The Somerset Furniture Company was founded in 1957 in Randolph County, Virginia. It traditionally has manufactured large, medium-priced, ornate residential wood furniture such as bedroom cabinets and chests of draws, and dining and living room cabinets, tables, and chairs, at its primary manufacturing facility in Randolph County. It employed a marketing strategy of rapidly introducing new product lines every few years. Over time it developed a reputation for high-quality, affordable furniture for a growing U.S. market of homeowners during the last half of the twentieth century. The company was generally considered to be an innovator in furniture manufacturing processes and in applying QM principles to furniture manufacturing. However, in the mid-1990s, faced with increasing foreign competition, high labor rates, and diminishing profits, the Somerset Company contracted to outsource several of its furniture product lines to manufacturers in China, simultaneously reducing the size of its own domestic manufacturing facility and labor force. This initially proved to be very successful in reducing costs and increasing profits, and by 2000 Somerset had decided to close its entire manufacturing facility in the United States and outsource all of its manufacturing to suppliers in China. The company set up a global supply chain in which it arranges for shipments of wood from the United States and South America to manufacturing plants in China where the furniture products are produced by hand by Chinese laborers. The Chinese manufacturers are very good at copying the Somerset ornate furniture designs by hand without expensive machinery. The average labor rate for furniture manufacturing in the United States is between $9 and $20 per hour, whereas the average labor rate for furniture manufacturers in China is $2 per day. Finished furniture products are shipped by container ship from Hong Kong or Shanghai to Norfolk, Virginia, where the containers are then transported by truck to Somerset warehouses in Randolph County. Somerset supplies retail furniture stores from this location. All hardware is installed on the furniture at the retail stores in order to reduce the possibility of damage during transport.

The order processing and fulfillment system for Somerset includes a great deal of variability, as do all aspects of the company's global supply chain. The company processes orders weekly and biweekly. In the United States it takes between 12 and 25 days for the company to develop a purchase order and release it to its Chinese suppliers. This process includes developing a demand forecast, which may take from one to two weeks; converting the forecast to an order fulfillment schedule; and then developing a purchase order. Once the purchase order is processed overseas by the Chinese manufacturer, which may take 10 to 20 days depending on the number of changes made, the manufacturing process requires approximately 60 days. The foreign logistics process requires finished furniture items to be transported from the manufacturing plants to the Chinese ports, which can take up to several weeks depending on trucking availability and schedules. An additional 5 to 10 days are required to arrange for shipping containers and prepare the paperwork for shipping. However, shipments can then wait from one day to a week for enough available containers. There are often too few containers at the ports because large U.S. importers, like “Big W” discount stores in the United States, reserve all the available containers for their continual stream of overseas shipments. Once enough containers are secured, it requires three to six days to optimally load the containers. The furniture pieces often have odd dimensions that result in partially filled containers. Since 9/11, random security checks of containers can delay shipment another one to three weeks, and smaller companies like Somerset are more likely to be extensively checked than larger shippers like Big W, whom the port authorities don't want upset with delays. The trip overseas to Norfolk requires 28 days. Once in port, one to two weeks are required for a shipment to clear customs and to be loaded onto trucks for transport to Somerset's warehouse in Randolph County, which takes from one to three days. When a shipment arrives, it can take from one day up to a month to unload a trailer, depending on the urgency to fill store orders from the shipment.

Because of supply chain variability, shipments can be off schedule (i.e., delayed) by as much as 40%. The company prides itself on customer service and fears that late deliveries to its customers would harm its credibility and result in cancelled orders and lost customers. At the same time, keeping excess inventories on hand in its warehouses is very costly, and since Somerset redesigns its product lines so frequently a real problem of product obsolescence arises if products remain in inventory very long. Somerset has also been experiencing quality problems. The Chinese suppliers employ quality auditors who rotate among plants every few weeks to perform quality control tests and monitor the manufacturing process for several days before visiting another plant. However, store and individual customer complaints have forced Somerset to inspect virtually every piece of furniture it receives from overseas before forwarding it to stores. In some instances, customers have complained that tables and chairs creak noisily during use. Somerset subsequently discovered that the creaking was caused by humidity differences between the locations of the Chinese plants and the geographic areas in the United States where their furniture is sold. Replacement parts (like cabinet doors or table legs) are difficult to secure because the Chinese suppliers will only agree to provide replacement parts for the product lines currently in production. However, Somerset provides a one-year warranty on its furniture, which means that they often need parts for a product no longer being produced. Even when replacement parts were available, it took too long to get them from the supplier in order to provide timely customer service.

Provide a clear flowchart of all activities included in one complete purchase
“cycle”. The graphical representation must be self-explanatory. In other words, you
must use symbols and their labels/identification in the flowchart, so that NO
ADDITIONAL wording/explanations be necessary outside the flowchart. The time
or time-range for each step of the purchase cycle must also be found on the
flowchart.
2. Calculate the range of days (minimum to maximum) of the variable timeline for
product lead time in this case. Start with the initiation and development of the
purchase order and end when the product is received and warehoused. Itemize
activities with their variable times, and provide the range for the total lead time.
3. Out of the activities identified above, mark with an asterisk, or by using special font
(e.g., bold) those activities whose durations might be reduced with help from
international trade specialists, or trade logistics companies (please do not use any
coloured highlights)
4. Pinpoint at least 7 problems that are prevalent (typical, characteristic) when
manufacturing is outsourced to other countries and appear to be present in this
company’s global supply chain.
5. Highlight two issues that you found of special interest in this case and are not
directly related to the discussion questions above. In other words, DO NOT just
repeat a “problem” stated in the mini-case, but share the “insights” that you may
have gained from examining this real business story.

Store Closing?

For this discussion, consider the following scenario:

The privately owned Baker Company was founded in 1960. The company manufactures kitchen cabinets and has been very successful, expanding from one facility to twelve facilities in the same and other states. All facilities but the original are located near interstate highways. The original facility, which is no longer the headquarters, is in a downtown area of a major city (which grew up around it) with relatively high real-estate taxes. It has had a negative contribution margin and a net loss for the last five years. The founder is retired and three of his children want to close the facility. The fourth does not, because it "was Dad's first place and I went there every day after school." She believes they can bring the facility back to profitability if the city's downtown revitalization project succeeds and they dedicate the first floor of the facility to retail.

• Your definition for "negative contribution margin."
• Whether the fact that the facility is not near an interstate makes a difference in the decision.
• Would it make a difference if the company were publicly traded?
• Might there be additional costs, in addition to revenues, to convert the first floor of the facility to retail?
• What risks may be associated with leasing to retail stores?
• What is your recommendation? Close and sell the facility or modify the first floor to be able to lease to retail stores.

Brunswick Parts is a small manufacturing firm located in eastern Canada. The company, founded in 1947, produces metal parts for many of the larger manufacturing firms located in both Canada and the United States. It prides itself on high quality and customer service, and many of its customers have been buying at least some of their parts from Brunswick since the 1950s.

Production of the parts takes place in one of two plants. The older plant, located in Fredericton, was purchased when the company was founded, and the last major improvements to the plant took place in the 1970s. A newer plant, located in Moncton, was built in 1995 to take advantage of the expanding markets. The same part can be produced in either plant, and the final scheduling decision is based on capacity, transportation costs, and production costs.

At a weekly production meeting, Sara Hunter, the manufacturing manager expresses her frustration at trying to schedule production.

Something isn’t right. We build a new plant to take advantage of new manufacturing technology and we struggle to keep it filled. We didn’t have this problem a few years ago when we couldn’t keep up with demand, but with the current economy, marketing keeps sending orders to the old plant in Fredericton. I know manufacturing, but I guess I must not understand accounting.

The latest order that generated discussion among plant management was placed by Lawrence Machine Tool Company, a long-time customer. The order called for 1,000 units of a special rod (P28) used in one of its many products. The order was received by the marketing department. Following the established procedure at Brunswick, the marketing manager checked the product costs for both plants. Because quality and transportation costs would be the same from either plant, a decision was made to produce and ship from the Fredericton plant.

The cost system at Brunswick is a traditional manufacturing cost system. Plant overhead (including plant depreciation) is allocated to products based on estimated production for the period. Separate overhead rates are computed for each plant. Corporate administration costs are allocated to the plants based on the estimated production in the plant for purposes of executive performance measurement. Production is measured by direct labor-hours. Cost and production information for P28 follows.

Corporate and plant overhead budgets are as follows:

Required:

a. What would be the reported product cost of P28 per unit for the two plants?

b. At what plant should the P28 units for the Lawrence order be produced?

• Moncton

• Fredericton

>> Club Med case study.

Club Méditerranée or Club Med is a French company founded in 1950 by Gérard Blitz and Gilbert Trigano with the objective of offering holidays to customers With an innovative "all-inclusive" formula. The idea of happiness was at the heart of the concept. Today, Club Med has 72 resorts in more than 30 countries, including the Mediterranean, the tropics. and even the snow-covered Alps. In 2013, more than 1.5 million customers Chose Club Med for their holidays. Club Med has revolutionized holidays with its all inclusive formula. At the time of its creation, the company aimed to give people a sense of freedom through nature and sports that allowed them to be happy and one with the others. Club Med proposed a new social link that was more festive and less binding on the client. It wanted to reconcile individual liberty and social life. At that time, in the holiday villages, customers could do what they wanted without the concept of money being present. Upon arival, customers were provided with necklaces made out of beads that allowed customers to pay for their drinks (Which would later be patented). Big tables allowed customers to share their meals and get acquainted with each other. The notions of freedom and equality were and still remain fundamental to the culture of Club Med. Since its creation, Club Med has never ceased to innovate. New and unknown destinations were added to the portfolio Tahiti in 1955 and Leysin in Switzerland in 1956. In 1967, Club Med created the first mini clubs for children. In the years 1980-1990, deciline of the attractiveness of the concept of holiday homes and the sharp rise of competition at lower prices weakened Club Meds posi-tion. The company's strategy at that point was unclear-it was neither a volume nor a value strategy. In addition, the economic crisis of 1993, a result of the Gulf war, and the events of September 2001 severely affected Club Med in the same way it affected all kinds of tourism. In 2004, Club Med decided to redirect to a value strategy in order to target an international clientele that wanted comfort, elegance, service, and customization. The holiday package offer was therefore repositioned with the closure of entry-level vacation villages (classified 2 trident), renovation of other villages in 4 trident to 5 trident, and the creation of a new range of luxury 5 trident (villages, villas, and chalets). Club Med now offers an all-inclusive premium with a high range of services and an extension of the à la carte services that come with gourmet food and high quality drinks. Starting at 4 trident, all clubs offer a spa in partnership with a famous brand. The shows in the resorts are all designed by specialized companies. Clubs for children have dedicated spaces with an emphasis on nature and local culture. The sports schools offer up to 10 different disciplines with qualified coaches and quality equipment. For its 5 trident resorts, Club Med chooses sites of exception in the most beautiful destinations of the World, such as Cancun in Mexico, Punta Cana in the Dominican Republic, and Kani in the Maldives. The development of these resorts is entrusted to renowned architects and designers. The services developed are high-end with all-day room service, a concierge service, and champagne offered after 6 p.m. Private villas come with a butler. In the 5 trident resorts in the Maldives, the villas are placed on stilts; clients have private access to the sea, and can observe marine life through a transparent floor in the room. This repositioning to the high-end has also necessitated a change in the relationship between customers, called Gentle Members, and staff, called Gentle Organizers. Club Med has 15,000 Gentle Organizers of 100 different nationalities to meet the requirements of its international clientele. They are qualified in various fields and specialize in cooking, sport, amusement, and client servicing. Trainings to inculcate precision and a sense of premium service have been developed. A resort school has even been created in Vittel, France; it welcomes 10,000 trainees every year. Club Med is always looking to recruit real talent and unique personalities. The organization's customer relationship has also evolved through the development of customer relationship management tools for a finer segmentation of customers. In some agencies, a concept of sale side-by-side has been developed to allow clients to customize their holiday packages along with the sellers.Club Med's communication campaign "and what's your idea of happiness?" highlights this upmarket strategy. This campaign has been deployed in 47 countries and in 22 languages. The positioning of Club Med's resorts, from 3 trident to 5 trident, allows for a broader coverage of the competition field-from standardization, and luxury services to all-inclusive offers. No other company offers this. Club Med's 4 trident resorts are in competition with the Swiss Mövenpick (69 hotels in 23 countries) and the Jamaican Sandals (12 resorts in Jamaica and the Bahamas). Club Med's 5 trident resorts compete with the Singaporean Banyan Tree (30 hotels and 60 spas all over the world). Finally, the Club Med luxury villas are in competition with the villas of the Mauritius company Beachcomber that works on the philosophy "dream is a serious thing" (9 hotels, resorts, and luxury villas), Aman Resorts (25 hotels in 15 countries), and the Ritz-Carlton (80 hotels in 27 countries). With the range and quality of its service, Club Med turns holidays into a one-of-a-kind experience. The focus on a globalized customer strategy helped Club Med grow and ensured its unique positioning in the market. As of January 2015, the proposed takeover of Club Med by the Chinese investor Fosun will help accelerate the internationalization of the brand and its development in Asia.

Questions

1, How did Club Med reach an upscale positioning and achieve excellence in the quality of service ?

2. Was Club Med's upmarket positioning the only one viable strategy?

3. Do you think that Club Med takes a risk by not in specializing in a particular range level, such as 4 trident or 5 trident?

Besserbrau AG is a German beer producer headquartered in Ergersheim, Bavaria. The company, which was founded in 1842 by brothers Hans and Franz Besser, is publicly traded, with shares listed on the Frankfurt Stock Exchange. Manufactur- ing in strict accordance with the almost 500-year-old German Beer Purity Law, Besserbrau uses only four ingredients in making its products: malt, hops, yeast, and water. While the other ingredients are obtained locally, Besserbrau imports hops from a company located in the Czech Republic. Czech hops are considered to be among the world’s finest. Historically, Besserbrau’s products were marketed exclusively in Germany. To take advantage of a potentially enormous market for its products and expand sales, Besserbrau began making sales in the People’s Republic of China three years ago. The company established a wholly owned sub- sidiary in China (BB Pijio) to handle the distribution of Besserbrau products in that country. In the most recent year, sales to BB Pijio accounted for 20 percent of Besserbrau’s sales, and BB Pijio’s sales to customers in China accounted for 10 per- cent of the Besserbrau Group’s total profits. In fact, sales of Besserbrau products in China have expanded so rapidly and the potential for continued sales growth is so great that the company recently broke ground on the construction of a brewery in Shanghai, China. To finance construction of the new facility, Besserbrau negotiated a listing of its shares on the London Stock Exchange to facilitate an initial public offering of new shares of stock.

Required: Discuss the various international accounting issues confronted by Besserbrau AG.

How does Zynga recognize revenue from virtual goods?

Zynga was founded in July 2007 and is headquartered in San Francisco, California. Around 80% of Zynga’s revenue comes from Facebook users. Facebook provides a social networking platform used by over 1 billion people, and Zynga is a video game developer with many products (e.g. FarmVille, MafiaWars) that interface with social technology sites like Facebook. Zynga has been publicly traded since December 16, 2011.

Zynga’s FarmVille players can use Facebook to purchase in-game currency they can use to acquire resources, such as hay and animals, in pursuit of a more productive virtual farm. Revenue from conversion of real dollars into in-game currency is big business: Zynga estimates that such sales, from FarmVille hay to Mafia Wars guns, accounted for nearly all of Zynga’s $1.1 billion in 2011 revenues and 12% of revenue for Facebook.

Revenue recognition in firms that earn money through socially-based use of virtual items is challenging. Zynga’s customers convert real dollars into FarmVille currency in order to purchase virtual goods. Customers’ real dollars become Farm Cash which the customers can use in the future to purchase virtual items in the Farmville application. When the customer uses Farm Cash to buy a tractor, for example, Facebook reduces the player’s Farm Cash, keeps 30% of the real dollar equivalent as a processing fee, and sends 70% to Zynga.

Starting in 2009, Zynga classified the game items it sells to players as either “consumable” or “durable” goods. The former category is for goods that players can immediately use, like energy in the game CityVille; the latter is for goods that players buy and keep for the duration of the game, such as tractors in FarmVille. Until 2010 Zynga estimated the average player life (the number of months a player on average continues to play the game) to be 19 months. In early 2011 it changed that estimate to 15 months. The shorter player life increased revenue for the six months by $27.3 million, turning a loss for the six months ended June 30, 2011 into a net profit of $18.1 million.

Required:
Discuss the revenue recognition at Zynga.

Assignment 2 - Assessment and Diagnosis of a Celebrity or Historic Individual

This project provides another opportunity to apply the concepts of diagnosis and assessment. With this assignment, choose an individual who is either a well-known celebrity or historical figure. You will need to discuss the individual’s childhood and family circumstances. You should organize the paper - (present problem, etiology, diagnosis and treatment), and cite your resources.

Describe an example of a problem that could be solved using the Coase theorem. Do this by defining a hypothetical situation where one individual is causing a negative externality on another individual. Describe whether it matters who holds property rights. Define the three necessary conditions for Coase theorem to work completely. Describe why a failure of these conditions will likely cause Coasian bargaining to fail.

A researcher is interested in comparing the level of knowledge of U.S. History possessed by university students in various majors. Random samples of Health Science, Business, Social Science, and Fine Arts majors were selected and each student completed a high school senior level standardized U.S. history exam. The spreadsheet in the "US History Knowledge vs Student Major Dataset B" file on Blackboard for today's date contains data showing the test scores (percent correct) for each student by major. Assume that the test scores for students in each major are Normally distributed.

Confidence interval output from Minitab for this data is provided below

Individual 95% CIs For Mean Based on Pooled StDev Level N Mean StDev -------+---------+---------+---------+-- Health Science 8 56.63 18.93 (---------*--------) Business 8 48.75 20.10 (---------*--------) Social Science 8 70.25 16.27 (--------*--------) Fine Arts 8 56.50 21.61 (---------*--------) -------+---------+---------+---------+-- 45 60 75 90

Determine whether this data provides evidence that there are any statistically significant differences in the average test scores of students majoring in Health Science, Business, Social Science, and Fine Arts. Your answer should include:

- Mean test scores for students in each major.

- Discussion of the conditions, and why they are satisfied or why they are not satisfied. (Regardless of your answer here, assume the conditions are satisfied.)

- Hypotheses, test statistic, degrees of freedom, and P-value.

- Your conclusion regarding the question of whether there are any significant differences in the U.S. history knowledge levels of students with these four majors.

- Your assessment of the nature of any potential relationship(s) between the average U.S. history test score and student majors.