Will Heinz have to decrease prices to increase their gross profit margin?

answer the following ques Show more Please read the following CNN.com article on layoffs in H.J. Heinz Co. and answer the following questions. Heinz laying off up to 4000 Cuts part of 4-year restructuring plan; company will take $900M charge NEW YORK (CNNfn) H. J. Heinz Co. said Wednesday it will lay off as many as 4000 workers and take a $900 million charge as part of a wide-ranging restructuring effort. The initiative dubbed Operation Excel is expected to generate $200 million in annual savings and improve earnings per share by 10 to 12 percent annually over the next four years. Under the plan Pittsburgh-based Heinz will focus on six core food categories and six key countries to provide a platform for growth in other new markets worldwide. Those categories include its flagship Ketchup products; frozen foods including Bagel Bites and Smart Ones; tuna led by Starkist and John West; soups; infant foods; and pet products including 9- Lives Kibbles-n-Bits and Pounce. The company one of the worlds largest food processors will invest $100 million in marketing key brands. Heinz will concentrate its efforts on the United States Australia the United Kingdom Italy Canada Australia and New Zealand. The initiative includes a realignment of the companys global manufacturing and distribution including the expansion of 13 to 15 factories. However Heinz also will close or sell 15 to 20 facilities and downsize at least 10 more laying off between 3000 and 4000 workers globally over the next four years. The company also plans to sell its Weight Watchers classroom business which it has owned for more than 20 years but will keep the Weight Watchers brand frozen foods. That move is expected to reduce future earnings per share projections by about 7 cents. The $900 million pre-tax restructuring charge includes a previously announced charge of $150 million primarily for the consolidation of Heinzs frozen food business. The $900 million will be spread over four years with most of the cost accrued this year. Future implementation costs that cannot be accrued under accounting rules will be approximately $200 million over the four years. Heinz hopes to sustain an annual tax rate of about 35 to 36 percent as a result of the restructuring as well as improve volume growth by 3 to 4 percent. Gross profit margins are expected to improve to 42 percent. Shares of Heinz (HNZ) gained 1-3/16 to 56-13/16 in early trade. 1. Explain carefully in terms of production theory why Heinz plans to lay off thousands of workers over the next four years? 2. Explain carefully in terms of the theory of production and cost what effect the layoffs will have on Heinz short-run average variable cost and marginal cost? 3. Explain carefully in terms of the theory of production and long run cost what Heinz hopes to accomplish by expanding 13 to 15 factories and at the same time close or sell 15 to 20 other facilities. 4. Do economies of scope exist for Heinz? If yes explain. 5. Will Heinz have to decrease prices to increase their gross profit margin? Explain in detail. Show less

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