Inventory Control

You are the production manager of GVT Manufacturing, a company that manufactures a wide range of products, including fire extinguishers. Data shows that GVT is projected to manufacture 30,000 of these fire extinguishers next year. A production-year for GVT covers 300 days. Information on the product also reveals that each extinguisher requires one handle. Additional information gleaned from the production records shows the following: annual carrying cost per handle is US$1.50; production setup cost is US$150 and daily production rate is 300 handles. Required a) Calculate and state the optimal production order quantity that will minimise inventory costs. b) Calculate and state the corresponding inventory costs from the quantity calculated in (a).

Honey Ltd, a New Zealand company, has sold US$150,000 of products to the US, to receive cash exactly one month later. At the time of sale, the spot rate of exchange is US$0.55, that is, NZ$1 buys US$0.55. Honey Ltd wishes to hedge the currency risk associated with this transaction, so on the day of the sale, the company buys a put option – that is, it buys the right to sell US$150,000 at an exercise price of US$0.57 one month later. The option costs $3,000 in cash. The relevant information is shown in the table below:

Required:

(i) In accordance with NZ IFRS 9, show the journal entry to record the sale and any additional journal entries that are required through to (and including) settlement.

(ii) What is the most that Honey Ltd can lose overall in this hedging activity (regardless of what the exchange rate is at settlement date)? Show all workings.

PART A

Your line manager, Ahmed, has sent you the following email late on Wednesday just as you are about to finalise your timesheet and head to a monthly tax-update webinar:

Required: You are required to calculate Lisa’s Net Capital Gain (loss) for the year ending 30 June 2020 based on the above information provided. In doing so, you must present an accurate and complete analysis.

Question 6

A.6 Determine the Net Capital Gain and/or Loss for Lisa. Briefly justify your answer/show all workings.

Hint: it is recommended you use a table format to present your answer.

Discuss some costs and benefits of the different management structures. If you were a CEO of a company which structure would you like to see?

Why are trust and commitment so important to strategic alliance? These are also important in our personal life. How so? Do you have any examples?

ABC Limited is a family owned business that has been in operation for the past ten years. The
company based in Kabwe manufactures one product: desks.
ABC limited Managing Director, Mr. Aubrey Bwalwa Chuungu has been away on a business trip
to China for the past three months. He is worried that the current outbreak of the Corona virus
and the subsequent restrictions imposed on commerce by the Zambian government may have had
adverse financial consequences for the company.
You are the Management Accountant of ABC Limited.
On his return, Mr. Chuungu , who is a non-finance specialist, has requested a financial review of
the company’s financial performance for the last month , May 2020 in order to put his fears to
rest.
You have just received an email from Mr. Chuungu to conduct a financial performance analysis
for the month May, 2020.
You have retrieved the following computer printout from the company’s management accounts
for the month of May, 2020:
Actual Budget
Sales volume 4,900 units 5,000 units
Selling price per unit K11.00 K10.00
Production volume 5,400 units 5,000 units
Direct materials:
Quantity 10,600 kg 10,000 kg
Price per kg K0.60 K0.50
Direct labour:
Hours 2,970 2,500
Rate per hour K3.80 K4.00
3
Fixed overheads:
Production K10, 300 K10, 000
Administration K3,100 K3,000
ABC Limited uses a standard absorption costing system, absorbing overheads into products
using labour hours.
There was no opening or closing work-in-progress for the month of May,2020.
Required:
(a) Prepare a statement that reconciles the budgeted profit with the actual profit for the
month of May, 2020, showing individual variances in as much detail as possible.

a) Explain a foreign currency futures contract and outline the differences between futures and forwards. b) The Chicago Mercantile Exchange (CME) and the New York Board of Trade (NBOT) operate futures markets in currencies in the following pairs US$/pounds and US Dollar/Pound. The value standardize size of a sterling futures contract is 6,500 pounds. Describe how a UK company that expects to received US$800,000 in three months time can use a futures contract to hedge transaction exposure if the following apply i) Currency spot rate US$ 1.64/pounds - US$1.68pounds ii) Sterling futures price US$1.64/Pounds

Selected accounts of the Zena Company are listed below. On January 1, 2016, the only intangible asset in the company’s account was Goodwill. This was recorded in 2009 when the company acquired another company and paid $350,000 more than the fair market value of the net identifiable tangible assets acquired. For two years, the company amortized the costs on the basis of a 40-year life, charging a total of $16,800 ($8,400 each year) to an account called Amortization Expense—Goodwill. However, no amortization of goodwill has been recorded since 2010. Transactions and events that took place at the company during 2016 are given below. TRANSACTIONS AND OTHER INFORMATION 1. On May 10, 2016, the company paid $180,000 to purchase a product formula. The formula is expected to have a useful life of eight years. 2. On July 5, the company paid $590,000 for a patent having a useful life of 10 years. 3. On September 22, the company purchased a unique computer program for $230,000. This program has an estimated useful life of five years. 4. During the year, the company recorded various cash expenditures of $205,000 for labor and supplies used in its research department. 5. At the end of 2016, the company reviewed the goodwill shown in the accounts. Based on the profitability of activities acquired in purchasing the other business, the owners of the business think the goodwill has a value of $270,000 and should be of benefit for many more years. 1. Record the transactions for 2016. 2.Record amortization of the intangible assets, where appropriate, for the year ended December 31, 2016. 3. Record impairment of assets, where appropriate, on December 31, 2016.

The creators and marketers of the Lumosity “brain training” program have agreed to settle Federal Trade Commission charges alleging that they deceived consumers with unfounded claims that Lumosity games can help users perform better at work and in school, and reduce or delay cognitive impairment associated with age and other serious health conditions. As part of the settlement, Lumos Labs, the company behind Lumosity, will pay $2 million in redress and will notify subscribers of the FTC action and provide them with an easy way to cancel their auto-renewal to avoid future billing. “Lumosity preyed on consumers’ fears about age-related cognitive decline, suggesting their games could stave off memory loss, dementia, and even Alzheimer’s disease,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “But Lumosity simply did not have the science to back up its ads.” According to the FTC’s complaint, the Lumosity program consists of 40 games purportedly designed to target and train specific areas of the brain. The company advertised that training on these games for 10 to 15 minutes three or four times a week could help users achieve their “full potential in every aspect of life.” The company sold both online and mobile app subscriptions, with options ranging from monthly ($14.95) to lifetime ($299.95) memberships. Lumosity has been widely promoted though TV and radio advertisements on networks including CNN, Fox News, the History Channel, National Public Radio, Pandora, Sirius XM, and Spotify. The defendants also marketed through emails, blog posts, social media, and on their website, Lumosity.com, and used Google AdWords to drive traffic to their website, purchasing hundreds of keywords related to memory, cognition, dementia, and Alzheimer’s disease, according to the complaint. The FTC alleges that the defendants claimed training with Lumosity would 1) improve performance on everyday tasks, in school, at work, and in athletics; 2) delay age-related cognitive decline and protect against mild cognitive impairment, dementia, and Alzheimer’s disease; and 3) reduce cognitive impairment associated with health conditions, including stroke, traumatic brain injury, PTSD, ADHD, the side effects of chemotherapy, and Turner syndrome, and that scientific studies proved these benefits. The complaint also charges the defendants with failing to disclose that some consumer testimonials featured on the website had been solicited through contests that promised significant prizes, including a free iPad, a lifetime Lumosity subscription, and a round-trip to San Francisco. The proposed stipulated federal court order requires the company and the individual defendants, co-founder and former CEO Kunal Sarkar and co-founder and former Chief Scientific Officer Michael Scanlon, to have competent and reliable scientific evidence before making future claims about any benefits for real-world performance, age-related decline, or other health conditions. The order also imposes a $50 million judgment against Lumos Labs, which will be suspended due to its financial condition after the company pays $2 million to the Commission. The order requires the company to notify subscribers who signed up for an auto-renewal plan between January 1, 2009 and December 31, 2014 about the FTC action and to provide a means to cancel their subscription. The Commission vote authorizing the filing of the complaint and proposed stipulated order was 4-0, with Commissioner Julie Brill issuing a separate concurring statement. The FTC filed the complaint and proposed order in the U.S. District Court for the Northern District of California, San Francisco Division. The FTC is a member of the National Prevention Council, which provides coordination and leadership at the federal level regarding prevention, wellness, and health promotion practices. This case advances the National Prevention Council’s goal of increasing the number of Americans who are healthy at every stage of life. This case is part of the FTC’s ongoing efforts to protect consumers from misleading health advertising.

Question 1

Discuss THREE (3) research approaches for gathering primary data that should be used by Lumosity to better understand the targeted markets prior to offering their services. Provide examples to support your answers.

Question 2

Evaluate the ineffectiveness advertising message strategies of Lumosity and suggest any TWO (2) ways on how the company should improve on advertising appeals in message strategy for their services.

Question 3

Discuss FIVE (5) sustainability marketing principles that Lumosity can practice to solve their unethical marketing practices. Provide clear examples to support your answers.

Yasmin Jamieson is 18 years old and is about to graduate from an Ottawa high school. She must decide: which university will she attend in September? She wants to follow a 4-year undergraduate degree in Economics. Yasmin has been accepted to attend McMaster University in Ontario, Canada, and Stanford University, California, United States. She faces only one annual cost for the each of the four years she is in university: tuition. Annual tuition at McMaster is $15,000. At Stanford, annual tuition is $45,000. Assume that she is not considering the option of working after high school. Therefore, do not consider the foregone labour earnings when going to university. After graduation, Yasmin has a strong interest in Labour Economics and hopes to receive job offers from Capital Economics (near Hamilton, Canada) and from Insight Economics (near Stanford, USA).

She knows that these two companies offer different annual salaries depending on where one has graduated. Capital Economics will offer a McMaster graduate an annual salary of $128,000 and a Stanford graduate an annual salary of $160,000. Insight Economics will offer a McMaster graduate an annual salary of $175,000 and a Stanford graduate an annual salary of $250,000.

Let’s assume the following:

• Yasmin’s objective in her decision-making is to maximize the present value of net future income over her career (that is, income net of costs).

• She is certain to get job offers from both companies.

• Please ignore differences between these two cities in terms of income taxes, the exchange rate, the cost of living and moving costs.

• These annual salaries do not change for the duration of her expected career, from age 22 to 65. Hint: this time horizon is sufficiently long to use the present value (PV) approximation formula.

• However, the present value of annual tuition costs should be calculated using the expanded present value formula.

• The market interest rate is 5%. Which university would you recommend to Yasmin? Please show all your calculations and explain your recommendation. (20 points)

If you were a hospital CEO being asked to redirect IT resources for this project, what would you want in return from the agency to ensure that this system provided value to your organization and clinicians?