Louise Wuitton (LW) is a New Zealand-based fashion label which specialises in creating luxury garments for both men and women. LW sources fabrics and other items for their garments locally, and the garments are made in a workroom in Auckland by a team of tailors and seamstresses who are paid at least the standard living wage of $22.10 per hour, depending on their experience. LW commenced operations in 2015, and since then, the company has gained a strong reputation in the marketplace for producing high-quality, fashion-forward clothing at a reasonable price. They have also been recognised as one of New Zealand’s top employers, based on their policies around safe working conditions, employee well-being, and above average hourly wages. Their strong reputation has contributed to growing revenue since 2015, and in the last financial year, the company reported its best ever earnings performance. In the last 18 months, a number of overseas competitors have entered the New Zealand marketplace. These competitors are able to produce similar clothing designs to LW at a much lower cost, given the differences in the cost of labour and materials in the overseas factories. Additionally, the impact of COVID-19 has resulted in lower than anticipated revenue for LW for the first half of the 2020 financial year, and the senior management team anticipates that the situation is likely to deteriorate further unless the company can find a way to cut their costs of production in order to remain competitive. If cost savings cannot be found, the company risks becoming insolvent in the next two years. The company’s CEO believes that the best option for LW is to outsource the manufacturing of their garments to a third-party company located in Bangladesh. This would drastically reduce the costs associated with production, as the standard wages paid in the garment industry in Bangladesh are much lower than those paid by LW in New Zealand. Additionally, the thirdparty manufacturer would be able to source cheaper fabrics from which to make the garments. There are differing views among the other members of the senior management team – some agree that this proposal seems like the best course of action for LW. However, other members of the senior management team are concerned that outsourcing production to Bangladesh would harm the company’s brand image and reputation, resulting in further deterioration of the company’s bottom line in the long-term. Among their concerns, they cite the well-known poor working conditions associated with the garment manufacturing industry in Bangladesh, the low wages paid to the workers in the factories there (who tend to be poorer women and girls with no skills or training that would enable them to obtain better employment elsewhere), and the possible negative environmental consequences of producing clothing using cheaper fabrics.

Required: Use the ethical decision-making framework discussed in lectures to evaluate the ethical dilemma in the above scenario, AND issue a recommendation to the senior management team of Louise Wuitton (LW) based on your evaluation.

Opportunity or temptation?

Journal of Case Studies

Introduction

Their facility was just too small. Steady growth had them bursting at the seams. Finally, after years of searching, they thought that a suitable location finally had been found, a location that might garner enough support to win membership approval when it came time to vote. Capacity, turmoil, turnover, a bad economy, limited budget, and aged physical plant were all constraints that had held back Hope Community Church (HCC). But there were good reasons that its name was Hope. One was that its leadership core was made up of people who were of strong faith and strong will. Leadership believed that constraints were nothing more than speed bumps that could be overcome. Turmoil and turnover had already been overcome. The bad economy was subsiding and, at least regarding monthly operations, the church budget was no longer an issue. The final constraints, capacity and structural integrity of the church building continued to be problematic and underscored the need to relocate the church.

Sometimes, things are beyond repair or are no longer suitable for their intended purpose, but facing the need for change can be a difficult challenge. HCC's church sanctuary had some serious structural problems. So, for many years, a church building committee had been in search of a better facility or building site. More than once it was thought that a suitable "new" location or facility had been found, but each time a fatal flaw had been discovered. Finally, the church building committee had found what seemed to be an affordable acreage on which they could build. Now church members had to make the decision as to whether or not to buy the new site. Still, it was not without potential problems. But hopefully, church members would not consider any of them to be major when it came time for them to vote. Should the church membership vote yes on its opportunity to purchase the land for construction of a new church, or, vote no and continue to meet in the current facility, and once again ask its building committee to start over in its quest for a new building site?

The thought of moving to a new location touched emotions on both sides of the issue. One group of church members had strong personal attachments and memories that were inextricably tied to the old sanctuary. For many of these long term members who favored remodeling and making do with the current facility, moving was out of the question. The oldest active member of the church, and perhaps the church's most loved member, was a stoic advocate for remaining with the status quo as she had been married in the old sanctuary decades ago and had no desire to move. She had a strong following, and it was no secret that she was not excited about the possibility of the church relocating. In fact, her opinions were so well known that there was concern among the church leaders that moving to a new location could so offend her and other long term members that they might leave the church.

However, other members thought that remaining in the current facility was untenable. This group, that included much of church leadership, was more concerned with adequacy and stewardship than nostalgia. They openly expressed their opinions that it was past time to abandon tradition and move on. To them, throwing more money at the small, deteriorating church sanctuary seemed an unreasonable thing to do. Would remaining in the current facilities strangle church growth? The opinions of these two groups would heavily influence the upcoming membership vote as to whether or not to buy new property.

Bursting at the Seams

Serving a farm community of about 3,000 people in beautiful southern Colorado, particularly among young families, HCC had experienced steady growth, and church attendance had doubled over the past five years. During that same time period, tithes and offerings had grown from $185,000 to $250,000 annually. Now, often with more than 80 percent of its seats occupied, HCC's current facility was both literally and figuratively bursting at the seams.

Built in the early 1900s, the church sanctuary had served many years as the center for both fellowship and spiritual gatherings. Since the pictures that had been taken that showed a hitching post where worshipers could tie their horses, the structure had been updated many times. Gone were the old coal burning stoves, as well as their old, dangerous gas replacements; they had been replaced with safer more fuel efficient gas burning furnaces. Gone were many of the old single pane windows; they had been replaced with energy-saving double pane windows. Bathroom facilities had been dramatically improved as had the kitchen facilities and furnishings.

Still, it was about a 100 year old wood and stucco structure sitting on dry rotted sill plates supported by a deteriorating rock and concrete foundation. In hindsight, the foundation had not been tall enough; the freezing and thawing that accompanied the melting snows of spring had eventually taken their toll, and little by little, the structure had slowly begun to sink. Some temporary mitigation had been provided by jacking up the building and inserting railroad ties under the floor joists, but maintenance costs continued to rise. From the steeple to its foundations, the church building had problems. Certainly if enough money were thrown at the structural problems, they could be solved. However, even if that were done, it would still just be an old building that the congregation had outgrown. And, remediation costs could be even greater than the costs of building a new structure. Rebuilding, on site, made little financial or practical sense, but some members of the congregation were still reluctant to move for sentimental reasons.

Both the city lot, 50' wide x 150' long, and the building were just too small. Membership was growing across all age groups, and finding a seat to attend church services had become problematic. Upon entering the packed facilities and surveying the lack of available seating potential, new congregants sometimes just turned around and left, never to be seen again. Hopefully, they found a church home in one of the other city churches that had excess capacity.

There were no church facilities for HCC's adult Sunday school. Classes had to be held in two rented rooms in a building half a block away, accessed by a rough graveled alley complete with mud puddles whenever it rained or snow melted. Sunday school for the church's swelling children ministry was held in yet another building. It was a too small 1960s vintage Housing and Urban Development (HUD) type house that also inadequately housed the church's administrative staff. Though needed, there was no youth ministry. There just was no place for them to meet. The church library was an old closet, and, not a very big one. There were no rooms for gatherings of the church's servant leadership team, elders, deacons, or women's ministry. There wasn't even room for the pastor to have an office. His office was in his home, about five miles from the church. In addition, what little bit of off-street parking that could be found did not come close to serving the needs of attending church members. Many members parked on the streets and in driveways of consenting owners. As the church continued to expand, these needs would not only increase but also constrain growth.

One possible partial solution that had been considered but rejected was to just increase the number of church services. Membership did not want to lose touch with other members who chose to attend the "other" service, and the small but dedicated praise and worship team did not want to commit to leading an additional weekly service. HCC was a small nondenominational church. While leadership certainly made efforts to interact with other church leaders, it was without the benefit of the organized network and knowledge base typical of larger denominations. Though there also was no evidence that they did so, had they felt the need for it, leadership might have gleaned some additional support regarding the need to relocate or build from information available through sources such as The Alban Institute (http://albiston.com).

Searching for a Solution

These problems certainly had not escaped the attention of church leadership. Eight years ago, the church had purchased highway acreage on the outskirts of town. It then slowly accumulated funds with which to build. It had made a good start and had accumulated about $110,000 when the church mission team identified an urgent need to support a TEARS (true evangelism always requires sacrifice) missionary dream in a third world country. Money was needed to provide housing, food, education, and spiritual training for impoverished single parent children including many girls who might otherwise become trapped in the horrors of human trafficking. Consistent with church goals, the membership enthusiastically voted to invest most (about $70,000) of its building fund in the effort to help save some of a third world country's young from despicable lives. The rest of the fund would be invested in a remodel of the sanctuary to address structural problems.

Several years later, after growing its building fund, the church building committee again started making plans to build on the site on the outskirts of town. Not long into the process, a problem was discovered. A government change in building codes now would require the church to fund acceleration/deceleration lanes to the adjacent highway, and that was expected to increase the cost of building by $500,000.

Five hundred thousand dollars would more than exhaust all of HCC's building funds and leave it unable to start construction. After considerable discussion, the decision was made. Church leadership recommended, and the church membership approved, that the acreage be resold. It was, and the church harvested a substantial profit of about $200,000. The profit enhanced the building fund and paved the way for a new search for a larger existing facility or a cost effective building site.

Renewed Hope

Unfortunately, such sites proved to be scarce. Church membership had a strong desire to build within the city limits, but few undeveloped parcels of adequate size remained. Those that did remain were owned by the city's school board, other government agencies, or farmers who did not want to subdivide their holdings. Time and again, over a period of years, the church's building committee investigated possible sites only to discover "show stopping" flaws. Some sites were too expensive; some were too small. Some, with existing structures, did not provide the needed space or could not be cost effectively remodeled. Others were too remote, or too far outside the city limits.

After several years of fruitless searching, in a private conversation with a public minded elderly land owner of an unlisted property, a building committee member discovered a possible site. It wasn't ideal; by now it was known that those sites either did not exist or were prohibitively priced. But the price on this parcel seemed right. At $110,000, the cost would only consume about one third of the church's building funds; there would still be money left over for construction of an economical metal building. So, after assurances that it would be a bargain purchase by a trusted realtor who had written the contract and who had long been an active church member, and one of its Sunday school teachers, church leadership acted decisively to lock in the opportunity to purchase the new parcel.

The church had lost out on other opportunities when those had become publicly known. Sometimes it had been "outbid". On one occasion, approval of a sale to the church had been nixed by regulatory board members who favored a non-church use for land over which the board had control. There was concern that this parcel also might get snatched away from the church by a higher bidder, if the owner's asking price became public knowledge. Hence; acting with approval of the church leadership team, HCC church pastor, Keith Wickman, signed a contract to buy the land and authorized $5,000 of earnest money as a down-payment towards its purchase.

One advantage of this parcel was that it was more than big enough for church needs. In total, it was about twenty acres; most of it was on a steep hillside or in a flood plain and not suitable for construction. However, about six acres were suitable for building, so space would not be a problem. The church would have more than enough land for building not only to meet its current needs but also for those of the foreseeable future. And unlike some other parcels that had been considered, where it was not clear that the church could get approval to build, on this land zoning was not a problem. So, that was another advantage of this land; there should be no problems getting necessary governmental approval to build the church. Yet another advantage was that the land had already been legally subdivided, so reselling some of the land was a possibility should the church need to raise additional funds. In fact, a one acre parcel even had commercial zoning dating back to a time when it had once been used as a meat processing plant. Besides affordable cost, among its advantages was that the acreage was within the city limits. It was in an area that so far had not yet experienced much development. But, as would be revealed in an upcoming meeting, that lack of development seemed to be destined to change.

Troubling Concerns

The contract had been carefully written to protect church members' interests (e.g. to recover its earnest money if the church voted not to complete the purchase). Before the church could close on the contract, in accordance with its bylaws, it had to obtain a two-thirds majority approval of church membership by a vote of its congregants. Prior to the vote, Pastor Wickman, mailed church members a letter that expounded upon the land's good qualities. In addition, during church services Pastor Wickman announced that following church services, the church building committee would host two weekly meetings to allow church members to raise questions regarding the possible acquisition.

The meetings were lightly attended; only a handful of church members stuck around to participate, and only a few questions were asked. One of the questions asked, was about access to the property. It was said that there was an existing 10-12' wide paved road that led to the property. Only two homes, ones that had existed for many years, were nearby; both had constructed additions that were within five feet of the pavement and probably encroached on the city right of way. Another building committee member, who was also a city school teacher, did not hesitate to add that those structures no doubt would be condemned when the city began construction of two new schools at an unspecified future date.

Asked if there was another access road, it was revealed that there was an undeveloped forty foot easement that led to the land. When questioned as to how much it would cost to improve the easement to meet government standards, a committee member responded that the committee did not know and could not find out until after the purchase was completed. When asked why that was so, it was said that the city's building department members refused to discuss the matter with the church building committee because the church was not the legal owner of the property.

When asked about utilities, building committee members revealed that electricity had already been installed but city water had not been extended to the property. Asked as to the cost to bring city water to the property lot line, again the building committee did not know; the city's building department refused to discuss such issues with the church building committee because the church was not the property owner.

Asked about the remaining, unusable land, the committee indicated that part of it was a steep hillside. The rest was in a flood plain, had a stream running through it, and had settling ponds left over from the days when the meat processing facility had discharged effluent (waste water). Might there be Environmental Protection Agency cleanup costs associated with the settling ponds? Building committee members were amused at the question and could see no reason to expect that there might be. However, to protect against the remote possibility that a child might somehow wander astray and drown in one of the ponds, the church would probably need to enclose the ponds with a chain link fence. With that question, the first meeting came to a close, and the second meeting, a week later, resulted in no questions at all.

At the conclusion of the following week's sermon, Pastor Wickman encouraged members to remain for a business meeting to vote on the possible land purchase. He briefly reiterated that the church had entered into a contract to buy acreage on which to build its new church and gave a brief description of the parcel. He then asked church members if anyone had questions regarding the land purchase. A woman asked if it was known what it would cost to pave the easement to the land. Pastor Wickman reported that an estimate of $750,000 (far more than what the church had in its building fund) had just been obtained. It was also stated that it was unknown how much of that amount would be absorbed by the new schools and other developments and how much would be the responsibility of the church or when the church might be able to build on the land if it were acquired. It was also disclosed that both the church building committee and the church's Servant Leadership Team had voted in favor of the acquisition but that neither had done so unanimously. One member of each group voted against the acquisition, but Pastor Wickman did not provide reasons for the dissenting votes and no church member asked for an explanation. With these facts in hand, the church membership was asked to vote.

1. What is the finacial analysis?

2. Based on the reading, what can we recommend?

3. What could be the risks/challeges/solutions?

Learning Assessment

Conch Republic Electronics

Conch Republic Electronics is a midsized electronics manufacturer located in Key West, Florida. The company president is Shelley Couts, who inherited the company. When it was founded over 70 years ago, the company originally repaired radios and other household appliances. Over the years, the company expanded into manufacturing and is now a reputable manufacturer of various electronic items. Jay McCanless, a recent MBA graduate, has been hired by the company's finance department. One of the major revenue-producing items manufactured by Conch Republic is a smart phone. Conch Republic currently has one smart phone model on the market, and sales have been excellent. The smart phone is a unique item in that it comes in a variety of tropical colors and is preprogrammed to play Jimmy Buffett music. However, as with any electronic item, technology changes rapidly, and the current smart phone has limited features in comparison with newer models. Conch Republic spent $1,000,000 to develop a prototype for a new smart phone that has all the features of the existing smart phone but adds new features such as WiFi tethering, dual cameras, and larger screen. The company has spent a further $400,000 for a marketing study to determine the expected sales figures for the new smart phone. Conch Republic can manufacture the new smart phones for $550 each in variable costs. Fixed costs for the operation are estimated to run $6.1 million per year. The estimated sales volume is 205,000, 215,000, 175,000, 125,000, and 75,000 per year for the next five years, respectively. The unit price of the new smart phone will be $799. The necessary equipment can be purchased for $40.5 million and will be depreciated on a seven-year MACRS schedule. It is believed the value of the equipment in five years will be $6.1 million. As previously stated, Conch Republic currently manufactures a smart phone. Production of the existing model is expected to be terminated in two years. If Conch Republic does not introduce the new smart phone, sales will be 95,000 units and 65,000 units for the next two years, respectively. The price of the existing smart phone is $699 per unit, with variable costs of $350 each and fixed costs of $4.3 million per year. If Conch Republic does introduce the new smart phone, sales of the existing smart phone will fall by 35,000 units per year, and the price of the existing units will have to be lowered to $499 each. Net working capital for the smart phones will be 25 percent of sales and will occur with the timing of the cash flows for the year; for example, there is no initial outlay for NWC, but changes in NWC will first occur in Year 1 with the first year's sales. Conch Republic has a 35 percent corporate tax rate and a required return of 18 percent. Shelley has asked Jay to prepare a report that answers the following questions:

A. What is the payback period of the project?

B. What is the discounted payback period of the project?

C. What is the IRR of the project?

D. What is the net present value of the project?

E. At what selling price would the company be indifferent to taking on the project? (NPV = 0)

F. At what variable cost would the company be indifferent to taking on the project? (NPV = 0)

G. What recommendation would they make based on the pro-forma statements?

I have a spreadsheet started with values included but I'm stuck and don't know where to go next.

Problem 2:
Let’s look again at the two small-town driveway paving companies, Asphalt, Inc. and Blacktop Bros. The inverse demand curve for
paving services is: P = 1,600 – 2 Q, where quantity is measured in pave jobs per month and price is measured in dollars per job.
Assume Asphalt, Inc. has a marginal cost of $400 per driveway and Blacktop Bros. has a marginal cost of $200.
Answer the following questions:
a. Determine each firm’s reaction curve and graph it.
b. How many oil changes will each firm produce in Cournot equilibrium?
c. What will the market price of an oil change be?
d. How much profit does each firm earn?

Question 3 Small Town hospital splits its service into two categories: general care and obstetrics. Medicare will pay the hospital 120% of the total cost incurred to treat Medicare patients. The hospital has two service departments: general records and dietary. The general records’ costs are allocated to departments based upon a log of hours spent for each department. Dietary costs are allocated on the basis of the number of meals served. Results for the past period are summarized below Records Dietary General Care Obstetrics Labour cost $3,000 $8,000 $40,000 $60,000 Supplies $4,000 $35,000 $25,000 $15,000 Meals served 100 100 700 200 Record hours 40 50 100 50 During the period 60% of the general care patients were Medicare patients. None of the obstetrics patients were Medicare patients.

Required If you were the hospital’s senior accountant, how would you determine the amount of the medicare reimbursement? Advise the finance director, with supporting calculations, the implications of different service department cost allocation approaches in determining the amount of Medicare reimbursement.

Please use paper to do thankyou so much !!!!!!

Suppose two small-town video stores, store A and store B, compete. The two stores collude and agree to share the market equally. If neither store cheats on the agreement, each store will make $2,500 a day in economic profits. If only one store cheats, the cheater will increase its economic profits to $4,000 and the store that abides by the agreement will incur an economic loss of $1,000. If both firms cheat, they both will earn zero economic profits. Neither store has any way of policing the actions of the other.

(a) What is the payoff matrix if the game is played just once?

(b) What is the equilibrium if the game is played only once? Explain.

(c) What do you think will happen if the game is played many times? Why?

(d) What do you think will happen if a third firm comes into the market? Will it be harder or easier to achieve cooperation among the three firms? Why?

1. Suppose two small-town video stores, store A and store B, compete. The two stores collude and agree to share the market equally. If neither store cheats on the agreement, each store will make $2,500 a day in economic profits. If only one store cheats, the cheater will increase its economic profits to $4,000 and the store that abides by the agreement will incur an economic loss of $1,000. If both firms cheat, they both will earn zero economic profits. Neither store has any way of policing the actions of the other. (a) What is the payoff matrix if the game is played just once? (b) What is the equilibrium if the game is played only once? Explain. (c) What do you think will happen if the game is played many times? Why? (d) What do you think will happen if a third firm comes into the market? Will it be harder or easier to achieve cooperation among the three firms? Why?