Hawkins Corporation began construction of a motel on March 31, 2018. The project was completed on April 31, 2019. No new loans were required to fund construction. Hawkins does have the following two interest-bearing liabilities that were outstanding throughout the construction period:

$4,000,000, 6% note
$16,000,000, 10% bonds

Construction expenditures incurred were as follows:

The company's fiscal year-end is December 31.

Required:

Calculate the amount of interest capitalized for 2018 and 2019

Thornton Industries began construction of a warehouse on July 1, 2018. The project was completed on March 31, 2019. No new loans were required to fund construction. Thornton does have the following two interest-bearing liabilities that were outstanding throughout the construction period:

Construction expenditures incurred were as follows:

The company’s fiscal year-end is December 31.

Required:
Calculate the amount of interest capitalized for 2018 and 2019.

Thornton Industries began construction of a warehouse on July 1, 2018. The project was completed on March 31, 2019. No new loans were required to fund construction. Thornton does have the following two interest-bearing liabilities that were outstanding throughout the construction period:

Construction expenditures incurred were as follows:

The company’s fiscal year-end is December 31.

Required:
Calculate the amount of interest capitalized for 2018 and 2019.

1. During and after the commissioning and turn-over process, the design and construction team need to provide the owner with many important documents for the operation of the building. These include all of the following, except:

   		A list of things that the contractor secretly left out of the building to save costs.
   		Operations and maintenance manuals for installed equipment
   		Final construction drawings, typically called "As Built" drawings. These incorporate any minor changes made during construction.
   		Design calculations for building systems.
   		Warranty, test-and-balance, and inspection documents.
   		Building Information Modeling (BIM) data, if included in the contract.
   		Samples and inventories of spare parts and materials used in the construction, to facilitate repairs.

Thornton Industries began construction of a warehouse on July 1, 2021. The project was completed on March 31, 2022. No new loans were required to fund construction. Thornton does have the following two interest-bearing liabilities that were outstanding throughout the construction period:

Construction expenditures incurred were as follows:

The company’s fiscal year-end is December 31.

Required:
Calculate the amount of interest capitalized for 2021 and 2022.

This is for a hotel that would be located in the University of the Virgin Islands

Section VI: Marketing Strategies

Unit-level goals and strategies

A.        Marketing: At least five items need to be identified as part of the Marketing Strategy

1. Target market: should identify the primary customers of the business. This should include demographics including age ranges, socioeconomic status, customer locations.

2. Product mix strategy: this should consist of a description of the services offered at Lovango Key Resort. Current and Future. If you are not sure, research product mix.

3. Pricing strategy Pricing strategy should follow the product strategy. Thus, your work must state if the prices are higher, lower, or match the competition. You must defend your strategy as to why you have chosen this strategy. Be articulate.

4. Promotion and selling strategy: The promotion strategy is one key part of the overall marketing strategy. What promotional strategy will be developed? What is the recommended budget for advertising and other promotional activities. State what the promotional activities are planned. State what media you may plan for. How much does this cost per event? (hint, you must research costs. BE SURE TO CITE YOUR WORK and RESEARCH). It may be good to create a 1 year promotional plan to insert as part of this section of the strategic plan.

5. Service Strategy: Service strategy should be strait forward and outline the day-to-day service policies. This section should focus on the degree of service.

The vice president at your company, Columbia Holdings, has given you a new assignment: “Recently I asked the folks at Patterson Manufacturing to develop a strategy for improving their profitability. They have responded with a proposal. I want you to evaluate the proposal: Is it viable? Is it sustainable? Visit their operations and bring back a recommendation.” As you travel to the site you review a brief history of the firm. Patterson Manufacturing was founded in a small northeastern city more than a century ago. Wesley Patterson started the firm alongside a fast-moving stream that provided mechanical power to drive cutting tools, grinders, lathes, and polishers. These tools were used to produce precision parts other manufacturers needed. The firm quickly established a reputation for producing high-quality products to exacting tolerances. The firm prospered. Wesley studied the industries he served to develop new products that could fill his customers’ emerging needs. He often met with customers to design unique products for them. He referred to his approach as providing “customer-driven creative solutions.” He also kept abreast of new manufacturing materials and technology to ensure his products were of the highest quality. The firm grew steadily and, by 1925, was (and still is) the community’s largest employer. Wesley donated the land that is now the city’s central park. He also paid for constructing the first municipal buildings. More recently, the company was the primary donor for the construction of the municipal library and the local hospital. And the taxes paid by the firm and its employees are responsible for an excellent array of community services, including the Patterson Sports Complex and Patterson Community Center. The Great Depression in the 1930s brought hard times to the company, yet none of its employees were discharged. Instead, the firm and its employees cooperated to spread the available work among its employees by reducing each individual’s working hours (and wages). During that time, the firm also suspended paying dividends to its owners. After the company returned to prosperity in the 1940s, it continued to emphasize customer-driven creative solutions, and its loyal workforce enthusiastically overcame product design challenges. Wesley passed leadership of his business to his son, who later passed it down to Wesley’s grandson, and then to Wesley’s great granddaughter, Jessica Patterson. But five years ago, when Jessica wanted to retire, there was no heir willing to take over the business. Consequently, the plant was sold to your employer, Columbia Holdings. Background Columbia invests in family-owned businesses with a strong presence in niche markets. Columbia retains exSAGE © 2013 IMA Educational Case Journal. All rights reserved. SAGE Business Cases Page 3 of 5 Patterson Manufacturing isting management and local business practices but provides centralized services, such as finance, accounting, insurance, and corporate-level management. Patterson has remained profitable since the acquisition, but its return on investment has been declining. Your first stop at the Patterson complex is a meeting with the controller. He provides some additional background: “Jessica, like her predecessors, spent most of her time with customers developing new products to meet customer needs. She didn’t concern herself with costs. Customers were willing to pay for products that solved problems. Upon Jessica’s retirement, Columbia appointed Paul, our former production manager, to CEO. Paul has done wonders in rationalizing and standardizing our product lines. He substantially reduced manufacturing costs, which led to record profits in the two years following the sale of the company. Those early results have apparently set high expectations for our continuing performance. Our proposal will help move us toward meeting those expectations,” he said. “Our proposal is to stop manufacturing our largest-selling product, the Gudgeon EH40, and instead acquire it from an overseas supplier,” continued the controller. “This product currently represents 30% of our total sales revenue and production volume. But sales have been declining because competitors are offering a similar product at lower prices. We think that by reducing our price by 5% we can increase our unit sales volume by 15%. The increased volume coupled with a lower product cost from the offshore supplier should nearly double our firm-wide profit.” The controller also provided some supporting documents. Exhibit 1 summarizes operations for the five years since Patterson Manufacturing was sold to Columbia Holdings. Year 1 represents the first full year after Jessica retired, and Year 5 is the year that just past. Exhibits 2, 3, and 4 provide an income statement for Year 5, the current employee staffing levels by job title, and a detailed price proposal from the overseas supplier. The controller continued: “The analysis is pretty straightforward. Sales of the Gudgeon EH40 were $27 million last year. The direct material costs came to $14.3 million, while overhead costs of $4.2 million were allocated to the product. But only $2.9 million of the overhead will be avoided if we stop manufacturing the Gudgeon EH40. The remaining overhead costs are nearly all fixed and not subject to reduction in the near future. Our direct selling costs consist mostly of an 8% commission paid to sales representatives. In addition, there’s a $2 million advertising allowance devoted to promoting the Gudgeon EH40 in trade magazines.” He also said, “By outsourcing the Gudgeon EH40, we can release three administrative managers, eight administrative support staff, 128 general production personnel, and 10 supervisors. The firm will incur a one-time charge of $1 million for severance pay and pension contributions for dismissed employees. We’ll also need to spend $200,000 for the construction of receiving facilities for the outsourced product.” The controller continued: “The supplier’s cost quotation (Exhibit 4) needs to be adjusted for the expected 15% increase in volume. The cost for materials and labor will increase proportionately, but the overhead and ‘other’ costs are unlikely to be affected. The supplier’s mark-up will be 10% of the new total cost. In addition to the product cost, Patterson will incur transportation costs to get the product from the manufacturer to our warehouse. The transportation costs are variable and would have been $0.6 million for the volume of product in Year 5.” The Task After his brief overview, the controller hands you the exhibits and says, “You should go through the numbers yourself to ensure that my projection for the increase in profit is correct.” As you make your way to an empty office to review the numbers, the marketing manager approaches you. She pleads, “Don’t let them do this. The proposed action will deal a devastating financial blow to our commuSAGE © 2013 IMA Educational Case Journal. All rights reserved. SAGE Business Cases Page 4 of 5 Patterson Manufacturing nity. Wesley Patterson would have never approved such a move. He loved this town.” Required 1. Using the controller’s projections, prepare an analysis of the expected effect of outsourcing the product on Patterson’s profitability. 2. Would it be a viable alternative to produce the product locally and lower the price to achieve the increase in sales volume? 3. Does the firm have an obligation to maintain employment levels in the town? 4. What risks are associated with the proposal? 5. Make a recommendation to your vice president on whether the proposal should be accepted. Provide your reasoning and any suggestions for additional or alternative actions that Patterson should take.

Please complete both parts.

Part I

(1) Jill, a supervisor at a construction company, distributes payroll and has authority to hire and fire employees. How might the owner of the construction company determine whether Jill has fictitious employees on the payroll and is secretly cashing their payroll checks for herself?

(2) Please explain why it is desirable to have at least two officials approve pay rate changes.

Part II

Jet-Clean sold washing machines totaling $1 million. Each washing machine carries a three-year warranty. Jet-Clean estimates that warranty repairs on the washing machines will cost 1 percent of the sales price.

   (1) Record the entry to accrue Jet-Clean’s warranty costs.

   (2) Jet-Clean paid $750 for washing machine repairs under warranty. Please record this entry.