Pleasanton Studios Kersten Brown, the CEO of Pleasanton Studios, is having a tough week – all three of her top management level employees have dropped in with problems. One executive is making questionable decisions, another is threatening to quit, and the third is reporting losses (again). Kersten is hoping to find simple answers to all her difficulties. She is asking you (her accountant) for some advice on how to proceed. Pleasanton Studios owns and operates three decentralized divisions: Entertainment, Streaming, and Parks. Pleasanton Studios has a decentralized organizational structure, where each division is run as an investment center. Division managers meet with the CEO at least once annually to review their performance, where each division manager’s performance is measured by their division’s return on investment (ROI). The division manager then receives a bonus equal to 10% of their base salary for every ROI percentage point above the cost of capital. The Entertainment division manager, John Freeman, was the first to knock on Kersten’s door this morning. Entertainment, Pleasanton Studios’ first endeavor, produces movies for the big screen. Entertainment has been in operation since 1965. Last month, John had mentioned a proposal to build a new animation studio. The build would cost $4,910,000 with an estimated life of 20 years and no salvage value and would allow Entertainment to start producing animated movies. Animated movies were projected to bring in an additional $1,210,000 in revenues each year, but would increase annual production costs by $574,000. John had dropped in to let Kersten know he had decided not to move forward with the animation studio. This surprised Kersten – her quick mental calculation indicated that the studio would have a payback period of 8 years, much shorter than the expected life of the studio. Not entirely sure that her quick assessment was valid, Kersten needed to check with her accountant on the matter. Next to Kersten’s door was the manager of Streaming, which produces short-form (30 minute to one hour) episodes in addition to streaming the movies developed by Entertainment. Customers then buy subscriptions to the service. Run by division manager Reyna Imanah, Streaming was introduced in 2016 and has increased subscriptions by 20% every year since. Reyna’s complaint was that, based on the current bonus payout schedule, John Freeman’s bonus last year was significantly higher than hers. She points to the increasing subscription rates at Streaming, and says that her division is being punished for having opened so recently (her division’s facilities are much more recent than those in Entertainment). She currently has an employment offer from another company at the same base pay rate, and stated that she will accept this offer unless she feels her performance is being appropriately acknowledged and compensated. Kersten needs to look at the relative performance across divisions to determine how to proceed with Reyna. Pleasanton Parks is a theme park based on the movies from Entertainment and the series from Streaming. For many years, it was a popular year-round destination, with characters, rides, and a hotel. This park has lost popularity in recent years, and has been ‘in the red’ for the past two years. If the park is not profitable this year, you will need to decide whether to permanently close that division. Included in the ‘Fixed COGS’ for Parks is an annual $1,650,000 mortgage payment on the land and buildings for the park, which would still need to be paid (as a corporate level cost) if the park is closed and that segment is removed from the financial statements. Incidentally, you recently had a conversation with a Marriott Hotels executive, who would like to expand into the area. If you decided to close Parks, you are fairly certain that you could lease the hotel facilities to Marriott for $650,000 annually. A partial report of this year’s financial results for Pleasanton Studios can be found in Table 1 below. The ‘Selling and admin costs’ listed in Table 1 are directly incurred by each division, and are determined at the beginning of each year (that is, they do not change with increased/decreased production). In addition to the divisional information above, there are $2,000,000 in corporate costs that are currently allocated evenly between the three divisions. These costs are primarily due to employee benefits costs, which are billed at the corporate level. If the Parks division is closed, the decreased employee base would reduce allocated corporate costs by $500,000. Pleasanton Studios has a cost of capital of 12 percent (and Kersten uses the cost of capital as their required rate of return) and are subject to 32% income taxes. Before she can make any decisions, Kersten needs to evaluate this year’s performance results. She sets off to see you, the company’s accountant, for answers.

Required: Write your response in the form of a 1-2 page memo to Kersten Brown, from the perspective of the company accountant. Be sure to include all the financial analyses to support your conclusions, clearly showing your calculations, at the end of the memo or attached in a separate document. Be sure to address the following points in your memo.

a. Evaluate this year’s performance results for the three divisions. Your financial analysis should include a segmented income statement for Pleasanton Studios, as well as the current annual ROI, residual income and EVA for the three divisions.

b. Evaluate Entertainment’s decision not to invest in the new animation studio (i.e., was the decision appropriate and in the best interests of Pleasanton Studios), including the appropriate financial analyses to support your evaluation.

c. Evaluate the validity of Reyna Imanah’s complaint regarding her evaluated performance. Explain why it is (or is not valid), and what further information would be necessary.

d. Provide a recommendation on whether to close the Parks division, including all necessary financial analyses.

Lynch was the loan officer at First Bank. Patterson applied to borrow $25,000. Bank policy required that Lynch obtain a loan guaranty from Patterson’s employer, a milk company. The manager of the milk company visited the bank and signed a guaranty on behalf of the company. The last paragraph of the guaranty stated, “This guaranty is signed by an officer having legal right to bind the company through authorization of the Board of Directors.” Should Lynch be satisfied with this guaranty? Would he be satisfied if the president of the milk company, who was also a director, affirmed that the manager had authority to sign the guaranty? Explain.

Ralph owned a retail meat market. Ralph’s agent Sam, without authority but purporting to act on Ralph’s behalf, borrowed $7,500 from Ted. Although he never received the money, Ralph repaid $700 of the alleged loan and promised to repay the rest. If Sam had no authority to make the loan, is Ralph liable? Why?

A guest arrived early one morning at the Hotel Ohio. Clemens, a person in the hotel office who appeared to be in charge, walked behind the counter, registered the guest, gave him a key, and took him to his room. The guest also checked valuables (a diamond pin and money) with Clemens, who signed a receipt on behalf of the hotel. Clemens in fact was a roomer at the hotel, not an employee, and had no authority to act on behalf of the hotel. When Clemens absconded with the valuables, the guest sued the hotel. Is the hotel liable? Why?

1) A public good is described, in part, as a good

A) that has a marginal cost at or near zero.

B) that is essential to life.

C) which has all of these characteristics.

D) that may be depleted if demand is heavy.

2) The optimal output of a public good occurs where

A) the marginal benefit of the consumer who values the good most should equal the marginal cost of the good.

B) the sum of the marginal benefit of each consumer at a given output equals the marginal cost of the good.

C) the total cost of the good equals the cumulated benefits of all consumers.

D) the horizontal sum of the consumer benefits of the good should equal the marginal cost of producing the good.

3) Which is not a good method of providing public type goods by private means?

A) Private contracts

B) Clubs

C) Free markets with competing entrepreneurs

C) Funding by donation

Please answer all of the questions

(A) If the answer in (c) is greater than 0.01 then we conclude at the 1% significance
level that the average weight of a bear in Yellowstone National Park is different from 187 lb.

(B) If the answer in (c) is less than 0.01 then we cannot conclude at the 1% significance
level that the average weight of a bear in Yellowstone National Park is different from 187 lb.

(C) If the answer in (a) is greater than the answer in (b) then we cannot conclude at the 1% significance
level that the average weight of a bear in Yellowstone National Park is different from 187 lb.

(D) If the answer in (c) is less than 0.01 then we conclude at the 1% significance
level that the average weight of a bear in Yellowstone National Park is different from 187 lb.

(E) If the answer in (a) is greater than the answer in (c) then we cannot conclude at the 1% significance
level that the average weight of a bear in Yellowstone National Park is different from 187 lb.

(F) If the answer in (b) is greater than the answer in (c) then we cannot conclude at the 1% significance
level that the average weight of a bear in Yellowstone National Park is different from 187 lb.

(G) If the answer in (a) is greater than the answer in (c) then we conclude at the 1% significance
level that the average weight of a bear in Yellowstone National Park is different from 187 lb.

(H) If the answer in (b) is greater than the answer in (c) then we conclude at the 1% significance
level that the average weight of a bear in Yellowstone National Park is different from 187 lb.

Suppose that oil fouls the beaches along the Florida panhandle. Vacationers are the primary customers of the hotels along the panhandle. The oil _____ the price of a hotel room and _____ the quantity of hotel rooms rented

How is the concept of resort hotel different from other types of hotels? From a manager’s perspective, how is managing a resort hotel different from running other properties?

As a concerned employee of 'Delexis Hotel', Sunyani, write a letter to the General Manager informing him of four (4) inherent challenges inhibiting the success of interpersonal communications within the hotel.