1

The information in this mini case is fictitious and

the case is used for instruction purpose only. Case

questions are provided at the bottom.

Kensington Plastics

In December 2017, Michael Roberts, managing direct

or of Kensington Plastics, was considering

the purchase of a PlaTech 2 automated injecti

on molding machine. The PlaTech 2 would replace

older semiautomated machines and would offer

improvement in quality and some additional

capacity for expansion. Given the size of the pr

oposed expenditure of $2.15 million, Roberts was

seeking a careful estimate of the project's costs

and benefits and, ultimately, a recommendation of

whether to proceed with the investment.

The Company

Kensington Plastics speciali

zed in the production of high qua

lity plastic products for use

in automotive equipment. The company had acqui

red a reputation for quality products. Its products

included seat bases and door trim

panels for cars. Customers we

re increasingly

insistent about

product quality, and Kensington Plastics' response had re

duced the defect rate of

its products to 10

parts per 100,000.

This record had won the company quality

awards from major car manufacturers

including GM, Ford, and Nissan, and had resulted

in strategic alliances with these firms.

Kensington Plastics and these ca

r manufacturers exchanged technical personnel and design tasks.

In addition, the car manufacturer

s shared important market-dema

nd information with Kensington

Plastics, which increased the precision of the la

tter's production scheduling.

In certain instances,

the car manufacturers had provided cheap loans

to Kensington Plastics to support capital

expansion. Finally, the company received relative

ly long-term supply contracts from these car

manufacturers and had a preferential

position for bidding

on new contracts.

Kensington Plastics, located

in Detroit, Michigan, was founded in 1965 by Roberts's

grandfather, John Roberts, a mechanical engine

er, to produce plastic parts for the automobile

industry. Kensington Plastics

grew slowly but steadily; its

sales for calendar-year 2017 were

expected to be $70 million. The company was liste

d for trading on the New York Stock Exchange

(NYSE) in 1995, but the Roberts family owned 51%

of the common shares of stock outstanding.

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The company's beta was estimated at 1.35. Currentl

y, the 3-month Treasury

Bill yields 2.75%. The

average market risk premium over the

last 100 years was approximately 7%.

The company's traditional hurdle rate of return on capital deployed was 9%, although

this rate had not been reviewed since 2014. In

addition, company policy

sought payback of an

entire investment within five years. At the tim

e of the case, the market

value of the company's

capital was 40% debt and 60% equity. The preva

iling borrowing rate Kensington Plastics faced on

its loans was 6.5%. The company's effective tax rate was about 40%, which reflected the

combination of federal and local

corporate income-tax rates.

Roberts, age 55, had assumed executive res

ponsibility for the comp

any 5 years earlier,

upon the death of his father. He held a doctorate in

plastic engineering. Over

the years, the Roberts

family had sought to earn a rate of re

turn on its equity investment of 13.5%.

The PlaTech 2 Injection Molding Machine

The new injection molding machine would re

place six semiautomated injection molding

machines that together had originally co

st $650,000. Cumulative depreciation of $260,000 had

already been charged against the original cost a

nd six years of depreciation charges remained over

the total useful life of 10 y

ears. Kensington Plastics' management believed that those

semiautomated machines would need to be replaced

after six years. Roberts had recently received

an offer of 250,000 for the six machines. The curre

nt six machines required 12 workers per shift

(24 in total) at $15.00 per worker per hour, plus th

e equivalent of two main

tenance workers, each

of whom was paid $15.50 an hour, plus mainte

nance supplies of $9,500 a year. Roberts assumed

that the semiautomated machines, if kept, would c

ontinue to consume electrical power at the rate

of $24,000 a year.

The PlaTech 2 injection molding machine

was produced by a company in Cleveland,

Ohio. Kensington Plastics had received a firm offe

ring price of $2 million from the Ohio firm. The

estimate for modifications to the plant, incl

uding wiring for the machine's power supply, was

$120,000. Allowing for $30,000 for transportation, installa

tion, and testing, the total cost of the

PlaTech 2 machine was expected to be $2.15 m

illion, all of which woul

d be capitalized and

depreciated for tax purposes over eight years. Robe

rts assumed that, at a

high and steady rate of

machine utilization, the Platech 2 wo

uld be worthless after the eighth

year and need to be replaced.

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The new machine would require two skilled

operators (one per sh

ift), each receiving

$21.50 an hour (including benefits), and contract

maintenance of $100,000 a year, and would incur

power costs of $37,000 yearly. In addition, the auto

matic machine was expected to save at least

$50,000 yearly through improved labor efficiency

in other areas of the production.

Certain aspects of the PlaTech 2 purchase

decision were difficult to quantify. First,

Roberts was unsure whether the tough collective-

bargaining agreement his company had with the

employees' union would allow her to lay off the

24 operators of the semiautomated machines.

Reassigning the workers to other jobs might be easier, but the only positions needing to be filled

were unskilled jobs, which paid

$12.50 an hour. The extent of a

ny labor savings would depend on

negotiations with the union. Sec

ond, Roberts believed that the

PlaTech 2 would

result in even

higher levels of product quality and lower defect

rates than the company was now boasting. In

light of the ever-increasing comp

etition, this outcome might prove

to be enormous, but currently

unquantifiable, competitive importance. Finall

y, the PlaTech 2 had a theoretical maximum

capacity that was 30% higher than that of the

six semiautomated machines; but those machines

were operating at only 90% of capacity, and Robe

rts was unsure when adde

d capacity would be

needed. There was plenty of uncertainty about

the economic outlook in th

e U.S., and the latest

economic news suggested that the economies of

the U.S. might be headed for a slowdown.

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Kensington Plastics case questions

1.

Please assess the economic benefits of ac

quiring the PlaTech 2 machine (assume 210

working days per year):

a.

What is the initial investment?

b.

What are the benefits over time?

c.

What is the appropria

te discount rate?

d.

Does the net present value (NPV) warrant the investment in the machine?

2.

What uncertainties or qualitative consid

eration might influence your recommendation?

Example:

a.

Inflation

b.

Discount rate

c.

Inability to lay off existing workers

d.

A reduction in the daily operating

hours due to economic slowdown

...

Please estimate the impact on NPV from a change in at least one of those elements.

3.

Should Michael Roberts proceed with the project? Explain.

1. [7 – 3] In terms of acting, Betty White is known for starring on 3 different long running television shows (The Mary Tyler Moore Show, The Golden Girls and Hot In Cleveland). Those three shows averaged 23.7 shows per season. However, it seems that shows are producing few episodes per season, and Betty decides to put that to the test. She takes a random sample of long running television programs and determined the number of episodes in their most recent season below:

13, 26, 23, 18, 24, 18, 19, 13, 13, 15, 16, 21, 20, 16, 26

You may assume that the data comes from a normal distribution.

1. Construct a 95% confidence interval for the average number of episodes per season for a television program

2. Based on your answer to (a), can we say that the average number of episodes per season is lower than the value 23.7, the average number of episodes for the shows that Betty starred in? Explain.

2. [5] Between 2006 and 2009, Betty appeared in 23 episodes of The Bold and The Beautiful. The work was quite different from her time on sitcoms. This led her to think about the following hypotheses:

H₀: Soap opera acting is the same difficulty as sitcom acting

H_a: Soap opera acting is harder than sitcom acting

Describe what a Type I error would look like in the context of this scenario.

3. [10] While playing the role of Catherine Piper on Boston Legal, Betty White “killed” the character of Bernard Ferrion (played by Leslie Jordan). Catherine ended being found not guilty, but it led Betty to wonder: are men and women treated differently when convicted of murder? As a result, Betty took two random samples of convicted murderers, given below, and determined how long the sentences were.

Men: 25, 30, 50, 25, 20, 30, 40, 25, 30, 25, 75, 25, 15

Women: 25, 15, 20, 15, 20, 25, 15, 30, 25, 40

You may assume the data comes from normal distributions. At the .05 level of significance, is there evidence to show that men get longer sentences for murder than women?

4. [10] Betty is a common diminutive of the name Elizabeth. As a result, many people think Betty White’s real first name is Elizabeth – but how large a proportion? Betty took a random sample of 265 people and found that 147 of them believe that Betty White’s real first name is Elizabeth. At the .05 level of significance, is there evidence that a majority (more than 50%) of all people think Betty White’s real first name is Elizabeth?

(Side note: Betty White’s real first name is… Betty – she says that it isn’t “short” for anything)

5. [10] In 1995, Betty White received a star on the Hollywood Walk of Fame – and her star is right near the star of her late husband, Allen Ludden. There are many couples that both have stars on the Hollywood Walk of Fame. This led Betty to wonder – is there a difference in the age between the husband and wife when they get their Hollywood star? As a result, Betty took a random sample of heterosexual couples that both have stars on the Hollywood Walk of Fame and recorded the age at which they received their star, given below.

At the .05 level of significance, is there evidence that there is a difference in the ages when husbands and wives get their Hollywood Walk of Fame star?

6. [10] For 19 years, Betty was hostess of the Tournament of Roses Parade (which is every year before the Rose Bowl). Of all the parades on television that exist, which is the favorite? A random sample of people was taken, with the results summarized below:

At the .05 level of significance, is there an association between gender and favorite parade on television?

7. [7 – 3] Betty starred on a great number of game shows – and perhaps my favorite was Match Game. While Betty was a great player, did she do better with some contestants than others? Betty took a random sample of Match Game episodes and found that she matched the male contestants 264 out of 385 times and matched the female contestants 294 out of 377 times.

1. Construct a 95% confidence interval for the difference in the proportion of the time Betty would match male contestants and the proportion of the time Betty would match female contestants.

2. Based on your answer to (a), can we conclude that Betty matched one group of contestants better than the other?

8. [12] There is a Facebook group devoted to The Golden Girls. On a regular basis, the group poses the question: Which Golden Girl was your favorite? A recent random sample of members of the Facebook group answered the question, given in the table below.

At the .05 level of significance, is there evidence to show that the distribution of favorite Golden Girls character is not uniform? (meaning, not an equal distribution)

9. [3 – 5 – 3 – 2 – 2] In 2010, Betty White (at age 88!) hosted an episode of Saturday Night Live, becoming the oldest host the show has ever had. Most people know that she was the oldest. However, what about the second oldest? Do people have an idea how old the second oldest guest host was? A random sample of people was taken; these people were asked two questions: what is your age (x) and what do you believe is the age of the second oldest SNL host?

Note: the second oldest SNL guest host was Miskel Spillman at age 80 (in 1977) who won a contest and is the only non-celebrity to host the show.

1. Draw a scatterplot for this set of data

2. Find the linear correlation coefficient. Based on that value, is there evidence of a linear relationship between the variables? Explain.

3. Find the line of best fit.

4. Predict the value of y given the value of x = 40

5. Find the residual for x = 40.

10. [5] Suppose that it can be shown that there is evidence of the following: There is a strong association between Betty White being a star on a show and Professor Simpson watching that show religiously.

Claim: By having Betty White star on a television show will guarantee Professor Simpson watches the show religiously.

What is the issue with this claim?

11. [6] While on Hot In Cleveland, Betty White was part of 2 live episodes. Not surprisingly, this increased her stress level. What about other actors? Stress scores follow a normal distribution with a mean of 3 and a standard deviation of 1.15. If a sample of 25 actors are taken, what is the probability that their average stress score is above 3.1?

After reading the case that is below, How can a foreign company entering China ensure that it tackles the most important “little” things that end up being huge barriers to success as we approach the year 2020 when China is expected to have significantly increased purchasing power among its middle class?​ Write your opinion, as a manager, on how to face cultural issues like those described in the case, when entering foreign markets.

The People's Republic of China opened up to foreign investments in the late 1970s. Since that time, numerous companies have tried to establish operations and sell their products to customers in China. Many more companies will try in the years to come—China is expected to have some 190 million people in the middle- and upper-income categories by 2020. This is an increase from only about 17 million people in these income brackets as recently as in 2010. China's purchasing power for virtually all products and services has strong potential, and foreign companies will seek these market opportunities. What have we learned culturally that can help Western-based companies in China's marketplace?

Some background on China can serve as a starting point for better understanding the culture in China and what some well-known companies such as Best Buy and eBay have done to target the Chinese marketplace. The motivation for many foreign companies to enter China—beyond those that have been there for a few decades for reasons of low-cost production—was the triple growth of the Chinese economy that was seen from 2000 to 2010. China overtook Japan to become the second-largest economy in the world behind only the United States, and its large population makes for an enormous target market. Investment from foreign companies was the largest driver of China's growth in the decade from 2000 to 2010. However, many companies also increased their exports to China. The United States, for example, saw its companies increase exports to China by 542 percent from 2000 to 2011 (from about $16.2 billion to $103.9 billion), while total exports to the rest of the world increased by only 80 percent in the same time period.

Interestingly, while foreign investments grew, domestic consumption as a share of the Chinese economy declined from 46 percent in 2000 to 33 percent in 2010. This consumption decline—coupled with slower growth globally and, ultimately, the worldwide economic downturn that started in 2008—raised questions about China's momentum. Right now, around 85 percent of mainstream Chinese consumers are living in the top 100 wealthiest cities. By the year 2020, these advanced and developing cities will have relatively few customers who are lower than the middle- and upper-income brackets by Chinese standards. The expectation is that these consumers will be able to afford a range of products and services, such as flat-screen televisions and overseas travel, making the Chinese customer much more of a target for a wide variety of consumption. This begs the question, can the unprecedented Chinese growth really continue, and would it come from increased consumption?

The resounding answer is yes according to research conducted by McKinsey & Company. McKinsey found that barring another major economic shock similar to what we saw in 2008, China's gross domestic product (GDP) will continue to grow, albeit not at the historic levels seen between 2000 and 2010 when it grew about 10.4 percent annually. The growth from 2010 to 2020 is expected to be about 7.9 percent per year, which is still far above the expected growth for the United States (2.8 percent annually), Japan (1.2 percent annually), and Germany (1.7 percent annually)—the three countries among the top four worldwide economies along with China. And, the key is that consumption will now be the driving force behind the growth instead of foreign investment. The consumption forecast opens up opportunities for foreign companies to engage with Chinese consumers who are expected to have more purchasing power and discretionary spending.But culturally translating market success from one country or even a large number of countries to the Chinese marketplace is not necessarily as straightforward as it may seem. Often, a combination of naiveté, arrogance, and cultural misunderstanding have led many well-known companies to fail in China. Lack of an understanding of issues such as local demands, buying habits, consumption values, and Chinese customers' personal beliefs led to struggles for companies that had been very successful elsewhere in the world. Let's take a brief look at Best Buy and eBay as two examples.

Best Buy, the mega-store mainly focused on consumer electronics, was founded in 1966 as an audio specialty store. Best Buy entered China in 2006 by acquiring a majority interest in China's fourth-largest appliance retailer, Jiangsu Five Star Appliance, for $180 million. But culture shock hit Best Buy, best described by Shaun Rein, the founder of China Market Research Group. He pointed to a few reasons for this culture shock and lack of success. First, the Chinese will not pay for Best Buy's overly expensive products unless they are a brand like Apple. Second, there is too much piracy in the Chinese market, and this reduces demand for electronics products at competitive market prices. Third, like many Europeans, the Chinese do not want to shop at huge mega-stores. So, these three seemingly easy-to-understand cultural issues created difficulties for Best Buy. Solving these issues, Best Buy believed that it would have to develop and implement a different business model for the Chinese market than it has used, for example, in the United States. Now, how far should a company go outside its normal business model to adhere to cultural values and beliefs of a new market? Strategically moving forward, Best Buy opted to close all of its Best Buy–branded stores in China and focus on its wholly owned local Jiangsu Five Star chain of stores. But will this new strategic business model be successful with the new makeup of customers in China expected by 2020?

eBay, the popular e-business site focused on consumer-to-consumer purchases, was founded in 1995. The company was one of the true success stories that lived through the dot-com bubble in the 1990s. It is now a multi-billion-dollar business with operations in more than 30 countries. But China's unique culture created problems for eBay in that market. Contrary to the widespread cultural issues that faced Best Buy, one company in particular (TaoBao) and one feature more specifically (built-in instant messaging) shaped a lot of the problems that eBay ran into in China. Some 200 million shoppers are using TaoBao to buy products, and the company accounts for almost 80 percent of online transaction value in China. Uniquely, TaoBao's built-in instant messaging system has been cited as a main reason for its edge over eBay in China. Basically, customers wanted to be able to identify a seller's online status and communicate with them directly and easily—a function not seamlessly incorporated into eBay's China system. Clearly, built-in instant text messaging is a solvable obstacle in doing business in China. It sounds easy now when we know about it, but may not always be the case when we take into account all the little things that are important in a market.

MARKETING ANALYTICS: Case Study                       Name: ____________________

                                                                                                       Date:     ________________________

Background

You have been promoted to Vice President of Marketing for ACME CPG, Inc. ACME sells consumer packaged goods (CPG) to its customers in the United States. ACME competes against other CPG companies, such as Procter & Gamble with brands such as Tide laundry detergent and Ivory soap, as well as Unilever, with brands such as Sun laundry detergent and Dove soap.

Customers mostly know ACME CPG for its line of environmentally friendly all-purpose cleaners. ACME prides itself on its non-toxic formula, safe for homeowners along with their children and pets. ACME has diversified beyond all-purpose cleaners to include stainless steel cleaner, pet stain remover, deck & fence cleaner, concrete and driveway cleaner, car wash, barbecue grill cleaner, carpet cleaner, floor cleaner, glass cleaner, and all-purpose wipes.

ACME CPG is considering expanding its product line to include laundry detergent. The company faces stiff competition but believes it can compete because of the stellar reputation of its environmentally-friendly brand.

ACME CPG management has asked you to estimate the size of the market to assess whether it is financially worthwhile to enter the market. To conduct a thorough approach to the problem, you plan to estimate the size using several different techniques, and then aggregate the results. Specifically, you will estimate the size using multiple approaches:

• Available industry analyst reports
• Government sources, such as Census data
• Top-Down estimation methods
• Bottom-Up estimation methods

Industry Analyst Reports

You learn that industry analyst firm SymphonyIRI Group (iriworldwide.com) has estimated the total size of the US laundry detergent market:

Fact 1: Laundry detergent accounted for $7.2 billion of sales for the 52 weeks ended Nov. 4, 2012.

Source: Branna, Tom. “Where’s the Bounce?” Household and Personal Products Industry (HAPPI) website. January 21, 2013.

http://www.happi.com/issues/2013-01/view_features/wheres-the-bounce/

Government Sources

You wonder how this industry analyst estimate compares with the Industry Statistics Sampler available through the U.S. Census Bureau. You conduct an Internet search and find the North American Industry Classification System (NAICS) code information you need:

Fact 2: United States Census Bureau data for 2007 Census:

NAICS 325611: Soap and other detergent manufacturing: $26.371 billion

NAICS 32561146 Household dry and liquid laundry detergents, heavy-duty: $6.734 billion

Source: U.S. Census Bureau, Industry Statistics Sampler, NAICS 325611 Soap and other detergent manufacturing.

Top-Down Estimation Methods

Having determined the industry analyst and government data, you proceed to the next step, which is to estimate the size using top-down techniques. To perform the top-down technique, we will need to know the total “universe” of detergent-using entities in the United States (i.e., households who do laundry), how many loads of laundry they wash per year, and the average cost of detergent per load. Luckily, we are able to find all of the facts we need:

Fact 3: Number of U.S. Households (designated as “HH” in U.S. Census Bureau data) in 2010 Census:

U.S. Households (HH) in 2010: 114.8 million

Source: U.S. Census Bureau, “Current Population Reports: Projections of the Number of Households and Families in the United States: 1995 to 2010.” April 1996

http://www.census.gov/prod/1/pop/p25-1129.pdf

Fact 4: Average number of loads of laundry washed per year per household: 400 loads/year.

The article mentions the impact of children on the loads of laundry washed, so we assume the figure refers to loads/year washed by households with children.

Source: California Energy Commission, “Consumer Energy Center: Appliances: Clothes Washers.”

Fact 5: Average cost of detergent per load of laundry: $0.23/ load

Source: Consumer Reports, “Laundry Detergent Test: High Price Doesn’t Guarantee High Performance.” June 1, 2010.

At this point, you have the data you need to estimate the market size using top-down techniques.

1. Estimate the size of the U.S. laundry detergent market using the Top-Down approach using the data given.

Bottom-Up Estimation Methods

Next, you estimate the market size using bottom-up techniques. You research the space and learn that different types of households have different laundry-washing behaviors. Specifically, you learn that married couples (especially those with children) wash many more loads of laundry than bachelors. You examine U.S. Census data and learn that the government breaks down households into three segments: Married Couples, Male Householder, and Female Householder. You obtain the data for each segment:

Fact 6: Breakdown of U.S. Households, according to 2010 U.S. Census Bureau data:

Married Couples: 58.4 million

Female Householder: 35.3 million

Male Householder: 23.8 million

Source: U.S. Census Bureau, “America’s Families and Living Arrangements: 2010.”

http://www.census.gov/population/www/socdemo/hh-fam/cps2010.html

Armed with this information, you set out to estimate the market size using bottom-up techniques. In general, the bottom-up approach will sum up usage from each segment like this:

Total Usage     =    Usage from Married Couples Households (i.e. Segment 1)

                           + Usage from Female Householder (i.e. Segment 2)

                           + Usage from Male Householder (i.e. Segment 3)

We can express this as follows:

Total Usage      = (Married HH * #Loads/yr) + (Female HH * #Loads/yr) + (Male HH * Loads/yr) * $cost/load

We assume that behavior for each segment will be different. We make the assumption that married households (especially those with children) will wash more laundry than female households, who in turn will wash more laundry than male households. We will need to quantify (or estimate) the difference in behavior as we calculate the bottom-up value.

2. Estimate the size of the U.S. laundry detergent market using the Bottom-Up approach.

Aggregating the Data

You decide to combine the values you estimated. In this process, if you feel particularly strongly about the accuracy of one of the methods, you can weight it higher or lower than the others. Alternatively, you can perform a simple arithmetic average.

3. Submit a final estimate by triangulating the data from the different approaches.

PEST Market Trend Analysis

You complete your analysis by conducting a PEST market trend analysis to predict the future state of the U.S. laundry detergent market, based on current market forces.

4. Conduct a PEST market trend analysis for the laundry detergent market in the United States, please refer to data from the top-down and bottom-up.

CASE 2

Mark Hobson is an internal auditor employed by Com­ stock Industries. He is nearing completion of an audit of the Avil Division conducted during the first five weeks of the year. The Avil Division is one of three manufacturing divisions in Comstock and manufactures inventories to supply about 50 percent of Comstock's sales. In addition to the manufacturing divisions, Comstock has two marketing divisions (domestic and international) and a technical service division that offers worldwide technical support. Each customer is assigned to the most suitable manufacturing division, which functions as the supplier for that customer. The manufacturing division then approves the customer's credit, ships against orders obtained by the sales representatives, and collects the customer receivables when due. This allows order-to-order monitoring of customer credit limits against customer orders received.

Two Potential Observations

Two items concern Mark. First, there was a material dollar amount of inventory of part number A2 still carried on the Avil books at year-end, despite the fact that the Fast-tac machining component in which part A2 was used is now considered the first generation and is no longer manufactured. Company policy requires an immediate write-off of all obsolete inventory items. Second, some accounts receivable still carried as collectible at year-end were more than 180 days old. All receivables are due in 30 days, which is standard for the industry. Mark believes many of these old accounts are uncollectible.

The division manager's administrative assistant, Brenda Wilson, performed the aging- of accounts receivable rather than the division accountant, as is standard practice. The division accountant refused to discuss the circumstances of Brenda's actions.

The Auditee's Comments

Mark scheduled a meeting with Brenda to discuss his concerns.

"Well, Mark," Brenda responded, "I know that policy requires that obsolete inventories be written off; but part A2 is just not being used at present. We might start to make those Fast-tac components again. Who knows? Wide ties are coming back again, aren't they? Fast-tac could, too. There are plenty of customers, especially in the third world, that are finding those second- and third-generation machines pretty expensive to maintain. I mean, there is a policy that states obsolete inventories should be written off, but there is no policy defining an obsolete part."

"And as for those receivables,” Brenda continued, "that is certainly a judgment call, too. Who knows if those accounts will be collected? We're in a slight recession now. When things pick up, we'll probably collect a few. There isn't even a policy in this division on writing off receivables. I checked. Nothing says I have to write them off. So who are you to say I have to?"

“'Brenda, be straight. You know those parts will never be used. And you know those receivables are bad."

"Look, Mark," Brenda finally bargained, "it's only two weeks from the close of the year. Let's let these items ride till after the close so that everyone gets their bonuses. Then, I promise I'll take a fresh look at both inventories and receivables. I'll write them down after year-end after the financial reports are issued. No one will know. And, after all, who's to be hurt?"

The Division Manager

Mark continued his audit, drafted his report containing observations related to the inventory and receivables, and reviewed the report with the division manager, Hal Wright. Hal was visibly disturbed.  

"Gee, Mark, this couldn't have come at a more awkward time. Our figures just passed muster by the independent outside auditors. There was a guy out here for our inventory count in November, and Brenda already sent her spreadsheet on year-end receivables to corporate head­ quarters. No one up there, in our group or on the CPA audit team, was the least bit critical. If you go raising a big stink, particularly now, the independent outside auditors will catch us writing off inventory and receivables, they'll adjust profit, and there will be hell to pay for all of us. And, Mark, this is no clear-cut issue either. I mean, I can see how you can write a report calling for clearer policy, but not one calling for specific write-downs. That's way out of your jurisdiction. But still, I promise, we'll look at all this after our statements go to bed. Right now, I feel the managers of this division have worked their hearts out and I intend to fight to protect what little bonuses they have coming. If we write down as you suggest, those bonuses will go and the stockholders will lose too. Earnings per share (EPS) will drop like a rock. They might even close this division. Now you don't want that, do you, boy?"  

"Well, Hal, I could word my observations as they are in the draft but include your response." Hal was suddenly angry. "What? And let the audit committee decide the issue? They have nothing to do with this. They accepted the CPA’s report. If you want to make the audit committee happy, you'll accept it, too, and leave this adjustment stuff alone."

The Internal Audit Director
Concerned, Mark delayed finalizing his report and discussed the draft with Gail Wu, director of internal audit. Gail is not trained as an auditor and was promoted to director of internal audit from corporate finance so that she might develop a better understanding of operating relationships. Still, Gail is very smart and Mark has always respected her opinion. The discussion was by telephone, with Mark still at the Avil Division headquarters and Gail at the corporate office.

"Mark, Hal is right. If you, in essence, blow the whistle on management bonuses this year, we can kiss goodbye all the goodwill I've been struggling to build for this department. It will all go out the window."

"I know you've been trying to put us on a better footing, Gail, but Hal is intractable. As far as he is concerned, the only observation he will accept in the report is that of deficient policy, with nothing mentioned about the inventory or receivables needing adjustment."

"Well, do what you have to," Gail ended the discussion. "But I insist that you submit a report that Hal agrees to and has signed. I don't want to stir up hornets and then have to try to explain my loose cannon to the board when everyone is howling about the bonus problem."

1. Refer to The IIA’s Code of Ethics. Identify three specific Rules of Conduct relevant to this case.
2. Using the Rules of Conduct you identify as the context, discuss the ethical issues raised in the case.
3. Discuss how the ethical dilemma Mark faces might have been avoided. In other words, discuss specific things Comstock's management and/or the internal audit function might have done to reduce the risk of such a situation arising.
4. Clearly indicate what you would do if you found yourself in Mark's position. Briefly explain why.

The movie industry is a competitive business. The opening weekend gross sales ($ millions), the total gross sales ($ millions), the number of theaters the movie was shown in, and the number of weeks the movie was in release are common variables used to measure the success of a movie. Data on the top 100 grossing movies released in 2016 (Box Office Mojo website) are contained in the attached Excel file. We will use the numerical methods of descriptive statistics discussed in Chapter 3 to create a report of our findings.

1. Find descriptive statistics, including the mean, median, mode, range, standard deviation, and quartiles, for each of the four variables described above. Discuss what the statistics you find tell us about the movie industry.

2. According to Total Gross Sales, what movies if any, should be considered high-performance outliers? Explain how you arrived at your answer mathematically. (Use the method on p. 134 for detecting outliers.) Round any calculations/data to two decimal values.

3. Compute descriptive statistics showing the relationship between total gross sales and each of the other variables. These need to include the covariance and correlation coefficient. Discuss the relationships.

If this client were to be seen on an ongoing basis, describe the types of change or outcomes one could realistically expect to see in this client, in light of the problems mentioned earlier using the identified approach in therapy. Be specific and show how the process of therapy with this counseling approach would lead to the outcomes intended .Utilize either of the following theories: Gestalt, Behavior, or CBT

Background Data

A brief description of data from the intake form is provided here:

            Age: 39

            Sex: Female

            Race: Caucasian

            Marital Status: Married

            Socioeconomic Status: Middle class

            Appearance: Dresses meticulously, is overweight, fidgets constantly with her clothes,

            avoids eye contact, and speaks rapidly.

            Living Situation: Recently graduated from college as an elementary-education major,

            Lives with husband (John, 45) and her children (Rob, 19; Jennifer, 18; Susan, 17; and

            Adam, 16).

Presenting Problem

Client reports general dissatisfaction. She says her life is rather uneventful and predictable, and she feels some panic over reaching the age of 39, wondering where the years have gone. For 2 years she has been troubled with a range of psychosomatic complaints, including sleep disturbances, anxiety, dizziness, heart palpitations, and headaches. At times she has to push herself to leave the house. Client complains that she cries easily over trivial matters, often feels depressed, and has a weight problem.

History of Presenting Problem

Client’s major career was as a housewife and mother until her children became adolescents. She then entered college part time and obtained a bachelor’s degree. She has recently begun work toward a credential in elementary education. Through her contacts with others at the university, she became aware of how she has limited herself; how she has fostered her family’s dependence on her own life. As a part of the course, she participated in self-awareness groups, had a few individual counseling sessions, and wrote several papers dealing with the turning points in her own life. One of the requirements was to write an extensive autobiography based on an application of the principles of the counseling course to her own personal development. This course and her experiences with fellow students in it acted as a catalyst in getting her to take an honest look at her life. Ruth is not clear at this point who she is, apart from being mother, wife, and student. She realizes that she does not have a good sense of what she wants for herself and that she typically lived up to what others in her life wanted for her. Ruth has decided to seek individual counseling to explore her concerns in several areas:

• A physician whom she consulted could find no organic or medical basis for her physical symptoms and recommended personal therapy. In her words, her major symptoms are these: “I sometimes feel very panicky, especially at night when I’m trying to sleep. Sometimes I’ll wake up and find it difficult to breathe, my heart will be pounding, and I’ll break out in a cold sweat. I toss and turn trying to relax, and instead I feel tense and worry a lot about many little things. It’s hard for me to turn off these thoughts. Then during the day I’m so tired I can hardly function, and I find that lately I cry very easily if even minor things go wrong.”
• Ruth is aware that she has lived a very structured and disciplined life, that she has functioned largely by taking care of the home and the needs of her four children and her husband, and that to some degree she is no longer content with this. Yet she reports that she doesn’t know what “more than this” is. Although she would like to get more involved professionally, the thought of doing so frightens her. She worries about her right to think and act selfishly, she fears not succeeding in the professional world, and most of all she worries about how becoming more professionally involved might threaten her family.
• Ruth’s children range in age from 16-19, and all of them are not finding more of their satisfactions outside the family and the home are spending increasing time with their friends. Ruth sees these changes and is concerned about “losing” them. She is having particular problems with her daughter Jennifer, and she is at a loss how to deal with Jennifer’s rebellion. In general, Ruth feels very much unappreciated by her children.
• In thinking about her future, Ruth is not really sure who or what she wants to become. She would like to develop a sense of herself apart from the expectations of others. She finds herself wondering what she “should” want and what she “should” be doing. Ruth does not find her relationship with her husband, John, at all satisfactory. He appears to be resisting her attempts to make changes and prefers that she remain as she was. But she is anxious over the prospects of challenging this relationship, fearing that if she does she might end up alone.
• Lately, Ruth is experiencing more concern over aging and losing her “looks.” All of these factors combined have provided the motivation for her to take the necessary steps to initiate individual therapy. Perhaps the greatest catalyst that triggered her to come for therapy is the increase of her physical symptoms and her anxiety.

Psychosocial History

Client was the oldest of four children. Her father is a fundamentalist minister, and her mother, a housewife. She describes her father as distant, authoritarian, and rigid; her relationship with him was one of unquestioning, fearful adherence to his rules and standards. She remembers her mother as being critical, and she thought that she could never do enough to please her. At other times her mother was supportive. The family demonstrated little affection. In many ways Ruth took on the role of caring for her younger brother and sisters, largely in the hope of winning the approval of her parents. When she attempted to have any kind of fun, Ruth encountered her father’s disapproval and outright scorn. To a large extent this pattern of taking care of others has extended throughout her life.

      One critical incident took place when Ruth was 6 years old. She reported: “my father caught me ‘playing doctor’ with an 8-year-old boy. He lectured me and refused to speak to me for weeks. I felt extremely guilty and ashamed.” It appears that Ruth carried feelings of guilt into her adolescence and that she repressed her own emerging sexuality.

      In her social relationships Ruth had difficulty making and keeping friends. She felt socially isolated from her peers because they viewed her as “weird.” Although she wanted the approval of others, she was not willing to compromise her morals for fear of consequence.

      She was not allowed to date until she completed high school. At the age of 19 she married the first person that she dated. She used her mother as a role model by becoming a homemaker.

Explain at least three counseling techniques or core principles from the chosen counseling theory that could be used to address the primary and secondary problems of this client. Explain how each of these techniques or principles would be applied in the counseling session and the expected outcome of each.

Utilize either of the following theories: Gestalt, Behavior, or CBT.

Background Data

A brief description of data from the intake form is provided here:

            Age: 39

            Sex: Female

            Race: Caucasian

            Marital Status: Married

            Socioeconomic Status: Middle class

            Appearance: Dresses meticulously, is overweight, fidgets constantly with her clothes,

            avoids eye contact, and speaks rapidly.

            Living Situation: Recently graduated from college as an elementary-education major,

            Lives with husband (John, 45) and her children (Rob, 19; Jennifer, 18; Susan, 17; and

            Adam, 16).

Presenting Problem

Client reports general dissatisfaction. She says her life is rather uneventful and predictable, and she feels some panic over reaching the age of 39, wondering where the years have gone. For 2 years she has been troubled with a range of psychosomatic complaints, including sleep disturbances, anxiety, dizziness, heart palpitations, and headaches. At times she has to push herself to leave the house. Client complains that she cries easily over trivial matters, often feels depressed, and has a weight problem.

History of Presenting Problem

Client’s major career was as a housewife and mother until her children became adolescents. She then entered college part time and obtained a bachelor’s degree. She has recently begun work toward a credential in elementary education. Through her contacts with others at the university, she became aware of how she has limited herself; how she has fostered her family’s dependence on her own life. As a part of the course, she participated in self-awareness groups, had a few individual counseling sessions, and wrote several papers dealing with the turning points in her own life. One of the requirements was to write an extensive autobiography based on an application of the principles of the counseling course to her own personal development. This course and her experiences with fellow students in it acted as a catalyst in getting her to take an honest look at her life. Ruth is not clear at this point who she is, apart from being mother, wife, and student. She realizes that she does not have a good sense of what she wants for herself and that she typically lived up to what others in her life wanted for her. Ruth has decided to seek individual counseling to explore her concerns in several areas:

• A physician whom she consulted could find no organic or medical basis for her physical symptoms and recommended personal therapy. In her words, her major symptoms are these: “I sometimes feel very panicky, especially at night when I’m trying to sleep. Sometimes I’ll wake up and find it difficult to breathe, my heart will be pounding, and I’ll break out in a cold sweat. I toss and turn trying to relax, and instead I feel tense and worry a lot about many little things. It’s hard for me to turn off these thoughts. Then during the day I’m so tired I can hardly function, and I find that lately I cry very easily if even minor things go wrong.”
• Ruth is aware that she has lived a very structured and disciplined life, that she has functioned largely by taking care of the home and the needs of her four children and her husband, and that to some degree she is no longer content with this. Yet she reports that she doesn’t know what “more than this” is. Although she would like to get more involved professionally, the thought of doing so frightens her. She worries about her right to think and act selfishly, she fears not succeeding in the professional world, and most of all she worries about how becoming more professionally involved might threaten her family.
• Ruth’s children range in age from 16-19, and all of them are not finding more of their satisfactions outside the family and the home are spending increasing time with their friends. Ruth sees these changes and is concerned about “losing” them. She is having particular problems with her daughter Jennifer, and she is at a loss how to deal with Jennifer’s rebellion. In general, Ruth feels very much unappreciated by her children.
• In thinking about her future, Ruth is not really sure who or what she wants to become. She would like to develop a sense of herself apart from the expectations of others. She finds herself wondering what she “should” want and what she “should” be doing. Ruth does not find her relationship with her husband, John, at all satisfactory. He appears to be resisting her attempts to make changes and prefers that she remain as she was. But she is anxious over the prospects of challenging this relationship, fearing that if she does she might end up alone.
• Lately, Ruth is experiencing more concern over aging and losing her “looks.” All of these factors combined have provided the motivation for her to take the necessary steps to initiate individual therapy. Perhaps the greatest catalyst that triggered her to come for therapy is the increase of her physical symptoms and her anxiety.

Psychosocial History

Client was the oldest of four children. Her father is a fundamentalist minister, and her mother, a housewife. She describes her father as distant, authoritarian, and rigid; her relationship with him was one of unquestioning, fearful adherence to his rules and standards. She remembers her mother as being critical, and she thought that she could never do enough to please her. At other times her mother was supportive. The family demonstrated little affection. In many ways Ruth took on the role of caring for her younger brother and sisters, largely in the hope of winning the approval of her parents. When she attempted to have any kind of fun, Ruth encountered her father’s disapproval and outright scorn. To a large extent this pattern of taking care of others has extended throughout her life.

      One critical incident took place when Ruth was 6 years old. She reported: “my father caught me ‘playing doctor’ with an 8-year-old boy. He lectured me and refused to speak to me for weeks. I felt extremely guilty and ashamed.” It appears that Ruth carried feelings of guilt into her adolescence and that she repressed her own emerging sexuality.

      In her social relationships Ruth had difficulty making and keeping friends. She felt socially isolated from her peers because they viewed her as “weird.” Although she wanted the approval of others, she was not willing to compromise her morals for fear of consequence.

      She was not allowed to date until she completed high school. At the age of 19 she married the first person that she dated. She used her mother as a role model by becoming a homemaker.

“what’s wrong with the Team?”

What’s wrong with the team? What’s wrong with the team? Nichole Dyer’s words repeated over and over in Henry Rankin’s mind as he boarded the plane from Los Angeles to Chicago. Rankin was responsible for the technical implementation of the new customer re- lationship management (CRM) software being installed for western and eastern sales offices in both cities. The software was badly needed to improve follow-up sales for his company, Reflex Systems. Reflex sold exercise equipment to high schools and colleges, as well as to small and midsize businesses for recreation centers, through a national force of 310 salespeople. The company’s low prices won a lot of sales; however, follow- up service was uneven and the new CRM system promised to resolve those problems with historical data, inquiries, reminders, and updates going to sales reps daily. The CEO of Reflex ordered the CRM system installed with all possible haste. Rankin pulled a yellow pad and pen from the side pocket of his carry-on bag and tossed it in the seat beside the window, stashed the bag in the overhead compartment, and sat down as other passengers filed past. In an effort to shut out his thoughts, he closed his eyes and concentrated on the muffled voices and low whooshing sound of the air vents. His thoughts were suddenly interrupted as a kid around 10 or 11 years old plopped into the seat beside him, shot him one of those pre-teen, “Do I have to ride with you?” looks, opened a Harry Potter book, and started reading. Rankin was grateful to have the kid as his seatmate rather than the non-stop talkers he was sometimes paired with on flights. He needed time to think, and doodling on a pad was his way of sorting his thoughts. He wrote what’s wrong with the team three times and began drawing arrows to circles bearing the names of his team members: Barry Livingston and Max Wojohowski in LA, and Bob Finley, Lynne Johnston, and Sally Phillips in Chicago. He marked through Sally’s name. She had jumped ship recently, taking her less-than-stellar but much-needed talents with her to another company. It was on a previous LA-to-Chicago flight that Sally had pumped him for feedback on her future with Reflex. She had in- formed him that she had another job offer. She admitted it was less money, but she was feeling under pressure as a member of the team and she wanted more “quality of life.” Rankin told Sally bluntly that her technical expertise, on which he placed top impor- tance, was slightly below that of her peers, so future promotion was less likely despite her impressive people and team skills. He wrote quality of life, circled it, and then crossed it out and wrote what the hell? “Why should she get quality of life?” he mused. “I’ve barely seen my wife and kids since this project started.” Rankin’s team was under a great deal of pressure and he had needed Sally to stick it out. He told her so, but the plane had barely touched down when she went directly to the office and quit, leaving the team short-handed and too close to deadline to add another body. What’s wrong with the team? Rankin furiously scribbled as his thoughts raced: (1) The deadline is ridiculously short. Dyer had scheduled a ten-week completion deadline for the new CRM software, including installation and training for both cities. He sud- denly stopped writing and drew a rider and horse, then returned to his list. (2) I feel like some frazzled pony-express rider running back and forth across the country, trying to develop, build, set up, and work the kinks out of a new system that everyone at Reflex is eager to see NOW. He was interrupted by the flight attendant. “Would you care for a drink, sir?” “Yes. Make it a scotch and water. And be light on the water.” The boy beside him shot a grimacing look and for a brief moment, Rankin felt—then squelched—the impulse to stick out his tongue at the kid. Rankin took his drink and continued to write. (3) Thank God for LA. From the outset, Barry and Max had worked feverishly while avoiding the whining and com- plaining that seemed to overwhelm members of the Chicago team. The atmosphere was different. Although the project moved forward, meeting deadlines, there appeared to be less stress. The LA guys focused tirelessly on work, with no families to consider, alternating intense work with joking around. “Those are my kind of people,” Rankin thought. (4) But there is Chicago, he wrote. Earlier in the day, Sam Matheny from sales had e-mailed, then called, Rankin to tell him the two remaining members of the Chicago team appeared to be alternating between bickering and avoiding one an- other. Apparently this had been going on for some time. “What’s with that?” Rankin wondered. “And why did Sam know and I didn’t?” So that morning, before his flight, Rankin had to make time to call and text both Finley and Johnston. Finley admitted he had overreacted to Johnston. “Look, man. I’m tired and stressed out,” Finley said. “We’ve been working non-stop. My wife is not happy.” “Just get along until this project is completed,” Rankin ordered. “When will that be?” Finley asked before hanging up. Rankin thought about Dyer’s persistent complaints to him that the team appeared to have a lack of passion, and she admonished him to “get your people to understand the urgency of this project.” Her complaints only added to his own stress level. He had long considered himself the frontrunner for Dyer’s job when she retired in two years. But had his team ruined that opportunity? The sense of urgency could be measured now in the level of stress and the long hours they had all endured. He admitted his team members were unenthusiastic, but they seemed committed. Rankin scribbled a final note on the pad: Is it too late to turn around and restore the level of teamwork? He tore off the sheet, crumpled it in his hand, and stared out the window.

Discussion Questions 1. How would you characterize Rankin’s leadership approach (task/results versus people/values)? What approach do you think is correct for this situation? Why?

2. What would you do now if you were Rankin? How might you awaken more en- thusiasm in your team for completing this project on time? Specify the steps you would take.

3. How would you suggest that Rankin modify his leadership style if he wants to succeed Dyer in two years? Be specific.