Midterm SAQ Answer Key

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Management (MGT)
Chris Bovaird

Question 1 – Tom Morton’s 5 marks Joseph Kelly is the General Manager of Tom Morton’s, a chain of coffee and donut shops. One day, Joseph was visiting the Tom Morton’s shop at the University of Scarberia. He noticed that there were 21 people standing in line, impatiently, waiting to place their orders and get served. To his dismay, Joseph heard one unhappy customer, near the very back of the line, say to his friend “Oh! This is taking forever! I haven’t got all day! Let’s go over to the “The Happy Mug” in the Student Centre.” Joseph was frustrated as he watched two customers walk out of the store, and head in the direction of his competitor’s store. Joseph Kelly is a friend of yours and he knows that you have studied Operations, Management, Information Systems, and Productivity. So, Joseph asks for your advice. You begin by asking Joseph a question. “Tell me exactly what happens when a customer places an order.” Joseph tells you that every time a customer places an order, and the Tom Morton’s employee punches the sale onto the screen of her terminal, a small piece of paper is printed, giving the information as to what was ordered (for example “2 large coffees, 1 large tea, 1 blueberry muffin”). In addition, the paper print-out gives the exact time the order was placed (for example “9.48 a.m.”). What would you advise Joseph to do with this transaction data to help him to make decisions which could reduce waiting time, increase sales, and lead to higher customer satisfaction? Answer to Tom Morton’s 5 marks This question combines eleements of chapter 4 (MIS) and Chapter 1 (operations management) The key concepts we are looking for are: Joseph has raw data that, with organisation and analysis, could be turned into management information. The information could be used to make better decisions about the store’s operations. Key words to look for: data, management information, decisions, operations planning, scheduling, quantity planning, customer satisfaction Possible Model Answer You should tell Joseph that the paper print out contains important data about: what gets ordered, how much gets ordered, and when. Joseph could accumulate ALL of the raw data and turn it into management information by organising it, and analysing it to look for patterns, cycles or trends. For example, Joseph could look to discover: Most popular products Products that don’t sell Busiest times of the day Slowest times of the day Products that sell most at a particular time of the day With this information, Joseph could make better decisions about product planning, quantity planning and staffing. For example, he could hire extra counter-staff for an hour or two during the busiest times of the day. He could make extra inventory of the most popular items during the morning and lunchtime rush hours. With these sort of improved operations management decisions, Joseph could expect that the line-ups at the Tom Morton’s would be shorter. The store’s customers would be less frustrated, and happier. More important, Tom Morton’s would probably turn away fewer customers. Thus, revenues would increase. Finally Tom could review the paper print outs a week or two after starting his new plan to be sure that revenues had increased more than enough to pay the extra salary expense. Question 2 - Frankie’s Forgettables A young entrepreneur and recent graduate of UTSC named Frank N. Stein has just finished writing a business plan for Frankie’s Forgettables; a small retail shop in downtown Toronto that will sell only products that commuters often forget while travelling to and from work. These include items such as sunglasses, umbrellas, hats, gloves, breath mints, lip stick and newspapers. In starting up the business, Frank engaged in the following transactions on Jan 1, 2012:  Put $5,000 of his own money into a chequing account for the business.  Put $10,000 of his parent’s money into the same account for the business. In return, he gave his parents a share certificate showing that they owned half of the business (Frank kept 500 shares for himself, and his parents now had 500 shares as well).  Took out a short term loan with his bank of $20,000 to make sure he had sufficient working capital during startup. He deposited this in the bank. nd Having acquired this capital, on January 2 Frankie spent $2,000 of his cash on furniture and equipment at Staples. Later that same day, Frankie purchased $10,000 worth of inventory from a distributor; the distributor is allowing Frank to take 60 days to pay for the inventory. Part a) Based on the information above, create a balance sheet for 5 marks Frankie’s Forgettables for January 2, 2012 Answer Award up to 5 marks – Award ½ mark each for getting the key accounts coorectly identified and calculated. Award up to 1 mark for overall presentation and layout. Frankie’s Forgettables Balance Sheet As of Jan 1, 2012  - 1 mark Assets Liabilities Current Assets Current Liabilitites Cash 33,000  Accts Payable 10,000  Inventory 10,000  Loan Payable 20,000  43,000 30,000 Fixed Assets Long Term Liabilities --------- Equipment 2,000  Owner’s Equity Share Capital 15,000  Total $45,000 Total $45,000 Question 2 - Frankie’s Forgettables - It is one year later now (early 2013), and Frank is looking over the performance of Frankie’s Forgettables for the fiscal year ended 31 December, 2012. He sees the following totals for the year in various accounts: During the year, Frankie’s brought in $98,000 in sales Frankie paid rent for his small store - $2,000 per month Marketing (printing business cards, posters and brochures) - $3,000 Frankie hired some part-time sales help, and paid out a total of $12,000 as salaries expense. Frankie’s paid interest of $2,000 on the bank loan. Depreciation expense on the equipment - $500 Frankie’s paid a total of $1,500 for utilities (electricity and he
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