Sembotix Company has several divisions including a Semiconductor Division that sells semiconductors to both internal and external customers. The company’s X-ray Division uses semiconductors as a component in its final product and is evaluating whether to purchase them from the Semiconductor Division or from an external supplier. The market price for semiconductors is $100 per 100 semiconductors. Dave Bryant is the controller of the X-ray Division, and Howard Hillman is the controller of the Semiconductor Division. The following conversation took place between Dave and Howard: Dave: I hear you are having problems selling semiconductors out of your division. Maybe I can help. Howard: You’ve got that right. We’re producing and selling at about 90% of our capacity to outsiders. Last year we were selling 100% of capacity. Would it be possible for your division to pick up some of our excess capacity? After all, we are part of the same company. Dave: What kind of price could you give me? Howard: Well, you know as well as I that we are under strict profit responsibility in our divisions, so I would expect to get market price, $100 for 100 semiconductors. Dave: I’m not so sure we can swing that. I was expecting a price break from a “sister” division. Howard: Hey, I can only take this “sister” stuff so far. If I give you a price break, our profits will fall from last year’s levels. I don’t think I could explain that. I’m sorry, but I must remain firm—market price. After all, it’s only fair—that’s what you would have to pay from an external supplier. Dave: Fair or not, I think we’ll pass. Sorry we couldn’t have helped. Is Dave behaving ethically by trying to force the Semiconductor Division into a price break? Comment on Howard’s reactions.
> Sk8 Company produces skateboards and purchases 20,000 units of a wheel bearing each year at a cost of $1 per unit. Sk8 requires a 15% annual rate of return on investment. In addition, the relevant carrying cost (for insurance, materials handling, breakag
> The Fabric World sells fabrics to a wide range of industrial and consumer users. One of the products it carries is denim cloth, used in the manufacture of jeans and carrying bags. The supplier for the denim cloth pays all incoming freight. No incoming in
> Sportsman Textiles (ST) manufactures the Galaxy jerseys that Wonder Line (WL) sells to its customers. ST has recently installed computer software that enables its customers to conduct “one-stop” purchasing using state-of-the-art Web site technology. WL’s
> Wonder Line (WL) operates a megastore featuring sports merchandise. It uses an EOQ decision model to make inventory decisions. It is now considering inventory decisions for its Los Angeles Galaxy soccer jerseys product line. This is a highly popular item
> Best Trim, a manufacturer of lawn mowers, predicts that it will purchase 204,000 spark plugs next year. Best Trim estimates that 17,000 spark plugs will be required each month. A supplier quotes a price of $9 per spark plug. The supplier also offers a sp
> Turnkey Manufacturing evaluates the performance of its production managers based on a variety of factors, including cost, quality, and cycle time. The following are nonfinancial measures for quality and time for 2016 and 2017 for its only product: The f
> For the past two years, Worldwide Cell Phones (WCP) has been working to improve the quality of its phones. Data for 2016 and 2017 follows (in thousands of phones): Required: 1. For each year, 2016 and 2017, calculate the following: a. Percentage of def
> Refer to the information presented in Exercise 19-25. The head of the registration advisors at SMU has decided that the advisors must finish their advising in 2 weeks (10 working days) and therefore must advise 420 students a day. However, the average wa
> The registration advisors at a small Midwestern university (SMU) help 4,200 students develop their class schedules and register for classes each semester. Each advisor works for 10 hours a day during the registration period. SMU currently has 10 advisors
> It’s a Dog’s World (IDW) makes toys for big breed puppies. IDW’s managers have recently learned that they can calculate the average waiting time for an order from the time an order is received till the time manufacturing starts. They have asked for your
> TidyCar washes vehicles using a nohands approach. Business is good but Jonathan, the manager, has noticed that customers complain because there are streaks on their vehicles at pickup. TidyCar warrants that each vehicle will sparkle at delivery and charg
> SpeedPrint manufactures and sells 18,000 high-technology printing presses each year. The variable and fixed costs of rework and repair are as follows: SpeedPrint’s current presses have a quality problem that causes variations in the sh
> iCover produces bags for carrying laptop computers. iCover sells 1,000,000 units each year at a price of $20 per unit and a contribution margin of 40%. To respond to customer complaints, iCover’s mangers want to modify the production processes to produce
> Safe Travel produces car seats for children from newborn to 2 years old. Safe Travel’s only problem with its car seats was stitching in the straps. The problem can usually be detected and repaired during an internal inspection. Inspection costs $5.00 per
> Adirondack Company makes chairs for outside living spaces. The company has been working on improving quality over the last year and wants to evaluate how well it has done on costs-of-quality (COQ) measures. Here are the results: Required: 1. Identify th
> The Svenson Corporation manufactures cellular modems. It manufactures its own cellular modem circuit boards (CMCB), an important part of the cellular modem. It reports the following cost information about the costs of making CMCBs in 2017 and the expecte
> The Cincinnati power plant that services all manufacturing departments of Eastern Mountain Engineering has a budget for the coming year. This budget has been expressed in the following monthly terms: The expected monthly costs for operating the power pl
> Locate the most recent annual report of Carrefour Group, the French retail company and the second largest retailer in the world, on the company’s website: www.carrefour.com. You will find an electronic copy of the annual report in the “Finance: Publicati
> Locate the most recent annual report of Toshiba Corporation, the large Japanese electronics company, on the company’s website: www.toshiba.co.jp. You will find an electronic copy of the annual report in the “Investor Relations” section of the website. Re
> Friedman’s Inc. is a leading fine jewelry retailer. In November 2004, the company said that it might default on certain of the financial covenants contained in one of the company loan agreements. Here is an excerpt from the company’s press release: In pa
> The IASB and its predecessor organization have as a stated objective to narrow worldwide differences in accounting practices and the presentation of financial information. In February 2006 at a ceremony in Beijing, People’s Republic of China, the Chinese
> The New York Stock Exchange (NYSE) and the National Association of Securities Dealers (NASD) require that listed firms have audit committees of independent (that is, outside) company directors. Audit committees review the firm’s audited financial stateme
> “It’s time for the government to stop enabling accounting fraud. The Internal Revenue Service and the SEC let companies keep two sets of books, one for tax reporting and the other for financial reporting. There should be no difference in the figures corp
> In the early 1990s, the FASB issued new rules that dramatically altered the way in which many companies recorded their obligations for postretirement health care benefits. The Board found that most companies used “cash basis” accounting and waited until
> Provide a two- or three-sentence response that argues for or against (indicate which) each of these statements: 1. Accounting is an exact science. 2. Managers choose accounting procedures that produce the most accurate picture of the company’s operating
> Suppose your company purchased land and a warehouse for $5 million. The price was steep, but you were told that a new interstate highway was going to be built nearby. Two months later, the highway project is canceled and your property is now worth only $
> Farmers State Bank is considering a $500,000 loan to Willard Manufacturing. Three items appearing on Willard’s balance sheet are: a. Cash on hand and in the bank, $20,000. b. Accounts receivable of $60,000, less an allowance for uncollectibles of $15,000
> You have decided to buy a new automobile and have been gathering information about the purchase price. The manufacturer’s website shows a “list price” of $24,500, which includes your preferred options: leather trim and digital audio player. You have also
> A friend of yours sent an e-mail asking about generally accepted accounting principles (GAAP). It seems your friend was browsing through Whirlpool Corporation’s recent annual report and she spotted the following statement: The financial statements have b
> Allocating resources in the most efficient manner maximizes the wealth of any country. It is generally acknowledged that financial information plays an important role in efficient resource allocation. Required: Given that both of the preceding statements
> 1. Define each of the following disclosure costs associated with financial accounting information, and provide an example of each cost: a. Information collection, processing, dissemination costs. b. Competitive disadvantage costs. c. Litigation costs. d.
> 1. Describe how the following market forces influence the supply of financial accounting information: a. Debt and equity financial markets. b. Managerial labor markets. c. The market for corporate control (for example, mergers, takeovers, and divestiture
> 1. Explain why each of the following groups might want financial accounting information. What type of financial information would each group find most useful? a. The company’s existing shareholders. b. Prospective investors. c. Financial analysts who fol
> You have been asked to attend a hastily called meeting of Landfil’s senior executives. The meeting was called to formulate a strategy for responding to questions from shareholders, analysts, and the media about Landfil’s accounting for site development c
> It is often alleged that the value of financial statement information is compromised by the latitude that GAAP gives to management. Companies can use different accounting methods to summarize and report the outcome of otherwise similar transactions. Inve
> The following excerpt is from Fortress International Group’s 2012 10-K report filed with the SEC and is a required disclosure: [W]e earned approximately 46% of our total revenue from two customers for the year ended December 31, 2012, and 43% from three
> As your first week at Henley Manufacturing Inc. draws to a close, you find a memorandum on your desk from the company’s CEO. The memo outlines sales and earnings goals for next year: Sales are expected to increase 15% with net income growing by 20%. The
> Novartis AG is a Swiss company that develops, manufactures, and markets pharmaceuticals and vaccines. As of January 2005, European firms, including Novartis, were required to compile their financial reports in accordance with International Financial Repo
> The vice president of operations of Free Ride Bike Company is evaluating the performance of two divisions organized as investment centers. Invested assets and condensed income statement data for the past year for each division are as follows: Instruction
> A condensed income statement for the Electronics Division of Gihbli Industries Inc. for the year ended December 31 is as follows: Assume that the Electronics Division received no charges from service departments. The president of Gihbli Industries Inc. h
> E.F. Lynch Company is a diversified investment company with three operating divisions organized as investment centers. Condensed data taken from the records of the three divisions for the year ended June 30, 20Y8, are as follows: The management of E.F. L
> Last Resort Industries Inc. is a privately held diversified company with five separate divisions organized as investment centers. A condensed income statement for the Specialty Products Division for the past year, assuming no service department charges,
> The three divisions of Yummy Foods are Snack Goods, Cereal, and Frozen Foods. The divisions are structured as investment centers. The following responsibility reports were prepared for the three divisions for the prior year: 1. Which division is making t
> The Customer Service Department of Door Industries Inc. asked the Publications Department to prepare a brochure for its training program. The Publications Department delivered the brochures and charged the Customer Service Department a rate that was25% h
> The Norsk Division of Gridiron Concepts Inc. has been experiencing revenue and profit growth during the years 20Y6–20Y8. The divisional income statements follow: There are no service department charges, and the division operates as an i
> In teams, visit the website of a company that uses the balanced scorecard to evaluate its performance. Identify the performance measures used by the company on its balanced corecard. For each measure, identify whether the measure best fits the innovation
> Thomas Railroad Company organizes its three divisions, the North (N), South (S), and West (W) regions, as profit centers. The chief executive officer (CEO) evaluates divisional performance using income from operations as a percent of revenues. The follow
> The Eastern District of Adelson Inc. is organized as a cost center. The budget for the Eastern District of Adelson Inc. for the month ended December 31 is as follows (in thousands): Sales salaries ……………………………………………………$ 819,840 System administration sala
> Exoplex Industries Inc. is a diversified aerospace company, including two operating divisions, Semiconductors and Navigational Systems divisions. Condensed divisional income statements, which involve no intracompany transfers and include a breakdown of e
> The ARA Railroad owns a piece of land along one of its right-of-ways. The land originally cost ARA $100,000. ARA is considering building a new maintenance facility on this land. ARA determined that the proposal to build the new facility is acceptable if
> Kitchen Helper Company decides to produce and sell food blenders and is considering three different types of production facilities (“plants”). Plant A is a laborintensive facility, employing relatively little specializ
> Define Q as the level of output produced and sold, and suppose that a firm’s total revenue (TR) and total cost (TC) functions can be represented in tabular form as shown here. a. Compute the marginal revenue and average revenue functi
> A manufacturing plant has a potential production capacity of 1,000 units per month (capacity can be increased by 10 percent if subcontractors are employed). The plant is normally operated at about 80 percent of capacity. Operating the plant above this le
> From your knowledge of the relationships among the various cost functions, complete the following table. Q TTC TFC TVC АТС AFC AVC MC 125 - - - 10 - - - - - 20 10.50 30 110 40 255 - 50 60 3 70 - - 80 295
> From your knowledge of the relationships among the various production functions, complete the following table: VARIABLE TOTAL AVERAGE MARGINAL INPUT PRODUCT PRODUCT PRODUCT ТР. (- Q) APL MPL L. 1 8 28 18 | 4 26 | 5 20 6. 108 -10
> US Airways owns a piece of land near the Pittsburgh International Airport. The land originally cost US Airways $375,000. The airline is considering building a new training center on this land. US Airways determined that the proposal to build the new faci
> Despite a decade of subsidies and considerable success in Denmark, Germany, and Britain, renewable energy in the U.S. accounts for only 7 to 8 percent of total energy consumption. Hydroelectric power remains the most successful source of renewable energy
> Ethanol is again viewed as one part of a solution to the problem of shortages of petroleum products. Ethanol is made from a blend of gasoline and alcohol derived from corn or sugarcane. What would you expect the impact of this program to bem on the price
> If the decision to develop and license or wait and imitate in Table 16.6 is a simultaneous-play repeated game between Lucent and Motorola for each new generation of technology, what happens if the Motorola payoff in the southwest cell is positive $2 bill
> An industry produces its product, Scruffs, at a constant marginal cost of $50. The market demand for Scruffs is equal to: Q = 75,000 - 600P a. What is the value to a monopolist who is able to develop a patented process for producing Scruffs at a cost
> Explain how the optimal incentives contract would differ if the less risk-averse bank officer (Dashing in Figure 15.4) had generated the smaller expected profit (i.e., the lower hill-shaped curve). Data from figure 15.4: FIGURE 15.4 Sorting Manager
> In benchmarking sales representatives against one another, what problems arise from continuing to reassign the above-average trade representatives to previously unproductive sales territories?
> General Cereals is using a regression model to estimate the demand for Tweetie Sweeties, a whistle-shaped, sugar-coated breakfast cereal for children. The following (multiplicative exponential) demand function is being used:
> Television channel operating profits vary from as high as 45 to 55 percent at MTV and Nickelodeon down to 12 to 18 percent at NBC and ABC. Provide a Porter Five Forces analysis of each type of network. Why is MTV so profitable relative to the major netwo
> What organizational form would warehouse operators and truck hauling companies adopt?
> How might the lender in Figure 15.2 use knowledge of the type of asset booked by the borrower on its balance sheet to offset the liability for the loan extension? Commercial loan covenants often include a restriction on precisely this balance-sheet decis
> Savings-Mart (a chain of discount department stores) sells patio and lawn furniture. Sales are seasonal, with higher sales during the spring and summer quarters and lower sales during the fall and winter quarters. The company developed the following quar
> If contract promises were not excused because of acts of war, would the clearing and settlements clients of Bank of New York change their behavior? If so, how? What reliance behavior would be considered efficient? What reliance behavior would be consider
> Analyze the pure Nash equilibrium and mixed Nash equilibrium strategies in the following manufacturer–distributor coordination game. How would you recommend restructuring the game to secure higher expected profit for the manufacturer?
> In the Division of a Decaying Business game, what should you offer if the assets at the start of the game are $4 million rather than $3 million? Now is there a first mover or second-mover advantage? Why?
> Suppose an enhanced effectiveness of cooperative advertising occurs if the distributor shares its superior on-the-spot information about current trends in the marketplace with the manufacturer. Explain how each of the following would affect the informati
> The Pear Computer Company just developed a totally revolutionary new personal computer. It estimates that it will take competitors at least two years to produce equivalent products. The demand function for the computer is estimated to be: P = 2,500 &aci
> If notorious firm behavior (i.e., defrauding a buyer of high-priced experience goods by delivering low quality) becomes known throughout the marketplace only with a lag of three periods, profits on high-quality transactions remain the same, and interest
> General Medical makes disposable syringes for hospitals and doctor supply companies. The company uses cost-plus pricing and currently charges 150 percent of average variable costs. General Medical learned of an opportunity to sell 300,000 syringes to the
> In the face of stable (or declining) enrollments and increasing costs, many colleges and universities, both public and private, find themselves in progressively tighter financial dilemmas that require basic reexamination of the pricing schemes used by in
> Phillips Industries manufactures a certain product that can be sold directly to retail outlets or to the Superior Company for further processing and eventual sale as a completely different product. The demand function for each of these markets is: Retai
> Cascade Pharmaceuticals Company developed the following regression model, using time-series data from the past 33 quarters, for one of its nonprescription cold remedies: where Y = quarterly sales (in thousands of cases) of the cold remedy X1 = Cascade
> Sort the following products into those priced with two-part tariffs, user charges only, or lump-sum access fees only: pay-per-view movies on cable TV, pay phones, Netflix, iTunes, country club membership, soda from vending machines, laundromats, cell pho
> Explain the concept of maximum sustainable yield for a fishery. Is maximum sustainable yield the most efficient rate of harvest for a renewable natural resource? Is it required to preserve biological diversity?
> Consider again the total revenue and total cost functions shown in tabular form in the previous problem. a. Compute the total, marginal, and average profit functions. b. On a single graph, plot the total profit and marginal profit functions. c. Determine
> Bell Greenhouses has estimated its monthly demand for potting soil to be the following: N = 400 + 4X where N = monthly demand for bags of potting soil X = time periods in months (March 2006 = 0) A
> A U.S. export-import shipping company operates a general cargo carrier service between New York and several western European ports. It hauls two major categories of freight: manufactured items and semimanufactured raw materials. The demand functions for
> The price elasticity of demand for air travel differs radically from first-class (- 1.3) to unrestricted coach (- 1.4) to restricted discount coach (- 1.9). What do these elasticities mean for optimal prices (fares) on a cross-country trip with increment
> The county assessor (see Exercise 4) feels that the use of more independent variables in the regression equation might improve the overall explanatory power of the model. In addition to size, the assessor feels that the total number of rooms, age, and wh
> People who are regularly late often don’t bother to carry watches. In response, other people tend to adjust to their tardiness by starting meetings 10 minutes after they’re scheduled, coming to lunch appointments 10 mi
> Consider an ongoing sequence of pair wise marketing competitions between three companies with promotional campaigns of varying degrees of success. Each campaign involves comparative advertising belittling the target company. The company with the most loy
> How do the analysis and the strategic equilibrium outcome differ in Exercise 4 if the other firm enjoys a cost advantage (e.g., $35 at AA&D)? Then does the order of play (i.e., who goes first in making price cuts) matter in this bidding game with asymmet
> Two insurance companies that manage employee benefit programs are bidding for additional business in their area of expertise at a market rate of $200 per hour. The potential customers refuse to leave their current suppliers and award benefit management c
> Suppose that two mining companies, Australian Minerals Company (AMC) and South African Mines, Inc. (SAMI), control the only sources of a rare mineral used in making certain electronic components. The companies have agreed to form a cartel to set the (pro
> Consider the following payoff matrix: a. Does Player A have a dominant strategy? Explain why or why not. b. Does Player B have a dominant strategy? Explain why or why not. Player B Strategy 1 2 $1,000 -$2,000 1 $2,000 -$1,000 Player A Strategy -$1,
> A math graduate student explains to her friend how to approach a group of smart attractive guys who have brought along famous actor Russell Crowe. What should her friend do? Ignore Russell Crowe or fixate on Russell Crowe? Explain the equilibrium reasoni
> Show that the optimal solution to the set of simultaneous equations in the Indiana Petroleum example are Q*1 = 5.77 and Q*2 = 4.08.
> With interest rates at historic lows in the United States, what is the effect on the optimal rate of extraction for a Texas oilfield owner? Explain the intuition that supports your answer.
> In a study of housing demand, the county assessor is interested in developing a regression model to estimate the market value (i.e., selling price) of residential property within his jurisdiction. The assessor feels that the most important variable affec
> Which of the following products and services are likely to encounter adverse selection problems: golf shirts at traveling pro tournaments, certified gemstones from Tiffany’s, graduation gift travel packages, or mail-order auto parts? Why or why not?
> The Questor Corporation has experienced the following sales pattern over a 10-year period: YEAR SALES ($000) 2004……………….………………………………… 121 2005 ………………………………………………….130 2006 ………………………………………………….145 2007 ………………………………………
> The outcomes in the bottom half of the game tree describing the last (the 20th) submarket of the chain store paradox in Figure 13.2 are labeled NA (not applicable). Why? What specific equilibrium concept in sequential games rules out the applicability of
> Suppose that two Japanese companies, Hitachi and Toshiba, are the sole producers (i.e., duopolists) of a microprocessor chip used in a number of different brands of personal computers. Assume that total demand for the chips is fixed and that each firm ch
> Chillman Motors, Inc., believes it faces the following segmented demand function: P = 150 – 0.5Q when 0 Q 50 P = 200 – 1.5Q for Q > 50 a. Indicate both verbally and graphically why such a segmented demand function is likely to exist? What type of ind
> Alchem (L) is the price leader in the polyglue market. All 10 other manufacturers (follower [F] firms) sell polyglue at the same price as Alchem. Alchem allows the other firms to sell as much as they wish at the established price and supplies the remaind
