ADMS 4570 Lecture 2: Week 3- Case Analyis
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| QuestionManufacturing Company, a small manufacturing company in Toronto,manufactures 3 | |||||
| typesof pumps used in a variety of applications. For many years thecompany has been | |||||
| profitable and has operated at capacity. However, in the last twoyears prices on all pumps were | |||||
| reduced and selling expenses increased to meet competition and keepthe plant operating at | |||||
| capacity. Second-quarter results for the current year, whichfollow, typify recent experience. | |||||
| ABCMANUFACTURING COMPANY | |||||
| IncomeStatement | |||||
| 2nd quarter | |||||
| (inthousands) | |||||
| R-Pump | F-Pump | S-Pump | Total | ||
| Sales | $4,800 | $2,700 | $2,700 | $10,200 | |
| COGS | 3,144 | 2,310 | 2,850 | 8,304 | |
| Gross Margin | $1,656 | $390 | $(150) | $1,896 | |
| Selling, Admin& other expenses | 1,110 | 555 | 405 | 2,070 | |
| Income before thetaxes | $546 | $(165) | $(555) | $(174) | |
| Robo,the company's president, is concerned about the results. Afterreviewing the second- | |||||
| quarter results she asked her management staff to consider thefollowing 3 suggestions: | |||||
| 1) Discontinue the S-Pump line immediately.S-Pump would not be returned to the product line | |||||
| unlessthe problems with the pump can be identified and resolved. | |||||
| 2) Increase quarterly sales promotion by $300,000on the R-Pump product line in order to | |||||
| increase salesvolume by 15%. | |||||
| 3) Cut production on the F-Pump line by 50%, andcut the traceable advertising and promotion | |||||
| forthis line to $60,000 each quarter. | |||||
| Nobo,the controller, suggested a more careful study of the financialrelationships to determine | |||||
| thepossible effects on the company's operating results of thepresident's proposed course of | |||||
| action. The president agreed and assigned Sobo, the assistantcontroller, to prepare an analysis. | |||||
| Sobohas gathered the following information: | |||||
| - The unit sales prices for the 3 pumps are asfollows: | |||||
| R-Pump $600 | |||||
| F-Pump $270 | |||||
| S-Pump $540 | |||||
| - The company is manufacturing at capacity and isselling all the pumps it produces. | |||||
| - All 3 pumps are manufactured with commonequipment and facilities. | |||||
| -Theselling, admin and other expense is allocated to the 3 pump linesbased on average sales | |||||
| volume over thepast 3 years. | |||||
| -Special (avoidable) selling expenses (primarily advertising,promotion, and shipping) are | |||||
| incurred for eachpump as follows: | |||||
| Quarterly Advertising & Promotion ShippingExpenses | |||||
| R-Pump | $630,000 | $30 per unit | |||
| F-Pump | $300,000 | 12 per unit | |||
| S-Pump | $120,000 | 30 per unit | |||
| - Theunit manufacturing costs for the 3 pumps are | as follows: | ||||
| R-Pump | F-Pump | S-Pump | |||
| DM | $93 | $51 | $150 | ||
| DL | 120 | 60 | 180 | ||
| VariableManufacturing OH | 135 | 90 | 180 | ||
| FixedManufacturing OH | 45 | 30 | 60 | ||
| Total | $393 | $231 | $570 | ||
| Required: | |||||
| (i)Sobo says that ABC Manufacturing Company's product-line incomestatement for | |||||
| the2nd quarter is not suitable for analyzing proposals and makingdecisions such as | |||||
| the ones suggestedby Robo. | |||||
| a) Explain why the product-line income statementas presented is not suitable for analysis | |||||
| and decisionmaking. | |||||
| b) Describe and prepare an alternativeincome-statement format that would be more | |||||
| suitable for analysis and decision making, and explain why it isbetter. (7 marks) | |||||
| (ii)Use the operating data presented by Question Manufacturing Companyand assume that the | |||||
| president's proposed course of action had been implemented at thebeginning of the second | |||||
| quarter. Then evaluate the president's proposal by specificallyresponding to the following | |||||
| points: | |||||
| a) Are each of the 3 suggestions cost-effective?Support your discussion with an | |||||
| theanalysis that shows that net impact on income before taxes for eachof the 3 | |||||
| suggestions. | |||||
| b) Was the president correct in proposing thatthe S-Pump line is eliminated? Explain | |||||
| your answer. | |||||
| c) Was the president correct in promoting theR-Pump line rather than the F-Pump line? | |||||
| Explain your answer. | |||||
| d) Does the proposed course of action makeeffective use of the company's capacity? | |||||
| Explain your answer. | |||||
Need help with question 2a,b,c,d
1. Terms of Payment found in international business contracts include:
a. CFR (cost and freight, foreign port)
b. Consignment
c. Documentary Drafts
d. all of the above
e. (b) and (c) above
2. Joint Ventures have the
a. advantage of utilizing the expertise of a local partner.
b. disadvantage of not being able to make all the decisions because control is shared.
c. advantage of being able to share the profits.
d. all of the above
e. (a) and (b) above
4. Businesses are using global or regional brands for the following reason(s):
a. private brands do not offer any meaningful competition.
b. economies of scale usually result in reduced costs.
c. satellite and cable TV are widely available.
d. all of the above
e. (b) and (c) above
6. E-Commerce Potential is
a) is higher for Jamaica than for Argentina.
b) is an index based on mobile phones, internet hosts, and number of PCs.
c) is a composite ranking of three indices.
d) (a) and (b) above
e) (a) and (c) above
7. Generally, industrial products require __________ adaptation than consumer products to meet the demands of the world market.
a) greater
b) less
c) the same amount of
d) only slightly less
e) only slightly more
13. Although global sourcing can be beneficial it may have some disadvantages such as
a. added costs
b. exchange rate fluctuations affecting prices
c. quality control
d. all of the above
e. (b) and (c) above
14. In staffing
a. an ethnocentric policy is always the most effective if qualified personnel are available.
b. a polycentric policy is always the least effective even when qualified personnel are available.
c. using third country personnel would be considered most frequently with regiocentric or geocentric policies.
d. all of the above
e. (a) and (c) above
16. In the most recent 40 years, union membership around the world has been in decline, in part because:
a) There are more women in the workforce.
b) The unions have been successful and priced themselves out of the market.
c) Employers have made efforts to keep business union-free.
d) (a) and (c) above only
e) All of the above.
17. When a firm has less than a majority interest in a subsidiary it can still have control by having
a) a management contract
b) the right to control the technology
c) the right to vote its shares
d) all of the above
e) (a) and (b) above only
18. The Female Wage Gap
a. is the percent of Male Wages earned by Female Employees.
b. younger females have less of a gap in all countries.
c. is the smallest for older females in Korea.
d. all of the above
e. (a) and (c) above
19. Income earned abroad by U.S. citizens:
a) incurs a tax liability in the US with some adjustments.
b) incurs tax liability only on the portions earned in the U.S.
c) incurs no tax liability.
d) incurs a tax liability in the US on all income earned with no adjustments for
taxes paid in other countries.
e) none of the above
20. The international structural stages model suggests that a typical evolutional path for an international company's structure would be:
a) from international division to geographical area division to worldwide product division.
b) from international division to worldwide product division to geographical area division.
c) from geographical area division to worldwide product division to global matrix.
d) from functional division to horizontal company to virtual corporation.
e) from international division to worldwide product division to global matrix.
21. Competitive advantage is acquired by developing competencies that
a. are common to all competitors so the firm can compete.
b. create value for customers even if the price is higher than customers want to pay.
c. are difficult to imitate.
d. all of the above
e. (a) and (c) above only
22. In their measurement and disclosure for accounting systems, less developed countries tend toward:
23. Export Marketing plans should be specific about: A. The markets to be developed B. The marketing strategy for servicing them. C. the tactics required to make the strategy operational
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24. Factors that are involved in the operation of a manufacturing system include:
A. Plant location
B. Plant layout
C. Material handling
D. Human asset
E. all of the above
| 26. A middle ground between an ad campaign that is standardized worldwide and an entirely local ad campaign is called a:
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27. In selecting a foreign market, a screening process is used by a firm. In regard to this process, answer the following:
a) The importance of the priority order of the steps in the screening process.
b) The reasons for participating in either a trade show or in a trade mission.(Select one)
c) The reasons for using cluster analysis in assessing global markets.
d) The importance of regional or ethnic subcultures in evaluating competitive forces.
28. Select any four of the following, explain each of them, and discuss the role each of them plays in international business activities:
a) Summarize any one of the videos from week six or eight (either one of them not both) and discuss the role the information in this video plays in international business activities.
b) Foreign (Free) Trade Zones
c) Countertrade
d) Explain why a manager with a global assignment needs a mentor in the host country and a mentor in the home country.
e) Quality and quantity of the labor force in a country
f) Labor Mobility and Guest Workers