant in Asia. Both plants can be operated at overtime to boost annual capacity by
20%, thus giving the company a current annual capacity of 7,200,000 pairs. Sales volume in Year 10
equaled 5.2 million pairs, so there’s no immediate urgency to add more capacity. At management’s
direction, the company’s design staff can come up with more footwear models, new features, and stylish
new designs to keep the product line fresh and in keeping with the latest fashion. The company markets
its brand of athletic footwear to footwear retailers worldwide and to individuals buying online at the
company’s Web site. In years past, whenever the company had more production capacity than was
needed to meet the demand for its branded footwear, it entered into competitive bidding for contracts to
produce footwear sold under the private-label brands of large chain retailers. In Year 10 the company sold
4.5 million pairs of branded shoes to retailers and individuals, and it bid successfully for contracts to supply
740,000 pairs of private label shoes to large multi-outlet retailers of athletic footwear.