IMT Co. reported the following selected information for 2010:

Sales revenue ..........................................................................................    $865,000

Cost of goods sold..................................................................................      360,000

Depreciation expense .............................................................................        43,000

Salaries & wages expense ……………………………………………...     178,000

Rent Expense …………………………………………………………..       95,000

                                                                                          Beginning of Year        End of Year

Accounts receivable .....................................                $ 15,000                 $ 35,000

Prepaid rent ...................................................                   21,000                    15,000

Salaries & wages payable .............................                   33,000                    18,000

Required:Use the above information to calculate:

The cash collected from customers

ii)The cash paid for depreciation

iii)The cash paid to employees

iv)The cash paid for rent

1. If a firm has two groups of customers whose elasticities of demand are different, how does it determine what prices to charge each group?

a. Sets the price (P) equal to marginal revenue (MR) equal to marginal cost (MC) in each market.

b. Sets the MR in each market equal to the firm’s MC and sets the price for each group by finding the prices on each group’s demand curve above where MR=MC.

c. Sets MC equal to P in each market.

d. None of the above.

Part 1: Pricing Strategy

Briefly describe pricing for your product or service for non for profit youth program. How does this compare to competitors, assuming competitors are at or near break-even point with their pricing? Analyze pricing alternatives and make recommendations about pricing going forward based on the following:

• How sensitive are your customers to changes in price?
• What revenue do you need to break even and achieve profitability?

• What does the price say about your product in terms of value, quality, prestige, etc.?

What is good data? What is meant by bad data? A term that you may have already encountered is "GIGO". This term refers to Garbage In, Garbage Out. In other words, if incorrect/bad data is entered into a database, the same useless data will be extracted. This results in poor decisions, lost revenue, and unhappy customers. Have you ever been the victim of bad data?

Discuss the importance of queries and good/bad data as they relate to database reports. Describe the impact on business of erroneous reports generated by bad data or faulty queries.

Johnson Company leases computer equipment to customers under sales-type leases. The equipment has no residual value at the end of the lease and the leases do not contain purchase options. Johnson desires a return of 8% interest on a five-year lease of equipment with a fair value of $970,425.

(The present value of an annuity due of $1 at 8% for five years is 4.313.) OR

(Hint: Change the calculator setting to BGN for the annuity due.)

What is the annual lease payment?

)What is the total amount of interest revenue that Johnson will earn over the life of the lease?

When interviewing a Customer Service Manager in any industry. What would be the most important aspects of serving customers in the Manager's perspective? I would like a minimum of three aspects, but more would be fine. Rank them in order of importance and explain the reasoning behind their rankings.

What are the TWO primary techniques/philosophies of continuous improvement that are used to manage processes in the supply chain such that they will meet the needs of customers today. Provide the prime objectives for each of the two techniques/philosophies. Also, for each technique, provide three elements used to achieve the prime objectives.

In December 2006, Bob Prescott, the controller for the Blue Ridge Mill, was considering the addition of a new on-site longwood woodyard. The addition would have two primary benefits: to eliminate the need to purchase shortwood from an outside supplier and create the opportunity to sell shortwood on the open market as a new market for Worldwide Paper Company (WPC). The new woodyard would allow the Blue Ridge Mill not only to reduce its operating costs but also to increase its revenues. The proposed woodyard utilized new technology that allowed tree-length logs, called longwood, to be processed directly, whereas the current process required shortwood, which had to be purchased from the Shenandoah Mill. This nearby mill, owned by a competitor, had excess capacity that allowed it to produce more shortwood than it needed for its own pulp production. The excess was sold to several different mills, including the Blue Ridge Mill. Thus adding the new longwood equipment would mean that Prescott would no longer need to use the Shenandoah Mill as a shortwood supplier and that the Blue Ridge Mill would instead compete with the Shenandoah Mill by selling on the shortwood market. The question for Prescott was whether these expected benefits were enough to justify the $18 million capital outlay plus the incremental investment in working capital over the six-year life of the investment. Construction would start within a few months, and the investment outlay would be spent over two calendar years: $16 million in 2007 and the remaining $2 million in 2008. When the new woodyard began operating in 2008, it would significantly reduce the operating costs of the mill. These operating savings would come mostly from the difference in the cost of producing shortwood on-site versus buying it on the open market and were estimated to be $2.0 million for 2008 and $3.5 million per year thereafter. Prescott also planned on taking advantage of the excess production capacity afforded by the new facility by selling shortwood on the open market as soon as possible. For 2008, he expected to show revenues of approximately $4 million, as the facility came on-line and began to break into the new market. He expected shortwood sales to reach $10 million in 2009 and continue at the $10 million level through 2013. Prescott estimated that the cost of goods sold (before including depreciation expenses) would be 75% of revenues, and SG&A would be 5% of revenues. In addition to the capital outlay of $18 million, the increased revenues would necessitate higher levels of inventories and accounts receivable. The total working capital would average 10% of annual revenues. Therefore the amount of working capital investment each year would equal 10% of incremental sales for the year. At the end of the life of the equipment, in 2013, all the net working capital on the books would be recoverable at cost, whereas only 10% or $1.8 million (before taxes) of the capital investment would be recoverable. Taxes would be paid at a 40% rate, and depreciation was calculated on a straight-line basis over the six-year life, with zero salvage. WPC accountants had told Prescott that depreciation charges could not begin until 2008, when all the $18 million had been spent, and the machinery was in service. You have been approached by Prescott with a request to evaluate the project.

If the required rate of return is 9.65%, what are the payback period, profitability index, net present value, and internal rate of return for the investment project? Should WPC implement the investment project?

Who wants to be a trillionaire?

The Economist Oct 26th, 2006 | HONG KONG | from the print edition

BY THE end of October, China's foreign-exchange reserves are likely to top $1 trillion, twice their level two years ago and more than one-fifth of global reserves. This handsome sum would be enough to buy all the gold sitting in central banks' vaults (indeed, twice over) or almost all of London's residential property.

China's massive hoard is the result of its large current-account surplus, significant inward foreign direct investment, and big inflows of speculative capital over the past couple of years. In theory, flows of foreign money into China should push up the yuan, but China has resisted this, forcing the central bank to buy up the surplus foreign currency. The growth in reserves has slowed in recent months, but it is still averaging a hefty $16 billion a month.

China's official reserves already far exceed what is required to ensure financial stability. As a rule of thumb, a country needs enough foreign exchange to cover three months' imports or to settle its short-term foreign debt. China's reserves are equivalent to 15 months of imports and are six times bigger than its short-term debt. The explosion in reserves is also a headache for the central bank. It creates excess liquidity, which risks fuelling higher inflation, asset-price bubbles and imprudent bank lending.

There are two simple ways to stop reserves rising. China could set free its exchange rate or it could relax restrictions on capital outflows and allow private citizens to hold foreign assets. Significant moves of either kind seem unlikely in the near future. So long as China runs a large external surplus (the natural result of its high saving rate) and refuses to set its currency free, its stash of foreign currency will probably continue to mount.

How that money is invested has big implications for the world economy, not just for China. Brad Setser, head of global research at Roubini Global Economics, estimates that about 70% of it is invested in dollars, mainly Treasury securities. This has propped up the dollar and reduced American bond yields—by up to 1.5 percentage points according to some estimates. A big shift out of dollars could therefore push up bond yields and hence mortgage rates, damaging America's already crumbling housing market.

China's central bank is thought to be switching from Treasury bonds to American mortgage backed securities and corporate bonds in an attempt to earn higher yields. Chinese officials have also discussed in private the need to diversify reserves out of dollars in order to reduce exposure to a big drop in the greenback. The bank may be putting a bigger slice of any increase in reserves into euros and emerging Asian currencies, but so far there is little sign of a shift out of its existing stock of dollars. One problem is that China's investments are so big that they move markets. Shifting money into euros would push down the dollar. China would then not only suffer a capital loss on its remaining dollar reserves, but it could also be forced to buy yet more reserves to hold its currency down against a weaker dollar

Fear of a capital loss, and dissatisfaction with unrewarding yields, have triggered a flurry of ideas on how to put the money to better use. One popular idea is to use some of China's reserves to buy oil and other commodities. The snag is that stockpiling oil would push up prices, yet absorb only a tiny proportion of the sums at China's disposal. Buying the equivalent of sixmonths' oil consumption, as has been suggested, would take only 8% of total reserves at current prices, but the extra oil bought would amount to three times the growth in global oil demand this year. Buying gold would have similar results: if China invested just 5% of its reserves in gold, it could buy the world's entire annual mine production.

Another proposal is to spend more money on infrastructure investment, which would yield a much higher return than American bonds. However, since China's investment already accounts for 40% of GDP, it is not clear that China needs more. Writing off banks' non-performing loans might seem more sensible. In 2004 and 2005 the People's Bank of China did indeed shift $60 billion to state banks. The remaining stock of bad loans is now around $250 billion, according to UBS.

By buying American bonds, China is subsidising rich American consumers while China's health care, education and social safety net are starved of funds. So why not use reserves to relieve rural poverty, improve health care, or inject money into the under-funded pension system?

Unfortunately, all of these proposals to spend money at home misunderstand the nature of foreign reserves. The problem is that conversion of the foreign currency into yuan would put upward pressure on the yuan and so force the central bank to buy yet more foreign currency to hold it down. Reserves would return to their original level.

The only real solution to the poor return on China's reserves is to stop accumulating them. That requires policy reforms to reduce China's massive saving, which drives its current-account surplus, and a more flexible exchange-rate system. But before that happens, China's reserves could well hit $2 trillion.

QUESTIONS:

1) Based on the article facts, why was China's massive hoarding of foreign exchange reserves the result of its large current-account surplus, significant inward foreign direct investment, and big inflows of speculative capital? Explain and motivate your answer

2) Based on the facts in the article, would you say that China is following a new-mercantilist policy? Explain and motivate your answer (Maximum length one page).

3) Based on the facts in the article, would you say that China is a currency manipulator? Make use of a demand and supply diagram to explain your answer

4) Note: this is a research-based question and all sources used should be properly referenced. What happened to China’s foreign exchange reserves since 2006? Is China still hoarding massive foreign exchange reserves? What are the implications of this in terms of new-mercantilist policy and currency manipulation?