Explain in your view, four limiting factors for material cost determination in a major university like the University of Ghana and what process would you use to collect the cost.

A company borrows $35000 at 14.75% simple interest from State Bank to purchase equipment. State Bank requires the company to make monthly interest-only payments and pay the full $35000 at the end of 10 years. In order to meet the 10 year obligation of $35000,the company makes equal deposits at the end of each month into a sinking fund with Wolf Savings. The sinking fund earns 6.75% compounded monthly. Note: This problem is set to allow for an answer of a specific tolerance. Be careful in your rounding. You may get some answers correct but not be in the range of answers for the others.

a. State the monthly interest payment to State Bank (rounded normally to the next cent).

b. State the amount of the equal monthly deposits to Wolf Savings, rounded normally to the next cent.

c. State the sinking fund balance at the end of 8 years.

d. State the total amount of interest earned on the sinking fund at the end of 8 years.

Moon Star Company obtained two notes receivable during the year of 2019. The details of the notes are as follows:

October 3, 2019 Sold goods for $24,000 on account to a customer (Sun Company) and received 8% note. The note was due on October 18, 2019.

December 5, 2019 Received 13% note for $15,000 to replace account receivable from a customer (Strong Company). The note was due on January 5, 2020.

Instructions (35 points):

a. Compute maturity value of the note receivable received on October 3 (Show supporting calculations.)

b. Journalize the collection of the note which was due on October 18, 2019.

c. Journalize the adjusting entry at December 31, 2019 to record accrued interest.

d. Compute total interest revenue earned on the note receivable received on December 5, 2019 (Show supporting calculations.)

e. Journalize the collection of the note which was due on January 5, 2020.

Exercise 9-03 Blue Company follows the practice of pricing its inventory at LCNRV, on an individual-item basis. Item No. Quantity Cost per Unit Estimated Selling Price Cost to Complete and Sell 1320 1,800 $3.90 $5.49 $1.95 1333 1,500 3.29 4.15 1.22 1426 1,400 5.49 6.10 1.71 1437 1,600 4.39 3.90 1.65 1510 1,300 2.75 3.97 1.71 1522 1,100 3.66 4.76 0.98 1573 3,600 2.20 3.05 1.46 1626 1,600 5.73 7.32 1.83 From the information above, determine the amount of Blue Company inventory. The amount of Blue Company’s inventory $enter The amount of Blue Company’s inventory in dollars. PLEASE SHOW WORK

Enterprise Transformation at Trustworthy Insurance

CIO Sheila Lee had every reason to be pleased with herself on this crisp winter day. She smiled at her image in the ladies room mirror as she checked her suit jacket. A petite Asian who dressed with flair, she had recently been recognized as one of the country’s top 100 most powerful women. A newcomer to Trustworthy Insurance’s executive leadership team, she had successfully delivered a huge new enterprise initiative that was central to her company’s transformation strategy—on time and on budget. Concerto Insurance was North America’s first fully online direct insurance business—and a new brand of its parent company, Trustworthy Insurance. For the first time, customers could obtain a fully binding quote for their car or home insurance directly online and purchase it without the need to go through a customer service representative or insurance broker to finalize the deal.

Although it was entirely ITbased, Concerto had been a significant undertaking for the entire company, Sheila reflected, as she walked down the hall to the boardroom. She couldn’t have done it without the CEO’s support and that of the entire business leadership team. When Sheila joined Trustworthy Insurance two years ago it was a midsized multichannel insurance company founded in 1871 with premiums of more than $2 billion annually and $6 billion in assets. Over the years it had experienced considerable growth and change through the acquisition of a number of different brands, including a pet insurance division and a commercial insurance division. Until Concerto, however, its business model had essentially remained the same. It relied on its network of independent brokers who worked in agencies across the country to recommend Trustworthy products. But as CEO Kelly Mason noted in a shareholders’ meeting three years’ ago, the insurance industry was changing rapidly and companies that didn’t keep pace would be left behind. “We have a vision of becoming a top property and casualty insurer,” she had said. “Our executive leadership team is committed to growing our business and we want to deliver the best possible products and service to our customers. We can’t do this simply by doing business in the same old way. We have a great broker network and we’re fully supportive of it, but our research shows that there are many customers we are not reaching.

Even excluding the impact of our investment in Concerto, our adjusted combined ratio is still 104.6 percent, which is too high. And we expect our strategic investments will continue to increase operating expenses over the next few years. However, we hope these investments will begin to improve our operational efficiency over the next few quarters and expect to see profitable growth in the longer term as a result. A key challenge in addressing these numbers has been our underwriting performance that has been poorer than expected. As you know, our goal with Concerto was to rewrite underwriting to make it fully automated for our customers. We will need to continue to tweak this component in order to make it more cost beneficial. And finally, while the market has given us a bit of a break this past year, we can expect it to be tougher on us going forward.” With that, Ron sat down and Kelly nodded at Jim Jenkins. Jim, who looked every bit of the actuary he was, in a pinstripe suit and horn-rimmed glasses, glanced around the room somewhat nervously. “Well,” he said, “I guess that puts us in Underwriting on the hot seat.

As you all know, automating underwriting has been a significant component of Concerto. We invested heavily in big data so we could access both structured and unstructured data about an individual’s home and car without them having to answer numerous questions. This required developing real-time access to a variety of third-party data providers through external interfaces. We can now get comprehensive information about properties in a particular postal area from a variety of service providers and details about an individual’s claims and driving history from the insurance bureau and Ministry of Transportation information simply by asking a customer a few key questions. We had to put a lot of work into these questions to get this right. We then developed advanced analytics so we could prepare a binding quote for an online buyer in real time. We wanted to keep things simple and straightforward but to know enough to be able to offer a customer a unique product tailored to their needs. This has been an instrumental component in providing our customers a unique insurance experience.” Jim gazed at the ceiling as if seeking inspiration to continue.

After a long pause he said, “As you all know, Concerto suggests three levels of coverage for each customer request: economy, recommended, and premium. However, as you have seen from the financials, there is still work to be done in our underwriting processes. We are constantly working to improve our ability to gather and use information, and tweaking our underwriting algorithms is our number one priority. Our use of big data and realtime analytics has captured global attention in the insurance industry and already sets us apart. Our full attention in Underwriting will now be on making the necessary adjustments to remain price competitive while reducing our combined ratios.” Kristen Stewart then took the floor. Although much younger than everyone else in the room, she had won their respect through her social media acumen and intuitive grasp of customer needs. “Marketing’s research played a significant role in the development of the Concerto strategy,” she said. “You all know that a key value of our company is our commitment to an exceptional customer experience. That is why we value our brokers so highly and why we invested significantly in customer research before making the decision to develop an online channel. We believe these investments have helped us create a highly customer-centric product with Concerto.

We, in Marketing, began this process several years ago with an initiative to explore shifting customer expectations and identify unmet customer needs.” “We found that almost one-half of all personal insurance policies were sold online, and that number was growing annually. But most players in the industry tap into rational marketing drivers such as price. We felt there was also some white space there around an emotional connection. In fact, our research revealed that when it comes to buying insurance 56 percent of purchasing drivers are actually emotional. Combining this with the needs of potential millennial customers, we realized that we could win the hearts and minds of these customers by changing everything about their experience with buying insurance, not just putting a traditional insurance experience online. Our goal was to be known as ‘not your typical insurance company.’ In short, Concerto has been designed to be a parallel digital experience. It doesn’t take away from our brokerage offerings but expands our market significantly.” Warming to her topic, Kristen held up three fingers. “When we began work on Concerto, we based it on three pillars: make it simple; make it available at their fingertips; and offer a customized product that best meets customer needs. To this end the Concerto team first mapped the end-to-end customer journey through the discovery, quoting, purchasing, servicing, and claims processes and then ensured these three pillars were addressed at every touch point.

Concerto products are also written in everyday language—like we speak—and clean modern design is used in both our print and online materials to help customers easily understand complex topics. They provide an engaging experience for customers that informs and creates connections for them.” “This new approach at Concerto was complemented by a broader shift to an even more customer-centric focus at Trustworthy that positions us as a forward-looking partner in the industry as well as a trusted one. We’ve simplified our overall image to create a more modern look that better reflects our ambitions as a company. We have refreshed our brand and redesigned our web site to more accurately tell our company story. Our biggest challenge now is to bring what we’ve learned with Concerto to our broker community to help them offer a best-in-class experience combining advice and digital support. But we aren’t sure what this will look like yet.” “Thank you Kristen,” said Kelly. “I think we all agree that our new look-and-feel is impressive. I’ll now ask Sheila to summarize IT’s perspective on Concerto and our ongoing transformation needs.” “Thanks Kelly,” said Sheila, walking to the front of the room. “As the newest member of our leadership team, who missed participating in the strategy development process, I deeply appreciate all the support you’ve given me since I joined Trustworthy. Although Concerto looks like an IT product, what we’ve just heard reinforces the fact that it’s a business strategy and its success required full business participation. From a technology point of view, this was an ideal project. Not only did we have a fully committed business team, we also had Kelly’s support at every single steering committee meeting.” Gesturing to the room, she bowed briefly to each of them.

“It is thanks to each of you that we’ve come so far so fast.” Smiling broadly, she continued. “When I joined Trustworthy as its CIO, frankly, I was uncertain we could pull this off, but I was very impressed with the discipline I found at all levels. In addition to full business support, I believe a critical success factor for this project was the fact that we were supported in taking a green field approach. By creating a separate office and team, we were freed from having to deal with a lot of legacy technology baggage. Although there was some back-end systems integration to contend with, we got knowledgeable people moved over to the Concerto office to help us. Creating a separate Concerto team enabled us to adopt a collaborative working model that facilitated problem solving.” Sheila’s enthusiasm was infectious although the group had only a limited understanding of the technological details she was speaking about. “The Concerto project adopted agile and DevOps practices from the start,” she said. “We divided our staff into small multidisciplinary teams so that each could work to continuously develop, integrate, and implement new functionality. We also developed a hybrid model of cloud and on-premise technology that has enabled an agile environment and which now helps us respond to new demands and opportunities extremely quickly.

“In fact, the main challenge I am dealing with right now is handling our other IT staff who want to know why the Concerto team is having so much fun! And we need to figure out how to bring what we’ve learned at Concerto back to our parent Trustworthy IT and business organizations.” “Thank you Sheila,” said Kelly warmly, as she stood up and began a round of applause. “I think I speak for all of us when I say we couldn’t have done it without you! A business strategy is only as good as its execution and Concerto in my opinion has been superbly executed. Well done! “Concerto has helped bring our growth strategy to life,” Kelly continued. “It started us on a journey of digital transformation but it’s just a start. Our next step will be to leverage our Concerto platform and experience for the rest of our business, especially our broker channel. From the beginning, we’ve been careful in how we managed our broker relationships, but now we have to redesign the rest of the insurance experience by combining digital transformation with deep industry expertise. As I said earlier, we cannot afford to stand still. We either have to disrupt or be disrupted.

Therefore, our challenges are twofold: to continue to improve the Concerto brand, and to apply what we’ve learned to our other Trustworthy brands and processes. “I see this as part of our multichannel evolution. It will involve further research, new ways of using data, new delivery mechanisms, new digital services, education, and cultural change. Our focus must continue to be on providing a superb customer experience regardless of the process or channel used. You have all been an important part of our transformation to date. I believe we as a company are unique in that we have taken a multifaceted approach to change. Our competitors have tended to focus only on technology. Fundamentally, the key to our competitiveness has been the successful business–IT collaboration at multiple levels. For this reason, I have decided to create a new position on our executive team here at Trustworthy. Please congratulate Sheila Lee as our new Chief Transformation Officer. She will be working with each of you and our new CIO to lead our company-wide digital transformation forward.” She paused, allowing Sheila to accept the congratulations of her peers. Then turning to Sheila she said, “The ball is in your court Sheila. What’s our next move?” “Thanks, Kelly,” Sheila said, standing up and smoothing her skirt. She had known about her new role for two days and had been thinking exclusively about the “next move.” She began cautiously. “Each of you has touched on part of the challenge we have with Concerto. We need to find ways to manage our costs down. It’s not just new business we’re after but profitable business and business efficiency. We must focus on how to use data to manage the risks of the business—such as exposure to different markets and products, dependence on third-party data, and changing demographics— as well as simply improving underwriting. And we are re-positioning ourselves in the marketplace with our three-pronged approach to customer experience. “But our bigger challenge as an organization is how do we leverage what we have learned with Concerto? First, we have to consider our traditional business, which has been our bread-and-butter. Kelly has just underlined the strategic importance of our agents to the future success of the company.

Discussion Questions

1. 1. Flesh out Sheila’s nightmare. Describe a scenario where Concerto becomes “disintermediated by a non-traditional company.” What impacts would this have on Trustworthy Insurance?

2. 2. Why would this be important to consider before designing any future transformation initiatives?

3. 3. Outline the next steps of a business strategy for Trustworthy Insurance that would extend transformation further into the organization. .

Erin is Yard and Shipping Supervisor for a Modular/Manufactured home company in Edmonton, Alberta. The company, in business for over 25 years, has a good reputation but does not have a formal quality control/assurance program. Erin has been the yard supervisor for 4 years and prior to that she worked a variety of jobs in the assembly plant.

In her position she is responsible for the supervision of the storage yard where finished homes are held prior to shipping. In addition she supervises 2 yard work crews. The first crew installs appliances and does touch ups or minor finishing in the yard not completed in the plant. This work could on occasion include installing doors, windows or flooring which was not installed in the plant due to a shortage of material or manpower on the assembly line. The second crew prepares the homes for final shipping, loads homes on a trailer and arranges actual delivery to retail sales agents across Western Canada.

Demand for the company’s homes has steadily increased in recent years and management has been anxious to increase production. To that end the company introduced a new bonus program where all employees would receive a small gift if weekly production exceeded 26 homes. Gifts included company promotional items like caps, shirts or lunch vouchers. If monthly production met or exceeded 110 homes each employee, supervisor or manager would receive a bonus that month of up to $350 dollars. Individual bonuses were calculated by a formula which considered actual wages or salary earned during the month. In this way it was thought absenteeism would also be reduced and he company would be a more exciting and fun place to work.

After 3 months production targets were actually exceeded. Management was pleased. Employees, supervisors and managers were happy to receive the small gifts and looked forward to the extra cash each month. In fact the union had asked management if the company would match the bonus if payment was directed to the employee’s RRSP(Registered Retirement Saving Program).

In the 4^th month Erin noticed that the number of finished homes being held in the yard for final touch ups and finishing was increasing. Homes were usually in the yard for 3 to 5 days prior to shipping. It was now common for homes to be in the yard over a week. Touch ups and finishing work had increased to the point she had to put on an afternoon shift. In addition she was getting calls and complaints from retail agents over delays in shipping and quality problems after delivery such as cracked plaster, missing trim and water leaks. She had also recently attended a meeting with the accountants who were alarmed that warranty claims were on the rise. Erin was asked to step up her vigilance and not overlook any quality issues prior to shipping. She was also criticized for having to put on an afternoon shift. Senior management asked her for a detailed report by the first of next week outlining her plans to fix problem.

Erin is very concerned. Everyone likes the bonus program. There is talk by employees that an increase in target production levels may also increase the monthly cash bonus.

1 What did the Company do wrong in the design and implementation of the bonus plan?  

2. What steps must Erin take do to fix the bonus problem and, in turn, improve both production levels and at the same time ensure product quality?