EXERCISE 2-13 (15 MINUTES)

1. This statement reflects Ford’s focus on reducing costs. Producing cars in

different colors adds to costs and reduces output in a variety of ways.

First, changing colors on the production line involves considerable set-

ups, during which time nothing can be painted. The old color must be

purged from paint lines before the new color can be applied. And differ-

ent colors mean larger paint inventories and—perhaps most impor-

tantly—larger inventories of finished autos. By producing the Model T in

only one color, Ford was able to keep costs low and to keep throughput

up—thus keeping its costs low. However, the market was eventually

willing to pay for more colors and Ford was slow to adapt to this

change.