Cases for Management Decision Making

Cases for Management Decision Making CA-1 suggested uses of cases Case CASE 1 Greetings Inc. : Job Order Costing CASE 2 Greetings Inc. : Activity-Based Costing CASE 3 Greetings Inc. : Transfer Pricing Issues CASE 4 Greetings Inc. : Capital Budgeting CASE 5 Auburn Circular Club Pro Rodeo Roundup CASE 6 Sweats Galore CASE 7 Armstrong Helmet Company Overview This case is the first in a series of four cases that presents a business situation in which a traditional retailer decides to employ Internet technology to expand its sales opportunities. It requires the student to employ traditional job order cost- ing techniques and then requests an evaluation of the resulting product costs. (Related to Chapter 2, Job Order Costing. ) This case focuses on decision-making benefits of activity-based costing relative to the traditional approach. It also offers an opportunity to discuss the cost/ benefit trade-off between simple ABC systems versus refined systems, and the potential benefit of using capacity rather than expected sales when allocating fixed overhead costs. (Related to Chapter 4, Activity-Based Costing. This case illustrates the importance of proper transfer pricing for decision making as well as performance evaluation. The student is required to evaluate profitability using two different transfer pricing approaches and comment on the terms of the proposed transfer pricing agreement. (Related to Chapter 8, Pricing. ) This case is set in an environment in which the company is searching for new op- portunities for growth. It requires evaluation of a proposal based on initial esti- mates as well as sensitivity analysis. It also requires evaluation of the underlying assumptions used in the analysis. Related to Chapter 12, Planning for Capital Investments. ) This comprehensive case is designed to be used as a capstone activity at the end of the course. It deals with a not-for-profit service company. The case involves many managerial accounting issues that would be common for a start-up business. (Related to Chapter 5, Cost-Volume-Profit; Chapter 7, Incremental Analysis; and Chapter 9, Budgetary Planning. ) This case focuses on setting up a new business. In planning for this new busi- ness, the preparation of budgets is emphasized. In addition, an understanding of cost-volume-profit relationships is required. (Related to Chapter 5, Cost-Volume- Profit, and Chapter 9, Budgetary Planning. ) This comprehensive case involves finding the cost for a given product. In addi- tion, it explores cost-volume-profit relationships. It requires the preparation of a set of budgets. (Related to Chapter 1, Managerial Accounting; Chapter 5, Cost- Volume-Profit; Chapter 9, Budgetary Planning; Chapter 10, Budgetary Control and Responsibility Accounting; Chapter 11, Standard Costs and Balanced Scorecard; and Chapter 12, Planning for Capital Investments. CA-2 case 1 ?Greet ings Inc. Greetings Inc. : Job Order Costing Developed by Thomas L. Zeller, Loyola University Chicago, and Paul D. Kimmel, University of Wisconsin–Milwaukee THE BUSINESS SITUATION Greetings Inc. has operated for many years as a nationally recognized retailer of greeting cards and small gift items. It has 1,500 stores throughout the United States located in high-traffic malls. As the stock price of many other companies soared, Greetings’ stock price re- mained flat. As a result of a heated 2010 shareholders’ meeting, the president of Greetings, Robert Burns, came under pressure from shareholders to grow Greetings’ stock value. As a consequence of this pressure, in 2011 Mr. Burns called for a formal analysis of the company’s options with regard to business op- portunities. Location was the first issue considered in the analysis. Greetings stores are located in high-traffic malls where rental costs are high. The additional rental cost was justified, however, by the revenue that resulted from these highly visi- ble locations. In recent years, though, the intense competition from other stores in the mall selling similar merchandise has become a disadvantage of the mall locations. Mr. Burns felt that to increase revenue in the mall locations, Greetings would need to attract new customers and sell more goods to repeat customers. In order to do this, the company would need to add a new product line. However, to keep costs down, the product line should be one that would not require much addi- tional store space. In order to improve earnings, rather than just increase rev- enues, Greetings would have to carefully manage the costs of this new product line. After careful consideration of many possible products, the company’s management found a product that seemed to be a very good strategic fit for its existing products: high-quality unframed and framed prints. The critical el- ement of this plan was that customers would pick out prints by viewing them on wide-screen computer monitors in each store. Orders would be processed and shipped from a central location. Thus, store size would not have to in- crease at all. To offer these products, Greetings established a new e-business unit called Wall Decor. Wall Decor is a â€Å"profit center†; that is, the manager of the new business unit is responsible for decisions affecting both revenues and costs. Wall Decor was designed to distribute unframed and framed print items to each Greetings store on a just-in-time (JIT) basis. The system works as follows: The Wall Decor website allows customers to choose from several hundred prints. The print can be purchased in various forms: unframed, framed with a steel frame and no matting, or framed with a wood frame and matting. When a CA-3 Greet ?ings CA-4 ase 1 Cases for Management Decision Making customer purchases an unframed print, it is packaged and shipped the same day from Wall Decor. When a customer purchases a framed print, the print is framed at Wall Decor and shipped within 48 hours. Each Greetings store has a computer linked to Wall Decor’s Web server so Greetings’ customers can browse the many options to make a selection. Once a selection is made, the customer ca n complete the order immediately. Store em- ployees are trained to help customers use the website to shop and to complete their purchases. The advantage to this approach is that each Greetings store, through the Wall Decor website, can offer a wide variety of prints, yet the indi- vidual Greetings stores do not have to hold any inventory of prints or framing materials. About the only cost to the individual store is the computer and high- speed line connection to Wall Decor. The advantage to the customer is the wide variety of unframed and framed print items that can be conveniently purchased and delivered to the home or business, or to a third party as a gift. Wall Decor uses a traditional job order costing system. Operation of Wall Decor would be substantially less complicated, and overhead costs would be sub- stantially less, if it sold only unframed prints. Unframed prints require no addi- tional processing, and they can be easily shipped in simple protective tubes. Framing and matting requires the company to have multiple matting colors and frame styles, which requires considerable warehouse space. It also requires skilled employees to assemble the products and more expensive packaging pro- cedures. Manufacturing overhead is allocated to each unframed or framed print, based on the cost of the print. This overhead allocation approach is based on the assumption that more expensive prints will usually be framed and therefore more overhead costs should be assigned to these items. The predetermined over- head rate is the total expected manufacturing overhead divided by the total ex- pected cost of prints. This method of allocation appeared reasonable to the ac- counting team and distribution floor manager. Direct labor costs for unframed prints consist of picking the prints off the shelf and packaging them for ship- ment. For framed prints, direct labor costs consist of picking the prints, framing, matting, and packaging. The information in Illustration CA 1-1 for unframed and framed prints was collected by the accounting and production teams. The manufacturing overhead budget is presented in Illustration CA 1-2. Illustration CA 1-1 Information about prints and framed items for Wall Decor ?Unframed Steel-Framed Print, Wood-Framed Print, Volume—expected units sold Cost Elements Direct materials Print (expected average cost for each of the three categories) Frame and glass Matting Direct labor Picking time Picking labor rate/hour Matting and framing time Matting and framing rate/hour Print 0,000 $12 10 minutes $12 No Matting 15,000 $16 $4 10 minutes $12 20 minutes $21 with Matting 7,000 $20 $6 $4 10 minutes $12 30 minutes $21 ?Greet ?ings ?case 1 Cases for Management Decision Making CA-5 Illustration CA 1-2 Manufacturing overhead budget for Wall Decor ?Manufacturing Overhead Budget Supervisory salaries Factory rent Equipment rent (framing and matting equipment) Utilities Insurance Information te chnology Building maintenance Equipment maintenance Budgeted total manufacturing overhead costs $100,000 130,200 50,000 20,000 10,000 50,000 11,000 4,000 $375,200 Instructions Use the information in the case and your reading from Chapters 1 and 2 of the text to answer each of the following questions. 1. Define and explain the meaning of a predetermined manufacturing overhead rate that is applied in a job order costing system. 2. What are the advantages and disadvantages of using the cost of each print as a man- ufacturing overhead cost driver? 3. Using the information in Illustrations CA1-1 and CA1-2, compute and interpret the predetermined manufacturing overhead rate for Wall Decor. 4. Compute the product cost for the following three items. a) Lance Armstrong unframed print (base cost of print $12). (b) John Elway print in steel frame, no mat (base cost of print $16). (c) Lambeau Field print in wood frame with mat (base cost of print $20). 5. (a) How much of the total overhead cost is expected to be allocated to unframed prints? (b) How much of the total overhead cost is expected to be allocated to steel framed prints? (c) How much of the tot al overhead cost is expected to be allocated to wood framed prints? (d) What percentage of the total overhead cost is expected to be allocated to un- framed prints? . Do you think the amount of overhead allocated to the three product categories is rea- sonable? Relate your response to this question to your findings in previous questions. 7. Anticipate business problems that may result from allocating manufacturing over- head based on the cost of the prints. case 2 ?Greet ings Inc. Greetings Inc. : Activity-Based Costing Developed by Thomas L. Zeller, Loyola University Chicago, and Paul D. Kimmel, University of Wisconsin–Milwaukee THE BUSINESS SITUATION Mr. Burns, president of Greetings Inc. created the Wall Decor unit of Greetings three years ago to increase the company’s revenue and profits. Unfortunately, even though Wall Decor’s revenues have grown quickly, Greetings appears to be losing money on Wall Decor. Mr. Burns has hired you to provide consulting serv ices to Wall Decor’s management. Your assignment is to make Wall Decor a profitable business unit. Your first step is to talk with the Wall Decor work force. From your conver- sations with store managers you learn that the individual Greetings stores are very happy with the Wall Decor arrangement. The stores are generating addi- tional sales revenue from the sale of unframed and framed prints. They are espe- cially enthusiastic about this revenue source because the online nature of the product enables them to generate revenue without the additional cost of carry- ing inventory. Wall Decor sells unframed and framed prints to each store at product cost plus 20%. A 20% markup on products is a standard policy of all Greetings intercompany transactions. Each store is allowed to add an additional markup to the unframed and framed print items according to market pressures. That is, the selling price charged by each store for unframed and framed prints is determined by each store manager. This policy ensures competitive pricing in the respective store locations, an important business issue because of the intense mall competition. While the store managers are generally happy with the Wall Decor products, they have noted a significant difference in the sales performance of the unframed prints and the framed prints. They find it difficult to sell unframed prints at a competitive price. The price competition in the malls is very intense. On average, stores find that the profits on unframed prints are very low because the cost for unframed prints charged by Wall Decor to the Greetings stores is only slightly be- low what competing stores charge their customers for unframed prints. As a re- sult, the profit margin on unframed prints is very low, and the overall profit earned is small, even with the large volume of prints sold. In contrast, stores make a very good profit on framed prints and still beat the nearest competitor’s price by about 15%. That is, the mall competitors cannot meet at a competitive price the quality of framed prints provided by the Greetings stores. As a result, store managers advertise the lowest prices in town for high-quality framed prints. One store manager referred to Wall Decor’s computer on the counter as a â€Å"cash machine† for framed prints and a â€Å"lemonade stand† for unframed prints. In a conversation with the production manager, you learned that she be- lieves that the relative profitability of framed and unframed prints is distorted CA-6 ?Greet ?ings ?case 2 Cases for Management Decision Making CA-7 ecause of improper product costing. She feels that the costs provided by the company’s traditional job order costing system are inaccurate. From the very beginning, she has carefully managed production and distribution costs. She explains, â€Å"Wall Decor is essentially giving away expensive framed prints, and it appears that it is charging the stores too much for unframed prints. † In her office she shows you her own product costing system, which supports her point of view. Your tour of the information technology (IT) department provided additional insight as to why Wall Decor is having financial problems. You discovered that to keep the website running requires separate computer servers and several in- formation technology professionals. Two separate activities are occurring in the technology area. First, purchasing professionals and IT professionals spend many hours managing thousands of prints and frame and matting materials. Their tasks include selecting the prints and the types of framing material to sell. They also must upload, manage, and download prints and framing material onto and off of the website. The IT staff tells you much of their time is spent with framing and matting material. Only a highly skilled IT professional can properly scan a print and load it up to the site so that it graphically represents what the print will look like when properly matted and framed. In addition, you discover that a different team of IT professionals is dedi- cated to optimizing the operating performance of the website. These costs are classified as manufacturing overhead because a substantial amount of work is required to keep the site integrated with purchasing and production and to safe- guard Wall Decor’s assets online. Most time-consuming is the effort to develop and maintain the site so that customers can view the prints as they would appear either unframed or framed and matted. A discussion with the IT professionals suggests that the time spent develop- ing and maintaining the site for the unframed prints is considerably less than that required for the framed prints and in particular for the framed and matted prints. Developing and maintaining a site that can display the unframed prints is relatively straightforward. It becomes more complicated when the site must al- low the customer to view every possible combination of print with every type of steel frame, and immensely more complicated when one considers all of the pos- sible wood frames and different matting colors. Obviously, a very substantial portion of the IT professionals’ time and resources is required to present the over 1,000 different framing and matting options. Based on your preliminary findings, you have decided that the company’s ability to measure and evaluate the profitability of individual products would be improved if the company employed an activity-based costing (ABC) system. As a first step in this effort, you compiled a list of costs, activities, and values. Your work consisted of taking the original manufacturing overhead cost ($375,200, provided in Case 1) and allocating the costs to activities. You identified four ac- tivities: picking prints; inventory selection and management (includes general management and overhead); website optimization; and framing and matting cost (includes equipment, insurance, rent, and supervisor’s salary). The first activity is picking prints. The estimated overhead related to this ac- tivity is $30,600. The cost driver for this activity is the number of prints. It is ex- pected that the total number of prints will be 102,000. This is the sum of 80,000 unframed, 15,000 steel-framed, and 7,000 wood-framed. Illustration CA 2-1 Information for activity 1 ?Estimated Activity Cost Driver Overhead Picking prints Number of prints $30,600 Expected Use of Cost Driver (80,000 15,000 7,000) 102,000 prints Greet ?ings CA-8 case 2 Cases for Management Decision Making The second activity is inventory selection and management. The estimated overhead related to this activity is $91,700. The cost driver for this activity is the number of components per print item. An unframed print has one component, a steel-framed print has two components (the print and the frame), and a wood- framed print has three components (the print, the mat, and the frame). The total number of components is expected to be 131,000. Illustration CA 2-2 Information for activity 2 ?Activity Inventory selection and management Cost Driver Number of components: Print (1) Print and frame (2) Print, mat, and frame (3) Estimated Overhead $91,700 Expected Use of Cost Driver Prints: 80,000 components Print and frame: 15,000 2 30,000 components Print, mat, and frame: 7,000 3 21,000 components Total 131,000 components The third activity is website optimization. The total overhead cost related to website optimization is expected to be $129,000. It was difficult to identify a cost driver that directly related website optimization to the products. In order to re- flect the fact that the majority of the time spent on this activity related to framed prints, you first split the cost of website optimization between unframed prints and framed prints. Based on your discussion with the IT professionals, you de- termined that they spend roughly one-fifth of their time developing and main- taining the site for unframed prints, and the other four-fifths of their time on framed prints, even though the number of framed prints sold is substantially less than the number of unframed prints. As a consequence, you allocated $25,800 of the overhead costs related to website optimization to unframed prints and $103,200 to framed prints. You contemplated having three categories (unframed, steel-framed, and wood-framed with matting), but chose not to add this addi- tional refinement. Illustration CA 2-3 Information for activity 3 ?Activity Website optimization: Unframed Framed Cost Driver Number of prints at capacity Number of prints at capacity Estimated Overhead $25,800 $103,200 Expected Use of Cost Driver Unframed prints: 100,000 print capacity Framed and/or matted prints: 25,000 print capacity (16,000 steel; 9,000 wood) Once the $129,000 of the third activity was allocated across the two broad product categories, the number of prints at operating capacity was used as the cost driver. Note that operating capacity was used instead of expected units sold. The overhead costs related to website optimization are relatively fixed be- cause the employees are salaried. If a fixed cost is allocated using a value that varies from period to period (like expected sales), then the cost per unit will vary from period to period. When allocating fixed costs it is better to use a base that does not vary as much, such as operating capacity. The advantage of using operating capacity as the base is that it keeps the fixed costs per unit stable over time. ?Greet ?ings ?case 2 Cases for Management Decision Making CA-9 The final activity is framing and matting. The expected overhead costs re- lated to framing and matting are $123,900. None of this overhead cost should be allocated to unframed prints. The costs related to framing and matting are rela- tively fixed because the costs relate to equipment and other costs that do not vary with sales volume. As a consequence, like website optimization, you chose to base the cost driver on levels at operating capacity, rather than at the expected sales level. The cost driver is the number of components. Steel-framed prints have two components (the print and frame), and wood-framed prints have three components (the print, mat, and frame). The total components at operating ca- pacity would be steel frame 32,000 or (16,000 2) and wood frame 27,000 or (9,000 3,000). Illustration CA 2-4 Information for activity 4 ?Activity Framing and matting cost (equipment, insurance, rent, and supervisory labor) Cost Driver Number of components at capacity Estimated Overhead $123,900 Expected Use of Cost Driver Print and frame: 16,000 2 32,000 components at capacity Print, mat, and frame: 9,000 3 27,000 components at capacity Total 59,000 components To summarize, the overhead costs and cost drivers used for each product are expected to be: Illustration CA 2-5 Summary of overhead costs and cost drivers ?Cost Activity Driver 1. Picking Number of prints prints Steel- Wood- Framed, Framed, No with Unframed Matting Matting Total 80,000 15,000 7,000 102,000 80,000 30,000 21,000 131,000 Overhead Cost $ 30,600 91,700 25,800 103,200 123,900 $375,200 ?2. Inventory selection and management 3. Website optimization 4. Framing and matting Number of components Number of 100,000 prints at capacity Number of components at capacity na 16,000 32,000 9,000 27,000 100,000 25,000 59,000 Instructions Answer the following questions. . Identify two reasons why an activity-based costing system may be appropriate for Wall Decor. 2. Compute the activity-based overhead rates for each of the four activities. 3. Compute the product cost for the following three items using ABC. (Review Case 1 for additional information that you will need to answer this question. ) (a) Lance Armstrong unframed print (base cost of print $12). (b) John Elway print in steel frame, no mat ( base cost of print $16). (c) Lambeau Field print in wood frame with mat (base cost of print $20). ? Greet ?ings CA-10 ase 2 Cases for Management Decision Making 4. 5. 6. 7. In Case 1 for Greetings, the overhead allocations using a traditional volume-based approach were $3. 36 for Lance Armstrong, $4. 48 for John Elway, and $5. 60 for Lam- beau Field. The total product costs from Case 1 were Lance Armstrong $17. 36, John Elway $33. 48, and Lambeau Field $48. 10. The overhead allocation rate for unframed prints, such as the unframed Lance Armstrong print in question 3, decreased under ABC compared to the amount of overhead that was allocated under the traditional approach in Case 1. Why is this the case? What are the potential implications for the company? Explain why the overhead cost related to website optimization was first divided into two categories (unframed prints and framed prints) and then allocated based on number of prints. When allocating the cost of website optimization, the decision was made to initially allocate the cost across two categories (unframed prints and framed prints) rather than three categories (unframed prints, steel-framed prints, and wood-framed prints with matting). Discuss the pros and cons of splitting the cost between two categories rather than three. Discuss the implications of using operating capacity as the cost driver rather than the expected units sold when allocating fixed overhead costs. 8. (a) Allocate the overhead to the three product categories (unframed prints, steel- framed prints, and wood-framed prints with matting), assuming that the estimate of the expected units sold is correct and the actual amount of overhead incurred equaled the estimated amount of $375,200. (b) Calculate the total amount of overhead allocated. Explain why the total overhead of $375,200 was not allocated, even though the estimate of sales was correct. What are the implications of this for management? case 3 ?Greet ings Inc. Greetings Inc. : Transfer Pricing Issues Developed by Thomas L. Zeller, Loyola University Chicago, and Paul D. Kimmel, University of Wisconsin–Milwaukee THE BUSINESS SITUATION Two years ago, prior to a major capital-budgeting decision (see Case 4), Robert Burns, the president of Greetings Inc. , faced a challenging transfer pricing issue. He knew that Greetings store managers had heard about the ABC study (see Case 2) and that they knew a price increase for framed items would soon be on the way. In an effort to dissuade him from increasing the transfer price for framed prints, several store managers e-mailed him with detailed analyses show- ing how framed-print sales had given stores a strong competitive position and had increased revenues and profits. The store managers mentioned, however, that while they were opposed to an increase in the cost of framed prints, they were looking forward to a price decrease for unframed prints. Management at Wall Decor was very interested in changing the transfer pric- ing strategy. You had reported to them that setting the transfer price based on the product costs calculated by using traditional overhead allocation measures had been a major contributing factor to its non-optimal performance. Here is a brief recap of what happened during your presentation to Mr. Burns and the Wall Decor managers. Mr. Burns smiled during your presentation and graciously acknowledged your excellent activity-based costing (ABC) study and analysis. He even nodded with approval as you offered the following suggestions. 1. Wall Decor should decrease the transfer price for high-volume, simple print items. . Wall Decor should increase the transfer price for low-volume, complex framed print items. 3. Youranalysispointstoatransferpricethatmaintainsthe20%markupovercost. 4. Adoption of these changes will provide Wall Decor with an 11% return on investment (ROI), beating the required 10% expected by Greetings’ board of directors. 5. Despite the objections of the store managers, the Gr eetings stores must ac- cept the price changes. Finishing your presentation, you asked the executive audience, â€Å"What questions do you have? † Mr. Burns responded as follows. Your analysis appears sound. However, it focuses almost exclu- sively on Wall Decor. It appears to tell us little about how to move for- ward and benefit the entire company, especially the Greetings retail stores. Let me explain. CA-11 Greet ?ings CA-12 case 3 Cases for Management Decision Making I am concerned about how individual store customers will react to the price changes, assuming the price increase of framed-print items is passed along to the customer. Store managers will welcome a decrease in the transfer price of unframed prints. They have complained about the high cost of prints from the beginning. With a decrease in print cost, store managers will be able to compete against mall stores for print items at a competitive selling price. In addition, the increase in store traffic for prints should increase the sales revenue for related items, such as cards, wrapping paper, and more. These are all low- margin items, but with increased sales volume of prints and related products, revenues and profits should grow for each store. Furthermore, store managers will be upset with the increase in the cost of framed prints. Framed prints have generated substantial rev- enues and profits for the stores. Increasing the cost of framed prints to the stores could create one of three problems: First, a store manager may elect to keep the selling price of framed-print items the same. The results of this would be no change in revenues, but profits would de- cline because of the increase in cost of framed prints. Second, a store manager may elect to increase the selling price of the framed prints to offset the cost increase. In this case, sales of framed prints would surely decline and so would revenues and profits. In addition, stores would likely see a decline in related sales of other expensive, high-quality, high-margin items. This is because sales data indicate that customers who purchase high-quality, high-price framed prints also purchase high-quality, high-margin items such as watches, jewelry, and cosmetics. Third, a store manager may elect to search the outside market for framed prints. † Mr. Burns offered you the challenge of helping him bring change to the company’s transfer prices so that both business units, Greetings stores and Wall Decor, win. From his explanation, you could see and appreciate that set- ting the transfer price for unframed and framed prints impacts sale revenues and profits for related items and for the company overall. You immediately rec- ognized the error in your presentation by simply providing a solution for Wall Decor alone. You drove home that night thinking about the challenge. You recognized the need and importance of anticipating the reaction of Greetings store customers to changes in the prices of unframed and framed prints. The next day, the market- ing team provided you with the following average data. For every unframed print sold (assume one print per customer), that cus- tomer purchases related products resulting in $4 of additional profit. †¢ For every framed print sold (assume one print per customer), that customer purchases related products resulting in $8 of additional profit. †¢ Each Greetings store sets its own selling price for unframed and framed prints. Store managers nee d this type of flexibility to be responsive to com- petitive pressures. On average the pricing for stores is as follows: unframed prints $21, steel-framed without matting $50, wood-framed with matting $70. Instructions Answer each of the following questions. 1. Prepare for class discussion what you think were the critical challenges for Mr. Burns. Recognize that Wall Decor is a profit center and each Greetings store is a profit center. ?Greet ?ings ?case 3 Cases for Management Decision Making CA-13 2. After lengthy and sometimes heated negotiations between Wall Decor and the store managers, a new transfer price was determined that calls for the stores and Wall Decor to split the profits on unframed prints 30/70 (30% to the store, 70% to Wall Decor) and the profits on framed prints 50/50. The following additional terms were also agreed to: †¢ â€Å"Profits† are defined as the store selling price less the ABC cost. †¢ Stores do not share the profits from related products with Wall Decor. †¢ Wall Decor will not seek to sell unframed and framed print items through anyone other than Greetings. †¢ Wall Decor will work to decrease costs. †¢ Greetings stores will not seek suppliers of prints other than Wall Decor. †¢ Stores will keep the selling price of framed prints as it was before the change in transfer price. On average, stores will decrease the selling price of unframed prints to $20, with an expected increase in volume to 100,000 prints. Analyze how Wall Decor and the stores benefited from this new agreement. In your analysis, first (a) compute the profits of the stores and Wall Decor using traditional amounts related to pricing, cost, and a 20% markup on Wall Decor costs. Next, (b) compute the profits of the stores and Wall Decor using the ABC cost and negoti- ated transfer price approach. Finally, (c) explain your findings, linking the overall profits for stores and Wall Decor. The following data apply to this analysis. (Round all calculations to three deci- mal places. ) Average selling price by stores before transfer pricing study Average selling price by stores after transfer pricing study Volume at traditional selling price Volume at new selling price Wall Decor cost (traditional) ABC cost Unframed Print $21 $20 80,000 100,000 $17. 36 $15. 258 Steel-Framed, No Matting $50 $50 15,000 15,000 $33. 48 $39. 028 Wood-Framed, with Matting $70 $70 7,000 7,000 $48. 10 $55. 328 3. Review the additional terms of the agreement listed in instruction 2 above. In each case, state whether the item is appropriate, unnecessary, ineffective, or potentially harmful to the overall company. case 4 ?Greet ings Inc. Greetings Inc. : Capital Budgeting Developed by Thomas L. Zeller, Loyola University Chicago, and Paul D. Kimmel, University of Wisconsin–Milwaukee THE BUSINESS SITUATION Greetings Inc. stores, as well as the Wall Decor division, have enjoyed healthy prof- itability during the last two years. Although the profit margin on prints is often thin, the volume of print sales has been substantial enough to generate 15% of Greetings’ store profits. In addition, the increased customer traffic resulting from the prints has generated significant additional sales of related non-print products. As a result, the company’s rate of return has exceeded the industry average during this two-year period. Greetings’ store managers likened the e-business leverage cre- ated by Wall Decor to a â€Å"high-octane† fuel to supercharge the stores’ profitability. This high rate of return (ROI) was accomplished even though Wall Decor’s venture into e-business proved to cost more than originally budgeted. Why was it a profitable venture even though costs exceeded estimates? Greetings stores were able to generate a considerable volume of business for Wall Decor. This helped spread the high e-business operating costs, many of which were fixed, across many unframed and framed prints. This experience taught top manage- ment that maintaining an e-business structure and making this business model successful are very expensive and require substantial sales as well as careful monitoring of costs. Wall Decor’s success gained widespread industry recognition. The business press ocumented Wall Decor’s approach to using information technology to in- crease profitability. The company’s CEO, Robert Burns, has become a frequent business-luncheon speaker on the topic of how to use information technology to offer a great product mix to the customer and increase shareholder value. From the outside looking in, all appears to be going very well for Greetings stores and Wall Decor. How ever, the sun is not shining as brightly on the inside at Greetings. The mall stores that compete with Greetings have begun to offer prints at very com- petitive prices. Although Greetings stores enjoyed a selling price advantage for a few years, the competition eventually responded, and now the pressure on sell- ing price is as intense as ever. The pressure on the stores is heightened by the fact that the company’s recent success has led shareholders to expect the stores to generate an above-average rate of return. Mr. Burns is very concerned about how the stores and Wall Decor can continue on a path of continued growth. Fortunately, more than a year ago, Mr. Burns anticipated that competitors would eventually find a way to match the selling price of prints. As a conse- quence, he formed a committee to explore ways to employ technology to further reduce costs and to increase revenues and profitability. The committee is com- prised of store managers and staff members from the information technology, CA-14 ?Greet ?ings ?cacaseses 14 Cases for Management Decision Making CA-15 marketing, finance, and accounting departments. Early in the group’s discussion, the focus turned to the most expensive component of the existing business model—the large inventory of prints that Wall Decor has in its centralized ware- house. In addition, Wall Decor incurs substantial costs for shipping the prints from the centralized warehouse to customers across the country. Ordering and maintaining such a large inventory of prints consumes valuable resources. One of the committee members suggested that the company should pursue a model that music stores have experimented with, where CDs are burned in the store from a master copy. This saves the music store the cost of maintaining a large inventory and increases its ability to expand its music offerings. It virtually guarantees that the store can always provide the CDs requested by customers. Applying this idea to prints, the committee decided that each Greetings store could invest in an expensive color printer connected to its online ordering system. This printer would generate the new prints. Wall Decor would have to pay a roy- alty on a per print basis. However, this approach does offer certain advantages. First, it would eliminate all ordering and inventory maintenance costs related to the prints. Second, shrinkage from lost and stolen prints would be reduced. Finally, by reducing the cost of prints for Wall Decor, the cost of prints to Greetings stores would decrease, thus allowing the stores to sell prints at a lower price than competitors. The stores are very interested in this option because it enables them to maintain their current customers and to sell prints to an even wider set of customers at a potentially lower cost. A new set of customers means even greater related sales and profits. As the accounting/finance expert on the team, you have been asked to per- form a financial analysis of this proposal. The team has collected the informa- tion presented in Illustration CA 4-1. Illustration CA 4-1 Information about the proposed capital investment project ?Available Data Cost of equipment (zero residual value) Cost of ink and paper supplies (purchase immediately) Annual cash flow savings for Wall Decor Annual additional store cash flow from increased sales Sale of ink and paper supplies at end of 5 years Expected life of equipment Cost of capital Amount $800,000 100,000 175,000 100,000 50,000 5 years 12% ?Instructions Mr. Burns has asked you to do the following as part of your analysis of the capital investment project. 1. Calculatethenetpresentvalueusingthenumbersprovided. Assumethatannualcash flows occur at the end of the year. 2. Mr. Burns is concerned that the original estimates may be too optimistic. He has sug- gested that you do a sensitivity analysis assuming all costs are 10% higher than ex- pected and that all inflows are 10% less than expected. 3. Identify possible flaws in the numbers or assumptions used in the analysis, and iden- tify the risk(s) associated with purchasing the equipment. . In a one-page memo, provide a recommendation based on the above analy- sis. Include in this memo: (a) a challenge to store and Wall Decor management and (b) a suggestion on how Greetings stores could use the computer connection for re- lated sales. case 5 Auburn Circular Club Pro Rodeo Roundup Developed by Jessica Johnson Frazier, Eastern Kentucky University, and Patricia H. Mounce, University of Central Arkansas THE BUSINESS SITUATION When Shelley Jones became president-elect of the Circular Club of Auburn, Kansas, she was asked to suggest a new fundraising activity for the club. After a consider- able amount of research, Shelley proposed that the Circular Club sponsor a profes- sional rodeo. In her presentation to the club, Shelley said that she wanted a fundraiser that would (1) continue to get better each year, (2) give back to the com- munity, and (3) provide the club a presence in the community. Shelley’s goal was to have an activity that would become an â€Å"annual community event† and that would break even the first year and raise $5,000 the following year. In addition, based on the experience of other communities, Shelley believed that a rodeo could grow in popularity so that the club would eventually earn an average of $20,000 annually. A rodeo committee was formed. Shelley contacted the world’s oldest and largest rodeo-sanctioning agency to apply to sponsor a professional rodeo. The sanctioning agency requires a rodeo to consist of the following five events: Bareback Riding, Bronco Riding, Steer Wrestling, Bull Riding, and Calf Roping. Because there were a number of team ropers in the area and because they wanted to include females in the competition, members of the rodeo committee added Team Roping and Women’s Barrels. Prize money of $3,000 would be paid to winners in each of the seven events. Members of the rodeo committee contracted with RJ Cattle Company, a live- stock contractor on the rodeo circuit, to provide bucking stock, fencing, and chutes. Realizing that osts associated with the rodeo were tremendous and that ticket sales would probably not be sufficient to cover the costs, the rodeo com- mittee sent letters to local businesses soliciting contributions in exchange for various sponsorships. Exhibiting Sponsors would contribute $1,000 to exhibit their products or services, while Major Sponsors would contribute $600. Chute Sponsors would cont ribute $500 to have the name of their business on one of the six bucking chutes. For a contribution of $100, individuals would be included in a Friends of Rodeo list found in the rodeo programs. At each performance the rodeo announcer would repeatedly mention the names of the businesses and in- dividuals at each level of sponsorship. In addition, large signs and banners with the names of the businesses of the Exhibiting Sponsors, Major Sponsors, and Chute Sponsors were to be displayed prominently in the arena. ?CA-16 case 5 Cases for Management Decision Making CA-17 A local youth group was contacted to provide concessions to the public and divide the profits with the Circular Club. The Auburn Circular Club Pro Rodeo Roundup would be held on June 1, 2, and 3. The cost of an adult ticket was set at $8 in advance or $10 at the gate; the cost of a ticket for a child 12 or younger was set at $6 in advance or $8 at the gate. Tickets were not date-specific. Rather, one ticket would admit an individual to one performance of his or her choice— Friday, Saturday, or Sunday. The rodeo committee was able to secure a location through the county supervisors board at a nominal cost to the Circular Club. The arrangement allowed the use of the county fair grounds and arena for a one- week period. Several months prior to the rodeo, members of the rodeo commit- tee had been assured that bleachers at the arena would hold 2,500 patrons. On Saturday night, paid attendance was 1,663, but all seats were filled due to poor gate controls. Attendance was 898 Friday and 769 on Sunday. The following revenue and expense figures relate to the first year of the rodeo. Illustration CA 5-1 Revenue and expense data, year 1 ?Receipts Contributions from sponsors $22,000 Receipts from ticket sales 28,971 Share of concession profits 1,513 Sale of programs 600 Total receipts Expenses Livestock contractor 26,000 Prize money 21,000 Contestant hospitality Sponsor signs for arena 1,900 Insurance 1,800 Ticket printing 1,050 Sanctioning fees 925 Entertainment 859 Judging fees 750 Port-a-potties 716 Rent 600 Hay for horses 538 Programs 500 Western hats to first 500 children 450 Hotel rooms for stock contractor 325 Utilities 300 Sand for arena 251 Miscellaneous fixed costs 105 Total expenses Net loss $53,084 ?3,341* ?61,410 $(8,326) *The club contracted with a local caterer to provide a tent and food for the contestants. The cost of the food was contingent on the number of contestants each evening. Information con- cerning the number of contestants and the costs incurred are as follows: Contestants Friday 68 Saturday 96 Sunday 83 Total Cost $ 998 1,243 1,100 $3,341 On Wednesday after the rodeo, members of the rodeo committee met to discuss and critique the rodeo. Jonathan Edmunds, CPA and President of the Circular Club, commented that the club did not lose money. Rather, Jonathan said, â€Å"The club made an investment in the rodeo. † CA-18 case 5 Cases for Management Decision Making Instructions Answer each of the following questions. . Do you think it was necessary for Shelley Jones to stipulate that she wanted a fundraiser that would (1) continue to get better each year, (2) give back to the com- munity, and (3) provide the club a presence in the community? Why or why not? 2. What did Jonathan Edmunds mean when he said the club had made an investment in the rodeo? 3. Is Jonathan’s comment concerning the investment consistent with Shelley’s idea that t he club should have a fundraiser that would (1) continue to get better each year, (2) give back to the community, and (3) provide the club a presence in the community? Why or why not? 4. What do you believe is the behavior of the rodeo expenditures in relation to ticket sales? 5. Determine the fixed and variable cost components of the catering costs using the high-low method. 6. Assume you are elected chair of the rodeo committee for next year. What steps would you suggest the committee take to make the rodeo profitable? 7. Shelley, Jonathan, and Adrian Stein, the Fundraising Chairperson, are beginning to make plans for next year’s rodeo. Shelley believes that by negotiating with local feed stores, innkeepers, and other business owners, costs can be cut dramatically. Jonathan agrees. After carefully analyzing costs, Jonathan has estimated that the fixed expenses can be pared to approximately $51,000. In addition, Jonathan estimates that variable costs are 4% of total gross receipts. After talking with business owners who attended the rodeo, Adrian is confident that funds solicited from sponsors will increase. Adrian is comfortable in budgeting revenue from sponsors at $25,600. The local youth group is unwilling to provide con- cessions to the audience unless they receive all of the profits. Not having the person- nel to staff the concession booth, members of the Circular Club reluctantly agree to let the youth group have 100% of the profits from the concessions. In addition, mem- bers of the rodeo committee, recognizing that the net income from programs was only $100, decide not to sell rodeo programs next year. Compute the break-even point in dollars of ticket sales assuming Adrian and Jonathan are correct in their assumptions. 8. Shelley has just learned that you are calculating the break-even point in dollars of ticket sales. She is still convinced that the Club can make a profit using the assumptions in number 7 above. (a) Calculate the dollars of ticket sales needed in order to earn a target profit of $6,000. (b) Calculate the dollars of ticket sales needed in order to earn a target profit of $12,000. 9. Are the facilities at the fairgrounds adequate to handle crowds needed to generate ticket revenues calculated in number 8 above to earn a $6,000 profit? Show calcula- tions to support your answers. 10. Prepare a budgeted income statement for next year using the estimated revenues from sponsors and other assumptions in number 7 above. In addition, use ticket sales based on the target profit of $12,000 estimated in 8(b). The cost of the livestock con- tractor, prize money, sanctioning fees, entertainment, judging fees, rent, and utilities will remain the same next year. Changes in expenses include the following: Members of the Club have decided to eliminate all costs related to contestant hospitality by soliciting a tent and food for the contestants and taking care of the â€Å"Contestant Hospitality Tent† themselves. The county has installed permanent restrooms at the arena, eliminating the need to rent port-a- potties. The rodeo committee intends to pursue arrangements to have hotel rooms, hay, and children’s hats provided at no charge in exchange for sponsorships. The cost of banners varies with the number of sponsors. Signs and More charged the Circular Club $130 for each Exhibiting Sponsor banner and $48 for each Major Sponsor banner. At this time there is no way to know whether additional sponsors will be Exhibiting Spon- sors or Major Sponsors. Therefore, for budgeting purposes you should increase the cost of the banners by the percentage increase in sponsor contributions. (Hint: Round ase 5 Cases for Management Decision Making CA-19 all calculations to three decimal places. ) By checking prices, the Circular Club will be able to obtain insurance providing essentially the same amount of coverage as this year for only $600. For the first rodeo the Club ordered 10,000 tickets. Realizing the con- straints on available seating, the Club is ordering only 5,000 tickets for next year, and th erefore its costs are reduced 50%. The sand for the arena for next year will be $300, and miscellaneous fixed costs are to be budgeted at $100. 11. A few members in the Circular Club do not want to continue with the annual rodeo. However, Shelley is insistent that the Club must continue to conduct the rodeo as an annual fundraiser. Shelley argues that she has spent hundreds of dollars on western boots, hats, and other items of clothing to wear to the rodeo. Are the expenses re- lated to Shelley’s purchases of rodeo clothing relevant costs? Why or why not? 12. Rather than hire the local catering company to cater the Contestant Hospitality Tent, members of the Circular Club are considering asking Shady’s Bar-B-Q to cater the event in exchange for a $600 Major Sponsor spot. In addition, The Fun Shop, a local party supply business, will be asked to donate a tent to use for the event. The Fun Shop will also be given a $600 Major Sponsor spot. Several members of the Club are opposed to this consideration, arguing that the two Major Sponsor spots will take away from the money to be earned through other sponsors. Adrian Stein has explained to the members that the Major Sponsor signs for the arena cost only $48 each. In ad- dition, there is more than enough room to display two additional sponsor signs. What would you encourage the Club to do concerning the Contestant Hospitality Tent? Would your answer be different if the arena were limited in the number of additional signs that could be displayed? What kind of cost would we consider in this situation that would not be found on a financial statement? case 6 Sweats Galore Developed by Jessica Johnson Frazier, Eastern Kentucky University, and Patricia H. Mounce, University of Central Arkansas THE BUSINESS SITUATION After graduating with a degree in business from Eastern University in Campus Town, USA, Michael Woods realized that he wanted to remain in Campus Town. After a number of unsuccessful attempts at getting a job in his disci- pline, Michael decided to go into business for himself. In thinking about his business venture, Michael determined that he had four criteria for the new business: 1. He wanted to do something that he would enjoy. 2. He wanted a business that would give back to the community. 3. He wanted a business that would grow and be more successful every year. 4. Realizing that he was going to have to work very hard, Michael wanted a business that would generate a minimum net income of $25,000 annually. While reflecting on the criteria he had outlined, Michael, who had been president of his fraternity and served as an officer in several other student organizations, realized that there was no place in Campus Town to have cus- tom sweatshirts made using a silk-screen process. When student organiza- tions wanted sweatshirts for their members or to market on campus, the offi- cers had to make a trip to a city 100 miles away to visit â€Å"Shirts and More. ’’ Michael had worked as a part-time employee at Shirts and More while he was in high school and had envisioned owning such a shop. He realized that a sweatshirt shop in Campus Town had the potential to meet all four of his crite- ria. Michael set up an appointment with Jayne Stoll, the owner of Shirts and More, to obtain information useful in getting his shop started. Because Jayne liked Michael and was intrigued by his entrepreneurial spirit, she answered many of Michael’s questions. In addition, Jayne provided information concerning the type of equipment Michael would need for his business and its average useful life. Jayne knows a competitor who is retiring and would like to sell his equipment. Michael can purchase the equipment at the beginning of 2011, and the owner is willing to give him terms of 50% due upon purchase and 50% due the quarter following the purchase. Michael decided to purchase the following equipment as of January 1, 2011. CA-20 case 6 Cases for Management Decision Making CA-21 Hand-operated press that applies ink to the shirt Light-exposure table Dryer conveyer belt that makes ink dry on the shirts Computer with graphics software and color printer Display furniture Used cash register Cost $7,500 1,350 2,500 3,500 2,000 500 Useful Life yrs. 10 yrs. 10 yrs. 4 yrs. 10 yrs. 5 yrs. Michael has decided to use the sweatshirt supplier recommended by Jayne. He learned that a gross of good-quality sweatshirts to be silk-screened would cost $1,440. Jayne has encouraged Michael to ask the sweatshirt supplier for terms of 40% of a quarter’s purchases to be paid in the quarter of purchase, with the re- maining 60% of the quarter’s purchases to be paid in the quarter following the purchase. Michael also learned from talking with Jayne that the ink used in the silk- screen process costs approximately $0. 75 per shirt. Knowing that the silk-screen process is somewhat labor-intensive, Michael plans to hire six college students to help with the process. Each one will work an average of 20 hours per week for 50 weeks during the year. Michael estimates to- tal annual wages for the workers to be $72,000. In addition, Michael will need one person to take orders, bill customers, and operate the cash register. Cary Sue Smith, who is currently Director of Student Development at Eastern University, has approached Michael about a job in sales. Cary Sue knows the officers of all of the student organizations on campus. In ad- dition, she is very active in the community. Michael thinks Cary Sue can bring in a lot of business. In addition she also has the clerical skills needed for the posi- tion. Because of her contacts, Michael is willing to pay Cary Sue $1,200 per month plus a commission of 10% of sales. Michael estimates Cary Sue will spend 50% of the workday focusing on sales, and the remaining 50% will be spent on clerical and administrative duties. Michael realizes that he will have difficulty finding a person skilled in com- puter graphics to generate the designs to be printed on the shirts. Jayne recently hired a graphics designer in that position for Shirts and More at a rate of $500 per month plus $0. 10 for each shirt printed. Michael believes he can find a uni- versity graphics design student to work for the same rate Jayne is paying her designer. Michael was fortunate to find a commercial building for rent near the uni- versity and the downtown area. The landlord requires a one-year lease. Although the monthly rent of $1,000 is more than Michael had anticipated paying, the building is nice, has adequate parking, and there is room for expansion. Michael anticipates that 75% of the building will be used in the silk-screen process and 25% will be used for sales. Michael’s fraternity brothers have encouraged him to advertise weekly in the Eastern University student newspaper. Upon inquiring, Michael found that a 3 3 ad would cost $25 per week. Michael also plans to run a weekly ad in the local newspaper that will cost him $75 per week. Michael wants to sell a large number of quality shirts at a reasonable price. He estimates the selling price of each customized shirt to be $16. Jayne has sug- gested that he should ask customers to pay for 70% of their purchases in the quarter purchased and pay the additional 30% in the quarter following the purchases. After talking with the insurance agent and the property valuation adminis- trator in his municipality, Michael estimates that the property taxes and insur- ance on the machinery will cost $2,240 annually; property tax and insurance on display furniture and cash register will total $380 annually. CA-22 case 6 Cases for Management Decision Making Jayne reminded Michael that maintenance of the machines is required for the silk-screen process. In addition, Michael realizes that he must consider the cost of utilities. The building Michael wants to rent is roughly the same size as the building occupied by Shirts and More. In addition, Shirts and More sells ap- proximately the same number of shirts Michael plans to sell in his store. Therefore, Michael is confident that the maintenance and utility costs for his shop will be comparable to the maintenance and utility costs for Shirts and More, which are as follows within the relevant range of zero to 8,000 shirts. Shirts Sold January 2,000 February 2,110 March 2,630 April 3,150 May 5,000 June 5,300 July 3,920 August 2,080 September 8,000 October 6,810 November 6,000 December 3,000 Maintenance Costs $1,716 1,720 1,740 1,740 1,758 1,818 1,825 1,780 1,914 1,860 1,855 1,749 Utility Costs $1,100 1,158 1,171 1,198 1,268 1,274 1,205 1,117 1,400 1,362 1,347 1,193 Michael estimates the number of shirts to be sold in the first five quarters, beginning January 2011, to be: First quarter, year 1 Second quarter, year 1 Third quarter, year 1 Fourth quarter, year 1 First quarter, year 2 8,000 10,000 20,000 12,000 18,000 Seeing how determined his son was to become an entrepreneur, Michael’s fa- ther offered to co-sign a note for an amount up to $20,000 to help Michael open his sweatshirt shop, Sweats Galore. However, when Michael and his father ap- proached the loan officer at First Guarantee Bank, the loan officer asked Michael to produce the following budgets for 2011. Sales budget Schedule of expected collections from customers Shirt purchases budget Schedule of expected payments for purchases Silk-screen labor budget Selling and administrative expenses budget Silk-screen overhead expenses budget Budgeted income statement Cash budget Budgeted balance sheet The loan officer advised Michael that the interest rate on a 12-month loan would be 8%. Michael expects the loan to be taken out as of January 1, 2011. Michael has estimated that his income tax rate will be 20%. He expects to pay the total tax due when his returns are filed in 2012. Instructions Answer the following questions. 1. Do you think it was important for Michael to stipulate his four criteria for the busi- ness (see page CA-21), including the goal of generating a net income of at least $25,000 annually? Why or why not? case 6 Cases for Management Decision Making CA-23 2. If Michael has sales of $12,000 during January of his first year of business, deter- mine the amount of variable and fixed costs associated with utilities and mainte- nance using the high-low method for each. 3. Using the format below, prepare a sales budget for the year ending 2011. SWEATS GALORE Sales Budget For the Year Ended December 31, 2011 Quarter 1 2 3 4 Year Expected unit sales Unit selling price x Budgeted sales revenue $ 4. Prepare a schedule of expected collections from customers. SWEATS GALORE Schedule of Expected Collections from Customers For the Year Ending December 31, 2011 Quarter 234 Accounts receivable 1/1/11 –0– First quarter Second quarter Third quarter Fourth quarter Total collections 5. Michael learned from talking with Jayne that the supplier is so focused on making quality sweatshirts that many times the shirts are not available for several days. She encouraged Michael to maintain an ending inventory of shirts equal to 25% of the next quarter’s sales. Prepare a shirt purchases budget for shirts using the format provided. SWEATS GALORE Shirt Purchases Budget For the Year Ended December 31, 2011 Quarter 1 2 3 4 Year Shirts to be silk-screened Plus: Desired ending inventory Total shirts required Less: Beginning inventory Total shirts needed Cost per shirt Total cost of shirt purchases 6. Prepare a schedule of expected payments for purchases. SWEATS GALORE Schedule of Expected Payments for Purchases For the Year Ended December 31, 2011 Quarter 1234 Accounts payable 1/1/11 –0– First quarter Second quarter Third quarter Fourth quarter Total payments CA-24 case 6 Cases for Management Decision Making 7. Prepare a silk-screen labor budget. SWEATS GALORE Silk-Screen Labor Budget For the Year Ended December 31, 2011 Quarter 2 3 4 Year Units to be produced Silk-screen labor hours per unit Total required silk-screen labor hours Silk-screen labor cost per hour Total silk-screen labor cost 8. Prepare a selling and administrative expenses budget for Sweats Galore for the year ending December 31, 2011. SWEATS GALORE Selling and Administrative Expenses Budget For the Year Ended December 31, 201 1 Quarter 1 2 3 4 Year Variable expenses: Sales commissions Total variable expenses Fixed expenses: Advertising Rent Sales salaries Office salaries Depreciation Property taxes and insurance Total fixed expenses Total selling and dministrative expenses 9. Prepare a silk-screen overhead expenses budget for Sweats Galore for the year end- ing December 31, 2011. SWEATS GALORE Silk-Screen Overhead Expenses Budget For the Year Ended December 31, 2011 Quarter 1 2 3 4 Year Variable expenses: Ink Maintenance Utilities Graphics design Total variable expenses Fixed expenses: Rent Maintenance Utilities Graphics design Property taxes and insurance Depreciation Total fixed expenses Total silk-screen overhead Direct silk-screen hours Overhead rate per silk-screen hour case 6 Cases for Management Decision Making CA-25 10. Using the information found in the case and the previous budgets, prepare a bud- geted income statement for Sweats Galore for the year ended December 31, 2011. SWEATS GALORE Budgeted Income Statement For the Year Ended December 31, 2011 Sales Cost of goods sold Gross profit Selling and administrative expenses Income from operations Interest expense Income before income taxes Income tax expense Net income 11. Using the information found in the case and the previous budgets, prepare a cash budget for Sweats Galore for the year ended December 31, 2011. SWEATS GALORE Cash Budget For the Year Ended December 31, 2011 Quarter 1234 Beginning cash balance Add: Receipts Collections from customers Total available cash Less: Disbursements Payments for shirt purchases Silk-screen labor Silk-screen overhead Selling and administrative expenses Payment for equipment purchase Total disbursements Excess (deficiency) of available cash over disbursements Financing Borrowings Ending cash balance 12. Using the information contained in the case and the previous budgets, prepare a bud- geted balance sheet for Sweats Galore for the year ended December 31, 2011. SWEATS GALORE Budgeted Balance Sheet December 31, 2011 Assets Cash Accounts receivable Sweatshirt inventory Equipment Less: Accumulated depreciation Total assets ? CA-26 case 6 Cases for Management Decision Making Liabilities and Owner’s Equity ? 13. (a) Accounts payable Notes payable Interest payable Taxes payable Total liabilities Michael Woods, Capital Total liabilities and owner’s equity Using the information contained in the case and the previous budgets, calculate the estimated contribution margin per unit for 2011. (Hint: Silk-screened labor and the taxes are both fixed costs. ) (b) Calculate the total estimated fixed costs for 2011 (including interest and taxes). c) Compute the break-even point in units and dollars for 2011. 14. (a) Michael is very disappointed that he did not have an income of $25,000 for his first year of budgeted operations as he had wanted. How many shirts would Michael have had to sell in order to have had a profit of $25

Major problems Facing Christianity Essay

All world religions face unprecedented times in the 21st century. The challenges are diverse and do not have easy solutions. The modern world has seen an amalgamation of global value systems and a similar confluence of socio-political ideologies and philosophies because of advances in information technology and the increased mobility made possible by modern day technology. It is feasible to find a representative of all the world major religions in each country. This has meant that the observance of each religion is no longer a mystical matter left for the convents and monasteries, but has become one that can be easily and readily scrutinized and compared with alternatives – which by the way do not have to be religious. In considering these challenges, those that affect Christianity can represent to a fair degree the struggles the others are facing and can provide a platform for the discussion of these forces. Christianity is by design an expansionist religion. Jesus sent out his disciples with the express command to evangelize all the nations. It is therefore the core duty of every Christian to spread the faith. Globalization is probably the most significant force affecting world religions, both serving and limiting the. Many technological changes took place in the closing half of the 20th century epitomized by the rise of the internet symbolizes the rise of the global village. Substantial changes include increasing ease of commercial travel by jets and high-speed trains, efficient telephone systems and powerful radio’s, the television set and a very efficient and diversified print and electronic media. The world has enjoyed many benefits because of these and indeed, even Christianity has had powerful tools to take its message across the world. Many a televangelist and bible teachers go on air in daily or weekly broadcasts, some with a global audience. Taped messages are downloadable from the internet as podcasts. Even if it is not possible to get the message in real time, it remains available for anyone to get it and watch or listen to it at their convenience. As commercial empires have grown into multinationals, so have efficient delivery networks, which now ensure the timely delivery of CD’s and DVD’s, magazines and newspapers to a global audience. However, these means for dissemination of information have not been available to just the Christian enterprise, they have also available to other establishments that have competing interests, usually commercial, and at times ideological that have employed them to good effect. A Christian watching television is not only watching popular televangelists preach the gospel, but at the comfortable press of a remote button, can watch virtually anything else. These options do not always complement the message heard but at times even go against the Christian value system. A Christian therefore is under immense pressure to conform to the prevailing worldview, as he does not live in a shielded Christian community, but rather in an information razzmatazz for which he has to sift through consistently, if he is to retain and spread the Christian message. As Smart (2000) puts it, â€Å"Even if each tradition stays true to its own message, it will have to operate in a context of this federal world civilization. † Secularization, which is a force to reckon with, has made it more difficult to proselytize. Faith is regarded as a personal issue and hence attempts to discuss faith in non-Christian settings with the hope of making disciples have become an uncomfortable, if not offensive undertaking. Decisions about what faith to ascribe to are made personally and increasingly, privately. After all, isn’t Christianity just one of the options? As Smart (2000) explains, â€Å"Making religion a private matter can also lead to a religion’s becoming just a minor element in a total fabric of living†. Smart (2000) adds, â€Å"Just as a person belongs to the golf club, so that person may join a church.† New age thinking has also made its blow on Christianity. Christianity claims exclusivity of access to salvation, and an exclusive personal God. One of the key new age values is tolerance to all religious beliefs and belief systems. Christianity therefore finds itself in a place where it must find a means of relating with the rest of the world religions, violating the fundamental belief in a single way to salvation. In addition, some of the practices of other religions meet the Christian threshold for classification as idolatry. This just serves to multiply the points of conflict. Further on, the modern world, especially those parts where democracy is dominant, acceptance in matters such as homosexuality is encouraged. This becomes a difficult undertaking for a traditional Christian, as it is excruciating for them to reconcile the practice of the Christian faith with homosexuality and therefore will demand a renouncement of the practice of homosexuality before Christian fellowship can commence. Another area of difficulty for the Christian faith has been the place of women in leadership. Feministic influence has pervaded traditional Christian leadership set up where formal overall leadership was the preserve of men. The Catholic Church still holds to this ideal, while the Anglican Communion has opened its priesthood in women. Protestant congregations and denominations seem to have much more flexibility in the matter, with a large number of women pastors and bishops, in some cases as the overall head of a denomination. Radicalization of faith has brought its share of problems to the world in general. Smart (2000) says, â€Å"Other sects are, in principle or in practice, at odds with society, and seek to change it radically, possibly by rebellion and upheaval. † Many people view Christianity as a western religion. Those who have any disagreements with the west therefore consider Christianity as a legitimate representative of the west. In countries where Christians are in the minority, militant religious fundamentalists have attacked them or their institutions as revenge against the west. State control has also had its punch at the Christian faith. Most of the socialist states such as the former USSR and China have had a very rigid stance against religion in general and Christianity has suffered as one of them. In others, proselytizing is illegal and attracts severe penalty. The spread of the Christian faith remains impeded thus. The Christian message along with that of other world religions has become more difficult to sell in a materialistic society. People do not see why they should wait for a coming glory when they can have the good life now made possible by modernization, which has generally increased the living standards in the world, most pronounced in the western world. â€Å"Then again, the new forms of social and economic organization promised a richer life here and now† (Smart, 2000, p. 138) It will be interesting to see how Christianity evolves in the coming age when each of these forces will have had sufficient time to unleash their full impact.

Hp Case Study

T A B L E O F C O N T E N T S 1. INTRODUCTION4 Hewlett-Packard: The Company4 The HP Way4 2. Current Situation4 Current Performance4 Strategic Posture4 Mission Statement of Hewlett Packard4 Vision statement of Hewlett Packard5 Improved Mission statement5 Improved Vision statement5 Why? 5 Comparison of Mission statement to a leading competitor statement5 Objectives:5 Strategies:6 The Current Strategy6 Focus on Your Customer6 Create Measurable Goals6 Create Major Initiatives6 3. Strategic Managers7 Board of Directors7 Top Management7 4. External Environment(EFAS Table)7MEGA Scanning(PEST analysis)7 Task Environment (Porter Five forces Model)7 5. Internal Environment (IFAS Table)8 Corporate Structure8 Corporate culture8 Corporate resources8 Marketing8 Finance8 R&D8 Operations9 Human Resources9 Information System9 Market Position9 6. Strategic Myopia (Filtration)10 7. Analysis of Strategic Factors10 Situational analysis (SWOT)10 TOWS Matrix13 SPACE Matrix15 INTERPRETATION16 Interpreting t he SPACE Analysis Matrix Diagram17 ixixGrand Starategy matr18 QSPM18 8. Strategic Alternatives and Recommended Strategy20 Recommended Strategy20 9.Implementation20 Expanding Geographically21 Reaching into new market segments21 10. Evaluation and control22 Appendix A23 Gross profit margin ratio23 Operating profit margin23 Net profit margin23 Current ratio23 Quick ratio23 Inventory turnover ratio23 Sales to receivables ratio24 Return on assets24 Debt to worth ratio24 1. INTRODUCTION Hewlett-Packard: The Company In 1938, two Stanford graduates in electrical engineering, William Hewlett and David Packard, started their own business in a garage behind Packard’s Palo Alto home. One year later, Hewlett and Packard formalized their usiness into a partnership called Hewlett-Packard. HP was incorporated in 1947 and began offering stock for public trading 10 years later. Annual net revenue for the company grew from $5. 5 million in 1951 to $3 billion in 1980. By 1997, annual net revenue exceeded $42 billion and HP had become the world’s second largest computer supplier. The company, which originally produced audio oscillators, introduced its first computer in 1966. In 1972, the company pioneered the era of personal computing by introducing the first scientific, hand-held calculator.Hewlett-Packard introduced its first personal computer in 1980. Five years later, HP introduced the LaserJet printer, which would become the company’s most successful product ever. The HP Way In 1956, Bill Hewlett, Dave Packard, and a handful of other HP executives gathered at the Mission Inn in Sonoma, California, to create a set of values and principles to guide their company. The six objectives that this small group subsequently created not only helped shape â€Å"a new kind of company, but ultimately became the foundation for what came to be known as â€Å"the HP way. 2. Current Situation Current Performance See Appendix 1 Strategic Posture Mission Statement of Hewle tt Packard â€Å"We are committed to developing a wide range of innovative products and multimedia services that challenge the way consumer’s access and enjoy digital entertainment. By ensuring synergy between businesses within the organization, we are also constantly striving to create exciting new worlds of entertainment that can be experienced on a variety of different products. † Vision statement of Hewlett Packard We recognize and seize opportunities for growth that builds upon our strengths and competencies. † Improved Mission statement To provide product, services and solution of highest quality and deliver more value to our customers that earn their respect and loyalty. Improved Vision statement To view change in market as an opportunity to grow, to use our profit and to ability to develop and produce innovative products, services and solutions that satisfy customers need. Why? They are brief and to the point. It is highlighting all the main points.Compar ison of Mission statement to a leading competitor statement IBM IBM, we strive to lead in the invention, development and manufacture of the industry most advanced information technologies, including computer systems, software, storage systems and microelectronics. We translate these advanced technologies into value for our customers through our professional solutions, services and consulting businesses worldwide. DELL Dell mission is to be the most successful computer company in the world at delivering the best customer experience in markets we serve. Organization |Customers | |Opportunities: |Threats: | |Globally acceptable software used in the laptops which makes them easy to use and|Competitor’s technology & pricing. | |repair Political-Legal. |Less global coverage than competitor. | | |Low compatibility with non- HP product. |The prices are very affordable. |Booming of mobile technology such as IPAD and IPHONE. | |Potential of using technology is very high. |Due to toug h competition bargaining power of customer is low. | |One of the top market leader with trusted Brand name. | | | | | |The HP is continuously keeps on updating their technology which keeps the | | |interest of the customers intact. | |High product differentiation (servers, Laptops, scanners Printers and others. | | |Expansion of retailed stores for customer convenience. | | |Participation in joint venture | | |Mass production leads to high bargaining supplier power. | |Key External factors |Weight |Rating |Weighted Score | |Opportunities | | | | |1. Globally acceptable software used in the laptops which makes them easy to use and repair |0. 02 |4 |0. 08 | |Political-Legal. | | | | |2. The prices are very affordable. 0. 1 |3 |0. 3 | |3. Potential of using technology is very high. |0. 05 |4 |0. 2 | |4. One of the top market leader with trusted Brand name. |0. 1 |4 |0. 4 | |5. The HP is continuously keeps on updating their technology which keeps the interest of the customers |0. 1 |4 |0. 4 | |intact. | | | | |6. High product differentiation (servers, Laptops, scanners Printers and others. |0. |3 |0. 3 | |7. Expansion of retailed stores for customer convenience. |0. 1 |3 |0. 3 | |8. Participation in joint venture |0. 05 |2 |0. 1 | |9. Mass production leads to high bargaining supplier power. |0. 01 |3 |0. 03 | |Threats | | | | |1.Competitor’s technology & pricing. |0. 2 |3 |0. 6 | |2. Less global coverage than competitor. |0. 01 |3 |0. 03 | |3. Low compatibility with non- HP product. |0. 01 |2 |0. 02 | |4. Booming of mobile technology such as IPAD and IPHONE. |0. 1 |2 |0. 2 | |5. Due to tough competition bargaining power of customer is low. |0. 05 |3 |0. 5 | |Total Weighted Score | | |3. 11 | Current strategy can catch opportunity and avoid threats |Key Internal factors |Weight |Rating |Weighted Score | |Strengths | |Organized into 7 business sections with strong position in each |0. |4 |0. 4 | |The company competes both at local and international leve l. It has increased its competitiveness |0. 1 |4 |0. 4 | |through policies and strategies that supports free-market economies | | | | |Strong financial position |0. 1 |4 |0. | |Leading provider of personal computers and imaging and printing |0. 05 |4 |0. 2 | |Good Operational Efficiency |0. 05 |3 |0. 15 | |Multi-vendor customer services, including infrastructure technology and business process  outsourcing,|0. 05 |3 |0. 5 | |technology support and maintenance, application development and support services  and consulting and | | | | |integration services. | | | | |Highly talented workforce |0. 05 |4 |0. 2 | |Ability to provide end-to-end IT solution H/W, application development and support. |0. 15 |4 |0. 6 | |Hewlett-Packard is a global enterprise and especially after its  merger  with Compaq, the company |0. 5 |3 |0. 15 | |became world’s biggest  computer hardware  and peripherals consort in the world and has ranked 20th in | | | | |the Fortune 500 list. | | | | | Weaknesses | | | | |Financial condition leans very heavily on the state of economy not just in the US but worldwide |0. 5 |2 |0. 1 | |Struggling to Add Value and Remain Profitable in Low-Cost High-Volume PC Business |0. 01 |1 |0. 01 | |R&D department has significantly less investments compared to historical spending |0. 1 |1 |0. 1 | |Slow speed to market or responsiveness The past acquisition of Peregrine made the HP’s  portfolio  even|0. 5 |2 |0. 1 | |more diverse and complete but HP Open View’s lack of mainframe management capabilities created | | | | |several problems | | | | |Lack of in-house management consulting division |0. 1 |1 |0. 01 | |Dependency on third-party suppliers, and our revenue and gross margin could suffer if HP fails to |0. 01 |2 |0. 02 | |manage suppliers properly | | | | |Pay cuts has brought low morale to employees |0. 02 |1 0. 02 | |HP did not yet hit a CMDB  product  that includes discovery and mapping. This cause many customers to | 0. 05 |1 |0. 05 | |switch the brand | | | | |Total Weighted Score |3. 6 | HP has strong internal position TOWS Matrix |IFE |Strengths: |Weaknesses: | | |Organized into 7 business sections with strong |Financial position leans very heavily on the | | |position in each. state of economy not just in the US but | | |The company competes both at local and international|worldwide. | | |level. It has increased its competitiveness through |Struggling to Add Value and Remain Profitable in | | |policies and strategies that supports free-market |Low-Cost High-Volume PC Business. | |economies. |R&D department has significantly less investments| | |Strong financial position. |compared to historical spending. | | |Leading provider of personal computers and imaging |Slow speed to market or responsiveness the past | | |and printing. acquisition of Peregrine made the | | |Good Operational Efficiency. |HP’s  portfolio  even more diverse and complete but| | |Multi-vendor customer service s, including |HP Open View’s lack of mainframe management | | |infrastructure technology and business |capabilities created several problems. | |process  outsourcing, technology support and |Lack of in-house management consulting division. | | |maintenance, application development and support |Dependency on third-party suppliers, and our | | |services  and consulting and integration services. |revenue and gross margin could suffer if HP fails| | |Highly talented workforce. to manage suppliers properly. | | |Ability to provide end-to-end IT solution H/W, |Pay cuts has brought low morale to employees. | | |application development and support. |HP did not yet hit a CMDB  product  that includes | | |Hewlett-Packard is a global enterprise and |discovery and mapping.This cause many customers | | |especially after its  merger  with Compaq, the company|to switch the brand. | | |became world’s biggest  computer hardware  and | | | |peripherals consort in the wor ld and has ranked 20th| | | |in the Fortune 500 list. | |Opportunities: |SO: |WO: | |Globally acceptable software used in the laptops |S1, S2, S3, S7, O3 to develop new products |W5, O8 to develop new HR policy in order to | |which makes them easy to use and repair |(Intensive strategies). |retain the human capital. | |Political-Legal. |S2, S3, S5, O9 (backward integration – Integrative |W6,O9 (backward integration – Integrative | | |strategies). |strategies). | |The prices are very affordable. | | | |Potential of using technology is very high. | | | |One of the top market leader with trusted Brand | | | |name. | | | | | | |The HP is continuously keeps on updating their | | | |technology which keeps the interest of the | | | |customers intact. | | |High product differentiation (servers, Laptops, | | | |scanners Printers and others. | | | |Expansion of retailed stores for customer | | | |convenience. | | |Participation in joint venture | | | |Mass production leads t o high bargaining supplier| | | |power. | | | |Threats: |ST: |WT: |Competitor’s technology & pricing. |S2, S9, T1 to offer products standardizing with |W1,W8, T1 to develop new products (Intensive | |Less global coverage than competitor. |lowest cost for broad range of customers |strategies) and to drop the non-profitable | |Low compatibility with non- HP product. |(competitive strategy). |products. | |Booming of mobile technology such as IPAD and |S2, S3, S5, T4 to develop new products (Intensive | | |IPHONE. strategies). | | |Due to tough competition bargaining power of |S2, S3, S5, T2 to open retail stores worldwide | | |customer is low. |(Forward integration -integrative strategies). | | | | | | SPACE Matrix Internal Strategic Position |External Strategic position | |Competitive Position (CP) |Industry Position (IP) | |Market Share |-2 |Growth Potential |5 | |Product Quality |-1 |Profit Potential |5 | |Customer Loyalty |-2 |Financial Stability |5 | |Technological know-h ow |-2 |Labor cost |2 | |Control over suppliers and |-4 |Technological know-how |5 | |distributors | | | | |Total |-11 |Total |22 | |Average |-2. 2 |Average |3. 7 | |Financial Position (FP) | Stability Position(SP) | |Return on Investment |5 |Technological changes |-4 | |leverage |6 |Rate of Inflation |-2 | |Working Capital |5 |Price range of Competing products |-3 | |Liquidity |5 |Competitive pressure |-4 | |Price earnings ratio |4 |Barriers to entry into market |-2 | |   |   |Demand variability |-3 | |Total |25 |Total |-18 | |Average |5 |Average |-3 | |   |X Value = 3. 67 – 2. 2 = 1. 47 |   |Y value = 5- 3 = 2 | [pic] INTERPRETATION Assessing the SPACE Analysis Scores Each factor in the Strategic Position and Action Evaluation matrix can be quickly judged but there are benefits for exploring each in detail.There are a large number of factors that can be considered and each industry will have its own key features which should be included in the detailed SPACE evalu ation. A few factors to be considered to give you a flavour of what to include in your SPACE analysis are listed below. SPACE Analysis Factors For Financial Strength †¢ Return on Sales †¢ Return on Assets †¢ Cash Flow †¢ Gearing †¢ Working Capital Intensity SPACE Analysis Factors For Competitive Advantage †¢ Market Share †¢ Quality †¢ Customer Loyalty †¢ Cost Levels †¢ Product Range SPACE Analysis Factors For Industry Attractiveness †¢ Growth Potential †¢ Life Cycle Stage †¢ Entry Barriers †¢ Customer Power †¢ Substitutes SPACE Analysis Factors For Environmental Stability †¢ Political Uncertainty †¢ Interest Rates Technology †¢ Cyclical †¢ Environmental Issues Interpreting the SPACE Analysis Matrix Diagram The arrow indicating the strategic thrust can be drawn from the origin by calculating the net result on each axis and plotting this net position. The Aggressive posture in the SPACE Anal ysis Matrix occurs when all the dimensions are positive. The implicit strategy is to aggressively grow the business raising the stakes for all competitors. The main danger is complacency. ? According to the space matrix score HP falls in the â€Å"AGGRESSIVE quadrant† . Their strategies should be one of the following: Vertical and horizontal integration1 Market penetration2Market development3 Product development4 Diversification5 ixixGrand Starategy matr |[pic] | | | |Horizontal diversification | |Concentric diversification | |Conglomerate diversification | |Divestiture | QSPM | |Key Factor |Weight |Horizontal |Market |Product |Horizontal | | | |Integration |Development |Development |Diversification | |   | | |Low Product Cost |This orientation is focused on developing the lowest cost or highest value product. This is typical of companies| | |with commodity type products, products reaching a mature phase in their life cycle, or where there is | | |consolidation or a shrinking market. This orientation typically will require additional time and development | | |cost to optimize product cost and the manufacturing process. | |Low Development Cost |This orientation focuses on minimizing development cost or developing products within a constrained budget. | |While this orientation is not as common as the other orientations, it occurs when companies are developing | | |products under contract for other parties, where a company has severely constrained financial resources, or | | |where a â€Å"stealth† development effort is being undertaken on a â€Å"shoestring†. This orientation is somewhat | | |compatible with time-to-market, but involves tradeoffs with product performance, innovation, cost and | | |reliability. |Product Performance, Technology & Innovation |This orientation focuses on having the highest level of product performance, the highest level of functionality | | |or functions and features, the latest technology or the highes t level of product innovation. This orientation | | |can be pursued by companies in many industries or many products except commodity products. Pursuit of this | | |strategy involves higher risks with newer technologies and accepts a trade-off of time and cost to pursue these | | |objectives. | |Quality, Reliability, Robustness |This orientation focuses on assuring high levels of product quality, reliability and robustness.This | | |orientation is typical of industries requiring high quality because of the significant costs to correct a | | |problem (e. g. , recalls in the automotive or food processing industries), the need for high levels of reliability| | |(e. g. , aerospace products), or where there are significant safety issues (e. g. , medical devices, | | |pharmaceuticals, commercial aircraft, nuclear plants, etc. ). This orientation requires added time and cost for | | |planning, testing, analysis and regulatory approvals. |Service, Responsiveness & Flexibility |This orientat ion focuses on providing a high level of service, being very responsive to customer requirements as| | |part of development, and maintaining flexibility to respond to new customers, new markets and new opportunities. | | |This orientation requires additional resources (and their related costs) to provide this service and | | |responsiveness. | 10. Evaluation and control 1. Determine what to measure: Top managers and operational managers must specify implementation process and results to be monitored and evaluated.The processes and results must be measurable in a reasonably objective and consistent manner. The focus should be on the most significant elements in a process – the ones that account for the highest proportion of exposure or the greatest no. of problems. 2. Establish standards of Performance: Standards used to measure performance are detailed expressions of strategic objectives. They are measures of acceptable performance results. Each standard can be usually includ es a tolerance range, which defines any acceptable deviations. Standards can be set not only for final output, but also for intermediate stages of production output. 3. Measure actual performance.Measurements must be made at predetermined times. 4. Compare actual performance with the standard – if the actual performance results are within the desired tolerance range, the measurement process stops here. 5. Take corrective action: If the actual results fall outside the desired tolerance range, action must be taken to correct the deviation. The action must not only correct the deviation but also prevent its recurrence. The following issues must be resolved: †¢ Is the deviation only a chance fluctuation? †¢ Are the processes being carried out in correctly? †¢ Are the processes appropriate for achieving the desired standards? Objectives of Strategy Evaluation and Control Organizations are most vulnerable when they are at the peak of their success †¢ Erroneous s trategic decisions can inflict severe penalties and can be exceedingly difficult, if not impossible, to reverse. †¢ Strategy evaluation is vital to an organization’s well-being; timely evaluations can alert management to problems or potential problems before a situation becomes critical. Appendix A Gross profit margin ratio The gross profit has increased from 23. 61% to 24. 53%. This means that profitability at the basic level has increased from previous year. This is a sign of good ratio. Operating profit margin Profitability before interest and tax has increased from 4. 00% to 7. 15%.This means that efficiency of the business before taking any financing has increased from the previous year. This also is a sign of good ratio. Net profit margin This also has increased from 2. 7% to 6. 76%. This means that overall profitability has also increased. This is a sign of good ratio. Current ratio Current ratio has decreased from 1. 38 to 1. 35. This means that working capital t o meet short term obligations has decreased, which shows a poor use of working capital. This is a sign of bad ratio. Quick ratio This ratio has also decreased from 1. 16 to 1. 13. So this shows that the ability to pay immediate financial obligations has also decreased. This quick ratio is acceptable but has decreased.Inventory turnover ratio The ratio has decreased from 9. 63 to 8. 93, which means that more capital is tied up in inventory which is not a good sign. Sales to receivables ratio It also has decreased from 8. 75 to 8. 43. This means that the efficiency in collecting accounts receivables has deceased. Return on assets This ratio has increased from 6. 9% to 13. 0% . This is the sign of good ratio. Debt to worth ratio This ratio has decreased to 6. 52% from 9. 12%. This means that debt financing has decreased and hence the risk also has decreased. Working capital . Working capital has increased from $11,874 to $12,414.This shows that the ability of a company to endure diffic ult financial periods has increased. |Gross profit margin |24. 53% |23. 61% | |Operating profit margin |7. 15% |4. 00% | |Net profit margin |6. 76% |2. 7% | |Current ratio |1. 35 |1. 38 | |Quick ratio |1. 13 |1. 6 | |Inventory turnover ratio |8. 93 |9. 63 | |Sales to receivables ratio |8. 43 |8. 75 | |Return on assets |13. 0% |6. 9% | |Debt to worth ratio |6. 52% |9. 12% | |Working capital |$12,414 |$11,874 | ———————– EFE

Descriptive Writing Essay

The much publicized meteor shower has finally arrived and is a much anticipated awaited aesthetic show. As I’m observing the dark night sky waiting for the gorgeous meteors to enter Earth’s atmosphere, I see the sensational stunning spectacular sparkling stars. While sitting on my porch in the small town of Malton, I hear a small owl chirping on my backyard tree and the soothing summer breeze gusting throughout the trees. I can hear the constant chatter of my neighbours as they eagerly wait for the show to begin. This being my first meteor shower observation, I feel really happy and believe that this is going to be an amazing show that I wouldn’t miss for the world. The meteor shower is starting and I’m full of enjoyment, gazing at the sky, I see meteors enter Earth’s atmosphere at a tremendous rate, the beautiful sky is lit up with different colours; orange, blue and a bit of purple. The bright strands of light are appealing to the human eye. While meteors are falling every 10-20 seconds, they hardly make a sound. My family comes onto the porch gawking at the meteors, both them and I are watching in enjoyment. My dad brings out his camera and takes numerous pictures of the beautiful sight. The meteor shower finishes, my family goes inside gossiping about the show and how they won’t see it again, I on the other half stay outside and glance at the Big and Little Dipper. The stars start to vanish and I go inside to reminisce with my family and neighbours the next day. In conclusion, this is a moment that will be cherished in my memories for a lengthy period of time and I will surely share these breathtaking sights with my children.

Philippine Racism Essay

In a famous trial in Manila about Neil Puache, convicted of rape, exclaimed: â€Å"You’re all racists and you don’t even know it!† This topic may be quite controversial but I have enough evidences to back up my opinions. Racism refers to any theory or doctrine stating that inherited physical characteristics such as skin color, facial features, hair texture, and the like determine behavior patterns, personality traits and intellectual abilities. They do not know that, according to the values’ standards, that the actions of man define what values they have instead of how they look because through these values, one can know that a person is acting in a proper or improper way. In practice, racism takes the form of a claim that some human races are superior to others. Did you know that the term â€Å"Mangyan†, the name of the indigenous peoples in Mindoro comes from the Tagalog phrase: â€Å"mangmang iyan† meaning â€Å"that person is stupid†? Why would people who have been oppressed by whites want to act like them? Because the oppression was effective in instilling the belief that whites are better than Filipinos. Instead of responding to this in an aggressive mood, Filipinos took the belief as something true. That’s why Filipinos are really conscious about their skin color. How about this: did you know that our country is the world’s capital of whitening products? Yes, it’s a fact. Filipinos seem to think that with lighter skin, one can climb the social ladder. Haven’t you noticed that Filipinos respond to sunlight the same way Clark Kent does to kryptonite? And this: did you know that only two dark-skinned Filipinas managed to get the title of Binibining Pilipinas Universe? This is another visible practice of racism in the Philippines. It might be coincidental if there were ten or fifteen candidates but two out of forty-one is just unacceptable. It isn’t only amongst us that Filipinos have shown preference of a certain race. Did you know that people with Chinese blood were often discriminated in the Philippines because of the way they look? Only because of the current  norms of what people perceive to be beautiful are Chinese people thought of as better than us. They make their Chinese blood a feature of their humanity. This is why â€Å"Tsinoys† are more frequently seen on T.V. than Filipinos with the traditional Filipino beauty. Historians claim that this fever started the same time colonial mentality seeped into our veins and pointed out that it was widespread by 1572. The colonizers start with the assumption that their ways are inherently superior to those of the colonized. Racist men were put into positions of power where they were expected to promote, first and foremost, the economic and fashion interests of the country’s elite. In the name of God, civilization progress and development, the colonizers justified the most barbaric acts they inflicted on the colonized. The brainwashing committed by the colonizers was meant to tell the imposed that their culture is way behind civilization. They did not know that the acts also made the Filipinos think that lighter skin meant more superior beings. Particularly when face-to-face with a person in authority, Filipinos have the tendency to be submissive. They have an obsessive desire to please, serve and accept the opinion of a person in authority. Rather than asserting their rights, they prefer to suffer in silence for fear of offending another person or being thought of as uncooperative or dumb. The Filipinos have practiced pakikisama but this value turned out to be a non-assertive mentality that started the whole disease. This is the kind of mindset and barbarism that shaped the history of the Filipinos. We must also talk about the ancestral influence. If parents cut corners, their children will too. If parents spend all their money on themselves and tithe no portion of it for charities, colleges, churches, synagogues and civic causes, their children won’t either. The same way, if parents snicker at racial and gender jokes, a new generation will pass on the poison adults still have not had the courage to snuff out. According to Rogdiger in his article from rubak.com, â€Å"a typical Filipino parent would say that being white is good because it shows superiority (the  female parent is likely to suggest this, most males tend to be contented with their own race) because only a small percent of Filipinos is lucky enough to have this gift†. The truth is, to think so is being as racist as the people who enslaved them and told them that they were inferior. Injustice anywhere is a threat to justice everywhere. Filipinos are so caught up in an inescapable network of mutuality, tied in a single garment of destiny. Whatever affects one directly, affects all indirectly. The parents sent the word and strength of racism to many generations in the future and it will never stop until Filipinos accept that they are racists. In the past, racism was easily defined and institutional. The colonizers have been successful in promoting their race to a higher level but they, surely enough, didn’t expect the Philippines to be a racist society in the future. The refusal to accept this sickness has allowed it to transform into new forms. Racism has evolved from an aggressive prejudicial behavior to a more subtle one. This type of subtle prejudicial behavior has advanced to a degree that is much more difficult to se, yet is regarded as more severe. This modern form of racism has entered the workplace. Filipinos are so caught up with trying to be an independent race, yet they would prefer to be a part of a different race. A foreigner came back from the Philippines and said: â€Å"All I saw was a lot of racists!† More that a quarter of the females in the Philippines have died their hair blonde, with an effort to be â€Å"more cool† or â€Å"more foreign† only to have most turn out an ugly orangy-color. These women also wear too much makeup to lighten their skin. We must also discredit the title of â€Å"the bearers of racism† to our ancestors, colonizers and the society. The media also has a lot to do with this. Most of the people who accepted the title of being â€Å"ugly† in showbiz entertainment are people with dark skin. The victims of racism have suffered from direct or indirect forms of racial discrimination. Direct forms include being laughed at; indirect forms include the â€Å"glass ceiling effect, a modern type of racism which describes the invisible differences in other Filipino’s views. This type of thinking may very well be the cause of a victim’s mental and psychological damage. It  has also affected the victim’s social health and yes, also his/her spiritual health. So it’s your choice. You can either be a lazy fool, influenced by the society’s wrong perspective or you can park the car, stand on hard ground and take a look at the real Philippine Islands.

Management Research Paper Example | Topics and Well Written Essays - 750 words

Management - Research Paper Example â€Å"The result of the innovation process is innovation – a creation that has significant value† (Cingula & Veselica). Innovation strategy is the manner by which organizations respond to challenges in market by way of research and development, product or process innovation, and by the use of technology or market forces; Analysis: 1) McDonald: McDonald’s Corporation operates its chain of business in a challenging market segment, and it employs an efficient competitive strategy against its competitors. To offer efficient service to those whom they cater, the company provides standardized training processes for employees. McDonald’s also competes by offering low price for high quality products. It necessitates efficient processes for the entire organization. The introduction of â€Å"Made for you† system offered standard food items that are not kept in a bin until they get sold. Later they realized that even if the new system offered fresh food, it wa s not time effective. Still, McDonald’s continues with the system, by adding new options to help the system work quickly. McDonald’s has planned to increase profits by increasing sales in its existing restaurants. They developed a â€Å"new taste menu,† where they offered a new type of sandwich for one week to offer a variety of options to satisfy customer’s desire. But, the new taste menu proved to be inefficient as customers were annoyed at the fact that they couldn’t purchase their new favorite sandwich again. Later they realized that people are more conscious regarding their health and they responded to this trend by adding salads and further lighter choice to their menu. McDonald’s has paid significant concentration to children who help them to build a stable business, by encouraging the entire family to visit McDonald’s. McDonald’s strategy to develop brand loyalty in children has turned out to be a great success. 2) Appl e: Apple exerts a combination of Bottom-Up and Top Down innovation strategy to generate new innovations. The innovation culture of Apple is closely attached with that of its leadership. â€Å"Innovation comes from saying no to 1,000 things, to make sure we don’t get on the wrong track or try to do too much† (A Leadership that Understands Innovation para. 2). The innovation process is facilitated by five leadership roles which include  Institutional Leader, Entrepreneur, Critic, Mentor and Sponsor.   The institutional leader produces organizational infrastructure needed for innovation.   The critic confronts investments and goals. The entrepreneur controls innovative units.   The sponsor procures and advocates, while the mentor counsels and advises. To maintain strategy of product differentiation, Apple has used these the five roles of leadership. The Innovation Factory which is the new build up of Apple, is the one that harnesses unrestrained creativity for its customers, enterprising new ideas & stimulating bold, steps, and being successful in innovations. Apple leverages its employees ecosystem, suppliers, customers, global networks and partners, proving the process of innovation, the idea that winning culture doesn't agree to second place, and to grab the new marketplace opportunities for the business to glow. 3. Microsoft: â€Å"