Question 2

Suppose there is enough room for a maximum of three (3) cars to park around a fire hydrant. The harm resulting to society rises as additional cars park around the fire hydrant. This is because as more cars park, it becomes more costly for firefighters to navigate their water hoses around the stationary vehicles. The total (not marginal) cost to society as a function of the number of parked cars around a fire hydrant is as follows:

a. If each driver’s gain from parking a car around the fire hydrant is constant at $20, how many cars should park around the fire hydrant from an economic perspective? (Hint: you need to find the marginal cost to society to answer this part.)

b. What is the maximum level of total surplus resulting from parking around the fire hydrant? How many cars should park around the fire hydrant from an economic perspective?

QUESTION TWO

1. Discuss the capital allowances available to hotel owners and the capital expenditures that qualify for such allowances.                                                                                                            
2. Wageni tourist hotel ltd. Is a five star hotel in Mombasa. The hotel provided the following information,

1. Written down values as at 31.12.2018

Disposals during the year.

2. Additions during the year

1. Computer            350,000.00
2. Fax Machine        40,000.00
3. Photocopier         160,000.00
4. Beds                    500,000.00
5. New hotel building                      5,000,000.00

      The new hotel building was brought to use on 1.9.2019

3. The old hotel building was first brought in to use on 1.1.2014 at a cost of Sh. 8,000,000.00
4. A saloon car which cost sh. 1,200,000 in 2014 was traded in for a new car costing Sh. 900,000.00. The old car was valued at Shs. 600,000 and the company paid a balance of shs. 300,000.00

Required

1. Compute capital allowances due to the company for the year ended 31.12.2019.            
2. Show the written down value of all the assets as at 31.12.2019. Comment on Class I balance.

Kodak Fails to Focus on the Big Picture

The closing case focuses on Kodak and their failure to innovate through the transition from analog to digital technology. It appears Kodak had the resources to innovate and they recognized the coming transition but incorrectly evaluated the needs and desires of the consumer. In addition, members of the company feared change and resisted change efforts. For these reasons, Kodak went from a top 20 Fortune 500 company to bankruptcy in 2012.

Management Update: There are signs Kodak may survive. During bankruptcy, Kodak put Eastman Park up for sale. Eastman Park is a giant industrial complex built in the early 1900s to meet demand for the company’s photographic and film products. In 2015, the company took the park off the market and turned it into a separate company division. With a focus on clean technology, over 60 companies have key operations on the site.

Case Question: Explain how – theoretically, anyway – making “change innovations” in each of the following Areas of Organizational Change might have helped Kodak ease the severity of the conditions that led it to bankruptcy and the challenges facing it now that it’s emerged from bankruptcy:  changing organization structure and design, changing people and attitudes, and changing processes.

Hanson Inn is a 96-room hotel located near the airport and convention center in Louisville, Kentucky. When a convention or a special event is in town, Hanson increases its normal room rates and takes reservations based on a revenue management system. The Classic Corvette Owners Association scheduled its annual convention in Louisville for the first weekend in June. Hanson Inn agreed to make at least 50% of its rooms available for convention attendees at a special convention rate in order to be listed as a recommended hotel for the convention. Although the majority of attendees at the annual meeting typically request a Friday and Saturday two-night package, some attendees may select a Friday night only or a Saturday night only reservation. Customers not attending the convention may also request a Friday and Saturday two-night package, or make a Friday night only or Saturday night only reservation. Thus, six types of reservations are possible: convention customers/two-night package; convention customers/Friday night only; convention customers/Saturday night only; regular customers/two-night package; regular customers/Friday night only; and regular customers/Saturday night only.

The cost for each type of reservation is shown here:

The anticipated demand for each type of reservation is as follows:

Hanson Inn would like to determine how many rooms to make available for each type of reservation in order to maximize total revenue.

1. Define the decision variables and state the objective function. Round your answers to the nearest whole number.
   

   Let	CT = number of convention two-night rooms
   	CF = number of convention Friday only rooms
   	CS = number of convention Saturday only rooms
   	RT = number of regular two-night rooms
   	RF = number of regular Friday only rooms
   	RS = number of regular Saturday only room

   CT

   +

   CF

   +

   CS

   +

   RT

   +

   RF

   +

   RS

2. Formulate a linear programming model for this revenue management application. Round your answers to the nearest whole number. If the constant is "1" it must be entered in the box.
   

   CT

   +

   CF

   +

   CS

   +

   RT

   +

   RF

   +

   RS

   S.T.

   1)	CT
   2)	CF
   3)	CS
   4)	RT
   5)	RF
   6)	RS
   7)	CT	+	CF
   8)	CT	+	CS
   9)	CT	+	CF	+	RT	+	RF
   10)	CT	+	CS	+	RT	+	RS
   11)	CT,	CF,	CS,	RT,	RF,	RS			0

3. What are the optimal allocation and the anticipated total revenue? Round your answers to the nearest whole number.
   

   Variable	Value
   CT
   CF
   CS
   RT
   RF
   RS

   
   Total Revenue = $  
   
4. Suppose that one week before the convention the number of regular customers/Saturday night only rooms that were made available sell out. If another nonconvention customer calls and requests a Saturday night only room, what is the value of accepting this additional reservation? Round your answer to the nearest dollar.
   
   The dual value for constraint 10 shows an added profit of $   if this additional reservation is accepted.

Hanson Inn is a 96-room hotel located near the airport and convention center in Louisville, Kentucky. When a convention or a special event is in town, Hanson increases its normal room rates and takes reservations based on a revenue management system. The Classic Corvette Owners Association scheduled its annual convention in Louisville for the first weekend in June. Hanson Inn agreed to make at least 50% of its rooms available for convention attendees at a special convention rate in order to be listed as a recommended hotel for the convention. Although the majority of attendees at the annual meeting typically request a Friday and Saturday two-night package, some attendees may select a Friday night only or a Saturday night only reservation. Customers not attending the convention may also request a Friday and Saturday two-night package, or make a Friday night only or Saturday night only reservation. Thus, six types of reservations are possible: convention customers/two-night package; convention customers/Friday night only; convention customers/Saturday night only; regular customers/two-night package; regular customers/Friday night only; and regular customers/Saturday night only.

The cost for each type of reservation is shown here:

The anticipated demand for each type of reservation is as follows:

Hanson Inn would like to determine how many rooms to make available for each type of reservation in order to maximize total revenue.

1. Define the decision variables and state the objective function. Round your answers to the nearest whole number.
   

   Let	CT = number of convention two-night rooms
   	CF = number of convention Friday only rooms
   	CS = number of convention Saturday only rooms
   	RT = number of regular two-night rooms
   	RF = number of regular Friday only rooms
   	RS = number of regular Saturday only room

   Max

   CT

   +

   CF

   +

   CS

   +

   RT

   +

   RF

   +

   RS

2. Formulate a linear programming model for this revenue management application. Round your answers to the nearest whole number. If the constant is "1" it must be entered in the box.
   

   Max

   CT

   +

   CF

   +

   CS

   +

   RT

   +

   RF

   +

   RS

   S.T.

   1)	CT	<
   2)	CF	<
   3)	CS	<
   4)	RT	<
   5)	RF	<
   6)	RS	<
   7)	CT	+	CF	≥
   8)	CT	+	CS	≥
   9)	CT	+	CF	+	RT	+	RF	≤
   10)	CT	+	CS	+	RT	+	RS	≤
   11)	CT,	CF,	CS,	RT,	RF,	RS		≥	0

3. What are the optimal allocation and the anticipated total revenue? Round your answers to the nearest whole number.
   

   Variable	Value
   CT
   CF
   CS
   RT
   RF
   RS

   
   Total Revenue = $  
   
4. Suppose that one week before the convention the number of regular customers/Saturday night only rooms that were made available sell out. If another nonconvention customer calls and requests a Saturday night only room, what is the value of accepting this additional reservation? Round your answer to the nearest dollar.
   
   The dual value for constraint 10 shows an added profit of $   if this additional reservation is accepted.

Fatima Hopkins, the CEO of Central Adventures, is having difficulties with all three of her top management level employees. With one manager making questionable decisions, another threatening to leave, and the third likely ‘in the red’, Fatima is hoping there is a simple answer to all her difficulties, and needs some advice from her accountant on how to proceed.

Central Adventures owns and operates three amusement parks in Michigan: Central Funland, Central Waterworld, and Central Treetops. Central Adventures has a decentralized organizational structure, where each park is run as an investment center. Each park manager meets with the CEO at least once annually to review their performance, as measured by their park’s ROI. The park manager then receives a bonus equal to 10% of their base salary for every ROI percentage point above the required rate.

Central Funland is an outdoor theme park, with twelve roller coaster rides and several other attractions. This park has first opened 1965, and most of the rides have been in operation for 20+ years. Attendance at this park has been relatively stable over the past ten years. The park manager of Funland, Janet Lieberman, recently shared with Fatima a proposal to replace one of their older rides with a new roller coaster, a hybrid steel and wood rollercoaster with a 90 degree, 200 foot drop and three inversions. The proposal indicated that the ride would cost $8,000,000 with an estimated life of 20 years. In addition, this new style of coaster would require additional maintenance, costing $125,000 each year. However, it projected that this new attraction would boost attendance, earning the park an additional $1,190,000 per year in revenues. Janet ultimately decided not to invest in this new attraction.

Central Waterworld is an indoor water park, operating year-round. Run by park manager David Copperfield, Waterworld was built in 2016 and has increased attendance by 20% every year since. David recently sent you an email complaining that, based on the current bonus payout schedule, Janet Lieberman’s bonus last year was significantly higher than his. He points to the increasing attendance, and says that his park is being punished for having opened so recently (his park assets are much more recent than the roller coasters at Funland). He currently has an employment offer from another company at the same pay rate, which he says he will accept if his performance is not appropriately acknowledged.

Central Treetops includes a high ropes course and has a series of ziplines that criss-cross over the Chippewa River. For many years, it was a popular venue for corporate team-building activities, so it is equipped with a main indoor facility with cafeteria and overnight guest rooms. This park has lost popularity in recent years, and has been ‘in the red’ for the past two years. If the park is not profitable this year, you will need to decide whether to close it - permanently. Central Adventures has a $86,000 mortgage payment on the land and buildings for Treetops, which would still need to be paid if the park is closed. Incidentally, you recently had a conversation with the regional head of the YMCA, who would like to open a summer camp in the central Michigan region. If you decided to close Treetops, you are fairly certain that you could lease that land to the YMCA for $250,000 annually.

A partial report of this year’s financial results for Central Adventures shows the following:

In addition to the information above, there are $2,542,920 in corporate costs, which are currently allocated evenly between the three parks. These costs are primarily due to employee benefits costs, which are billed at the corporate level. If the Treetops park is closed, the allocated corporate costs would decrease by $12,000. Central Adventures has a required rate of return of 12 percent (set at the company’s weighted-average cost of capital) and are subject to 18% income taxes.

Fatima needs to see this year’s performance results before she can make any decisions. Is David’s complaint about the performance evaluation metrics valid? Is that also affecting management decisions in the form of Janet’s rejection of the proposed new rollercoaster? And is the company better off without Treetops? She sets off to the company accountant’s office to help get some answers.

The COVID-19 pandemic has caused many retailers to shut down their business, layoff their employees, and drain their bank accounts.

While some federal funding will help these businesses stay afloat, many will have to adjust to new ways of operation once the quarantines are lifted.

Several ways can be used to reframe a retailer’s business model. Form reconfiguration; Time reconfiguring; Place reconfiguring; Possession reconfiguring. Using at least three of these methods of reframing, describe how a retailer of your choice will adjust its business model to be successful in reopening.

Choose a specific retailer from one of these categories:
Theme Park; Salon; Hotel; Beauty Supply Store; Sports Bar

Emma has noticed a small red fox living in the park near her apartment. She takes a walk at the same time every day and has observed the fox in three different areas: in the woods, in the meadow, and by the pond.

If it is in the woods on one observation, then it is twice as likely to be in the woods as in the meadow on the next observation but not by the pond.

If it is in the meadow on one observation, then it is equally likely to be in any of the three locations on the next observation.

If it is by the pond on one observation, there is a 0.5 probability it will be by the pond on the next observation and will otherwise be in the woods.

When Emma went for a walk today, the red fox was in the woods.

a. Define the states and construct the transition matrix for this Markov chain.

b. Find the initial distribution vector for this Markov Chain.

c. Determine the probability that the red fox is in each of the three areas tomorrow.

If this trend continues, what is the probability the red fox will be in the meadow in the long run?

Show all work to support your answer. Correct answers without supporting work will not receive credit.

The city of Imaginopolis, which is located near White River, has an elaborate system of levees to protect the city from flooding during high-water events. The levees were built over 50 years ago and many of them are showing signs of structural distress. Using a systems perspective, how would you draw up a program to rehabilitate the levee system under budgetary constraints over a 5-year period?