Question 1: (B1, C3)

In 2017, Ahmad & Sons, a small environmental-testing firm, performed 12,200 radon tests for $290 each and 16,400 lead tests for $240 each. Because newer homes are being built with lead-free pipes, lead-testing volume is expected to decrease by 10% next year. However, awareness of radon-related health hazards is expected to result in a 6% increase in radon-test volume each year in the near future. Jim Rouse feels that if he lowers his price for lead testing to $230 per test, he will have to face only a 7% decline in lead-test sales in 2018.

Instructions:

1. Prepare a 2018 sales budget for Ahmad & Sons assuming that Rouse holds prices at 2017 levels.

2.         Prepare a 2018 sales budget for Ahmad & Sons assuming that Rouse lowers the price of a lead test to $230. Should Rouse lower the price of a lead test in 2018 if the company’s goal is to maximize sales revenue

1. Who is Tommy Saleh, what is his job title and duties and what type of hotel does he work for?

2. What event did he have to analyze to determine if his company should go forward with it? Summarize the process he and his company went through to make their decision on whether or not to hold the event.

• Tommy Saleh has the type of job that a lot of people probably dream of.
• He is paid to make sure his organization, the Tribeca Grand
• Hotel in New York City, remains on the cutting edge of cool.
• Whether that means hosting an informal concert in the lobby
• with the Kings of Leon, or helping to host the Tribeca
• Film Festival in their basement screening room, Tommy gets
• paid to keep his finger on the pulse of current culture.
• Budgetary planning plays a significant role in Tommy's job,
• and he is evaluated in part by how he controls costs.
• Each year, the planning process for the company's
• annual budget normally begins in the 4th quarter.
• Saleh: We probably meet around the end of September, and
• we involve the CFO, the COO, and the general managers.
• Narrator: The master budget covers all aspects of
• running the hotel, but Tommy's events budget is
• particularly significant, because, let's face it,
• there are lots of cool hotels in New York City.
• Clients choose to stay at the Tribeca knowing that Tommy's planners, event specialists and
• his concierge team are plugged into not just New York City, but the larger world stage.
• As Tommy plans and implements his events budget, the key is to maintain budgetary
• control, including budget reports that compare planned objectives with actual results.
• A budget can cover any length of time and any purpose,
• so formalized reporting systems help by identifying
• the name of the budget report, the frequency of the
• report, the purpose, and the primary recipients.
• Let's look at an example of budgetary control
• activities, and, for this, let's go back to 2002,
• when the Tribeca Film Festival was created to combat
• the economic effect of 9/11 on lower Manhattan.
• Saleh: The Tribeca Film Festival started with Robert
• DeNiro's idea of bringing something to the downtown area.
• Narrator: The hotel had to develop a budget for events they would host.
• Then, after the festival, they analyzed what they planned
• from what was actually spent, and took corrective action.
• They increased the budget for the following year—it was
• a big success—and modified future plans accordingly.
• This cycle of control activities can be used over and over, and, when
• implemented properly, can help management to evaluate performance.
• Now, if Tommy was responsible for just one hotel event
• each year, he could probably get by with a static budget.
• But he has many events, some of which occur on
• short notice, so he relies on a flexible budget,
• which is really just a series of static budgets
• that account for a wide variety of activities.
• The basic idea behind responsibility accounting is
• that large, diversified organizations, especially
• those with multiple product lines, are difficult,
• if not impossible, to manage as a single segment.
• Breaking them up into smaller segments allows responsibility to be assigned to
• managers that have the authority to make day-to-day decisions at that level.
• Evaluating a manager whose performance can be quantified,
• like a sales manager, is fairly straightforward.
• But what about someone who contributes indirectly
• to the profitability of an organization? To answer this, it's important to
• understand profit and cost centers. Profit centers in an organization do exactly
• what they sound like: they generate profits.
• Hotel profit centers are typically sleeping rooms,
• events, restaurants, and catered food functions.
• Saleh: The rooms are the main income for the hotel.
• Food and beverage is not an amenity here, only it's actually another source of revenue,
• where people want to try the shop that you have, or expect 24-hour room service.
• Narrator: Cost centers incur costs but don't directly generate revenue, but you need them.
• In a hotel, they might be marketing, engineering,
• human resources, and, yes, accounting. Okay now, let's have some fun.
• Let's take everything we've learned and apply it to a real world example.
• We mentioned the time that the Kings of Leon were staying at the Tribeca.
• Saleh: And they go, "Why don't you just put a secret gig for the, um, for our fans?"
• Narrator: Now, Tommy didn't have a "Kings of Leon secret
• gig” budget, on the off-chance that they ever showed up at
• his hotel, but since he made use of flexible budgets, he was
• ready, and had a basic idea of what his costs would be.
• Saleh: One of those projections was based upon what
• would the total night cost us when we do it from a to z.
• Narrator: Including everything from building a temporary sound system,
• to hiring doormen, and even bathroom attendants.
• Keep in mind that some of these budget items are a result
• of valuable lessons from past budgetary control activities.
• Armed with this budget, he did a quick ROI evaluation
• to determine if the event would be profitable. In the end, the event
• was a huge success. But from a profit/cost center perspective,
• what if it had been slightly unprofitable? From a marketing standpoint, there
• certainly were other benefits. Saleh: It's good
• promotion for the hotel. It's great press for the hotel.
• Narrator: So, maybe you compensate by canceling another event
• later in the year that wouldn't have had the same impact.
• The point being, budgetary control allows managers like Tommy to not only
• do their job, but to take advantage of opportunities when they arise.
• And from a responsibility accounting perspective, this has served Tommy well.
• Sure, his events help drive profits, but what they
• really do, in an industry where boutique hotels
• come and go, is to help keep the Tribeca Grand both
• relevant and hip as a key Manhattan destination.

Hotel Fawlty Towers is (as expected) not doing so well. In total, there are fixed joint costs of 4,800,000 (converted to SEK) per year. On average, you have separate income (= sales price) of SEK 1200 per guest per night. The special cost for each guest and night is 180 SEK. In total, there are 3100 overnight guests per year but a capacity of 6500 per year. The worst is during the weekends where you only have 120 overnight guests per year (included in the 3100 guests per year). Now the hotel owner, Basil, has been on a course in Revenue Management and learned there that you should put a lower price on the weekends to fill the hotel better. Together with the regular guest and strategist Major Gowen, Basil estimates that if the price per guest and night is set to SEK 700, the number of overnight stays at weekends will increase to 350 per year and if the price is set to SEK 500, the number of overnight stays at weekends will be a total of 800 per year. The price during other days does not change, nor the number of guests.

SEK = Swedish kronor. Although hotels and people are taken from the English series "Pang in the building", we are based on Swedish conditions regarding VAT rate and currency.

a)Should you lower the price on weekends? If so to SEK 700 or SEK 500? Show total results for the different options and compare with not lowering the weekend price! (6p)

b) In order to obtain additional revenue, you plan to sell various small items at the reception. Basil has heard that the gross profit margin for these goods should be 60%. What then is the selling price of a toothbrush the hotel buys for 8,00 SEK? Don't forget to add VAT with a 25% surcharge!

You are a data analyst with strong backgrounds in database design and management. In fact, you have learned from education, mentors, and experience the art of collecting data and transforming data into business intelligence and your experience in database design and management complements your abilities to analyze data. Your hypothetical employer, Park University, is in the process planning a new employee payroll database and has asked you for assistance. The database will be standalone but will need to have ability to communicate with other ODBC and SQL Server databases. The overall purpose of the database will be to input employee data for 100-150 employees. The database will need to input time and process data needed to document payroll and to create payroll checks. Park University at this point needs to understand and review options so that cost to develop and maintain this payroll database are kept at a minimum but without compromising security. Park University has requested information and has asked you to address the following questions: Would a full-scale Database Management System (DBMS) or Relational Database Management Systems (RDBMS) be required in this case? Discuss and defend your answer in scholarly detail!! Could Microsoft Access be a good option in this case? Discuss and defend your answer in scholarly detail!! Could even Microsoft Excel be used in this case maybe as a secondary database support application for further data analysis and statistical models? Discuss and defend your answer in scholarly detail!! What Systems Development Life Cycle methodology would you suggest in this case for the overall planning, design, implementation, and maintenance of this database? Discuss and defend your answer in scholarly detail!! What else might you need to cover to help Park University determine what type of database to consider for the new payroll database? Include any other important conclusions or content you see fit to support this assignment.

Louis owns a condominium in New Orleans which has been his principal residence for 12 years. He wants to be near Lake Ponchartrain since he enjoys water activities. Therefore, he sells the condominium. His original intent was to purchase a house in New Orleans near the lake. However, the cost of such properties far exceeded his sales proceeds. He was able to purchase a house on the lake in Covington, which is located across the causeway. He invested all of his sales proceeds in the Covington house. After two months of commuting over an hour to and from work each day, he decides to rent an efficiency apartment in New Orleans near his office. He spends the weekends and vacations at his home in Covington.

a.

Please explain if Louis qualify for exclusion of gain under § 121

b.

Please explain if his Covington house qualify as his principal residence

Using economic thinking and theory(cost-benefits, demand supply, opportunity costs) , write an essay on why houses of the same sizes are more expensive in places near shopping malls than compared to one that is quite far away from a mall.

You and a group of friends are planning to visit a theme park, which charges $60 for admission, $80 for a two-day pass, and $90 for a three-day pass. Your friends are interested in spending a lot of time there, but they’re worried about paying a lot of money. You explain the concept of marginal cost, which helps them see that the additional day is a good value.

1. The average cost per day of a three-day pass is   $   per person.

2. The marginal cost of adding the third day is   $   per person.

3. If there are 6 people in your group, the group's marginal cost of switching from the two-day pass to the three-day pass is   $  .

Briefly answer the following:
a. BlueNile, is a diamond online retailer, discuss how has BlueNile built its supply chain to keep costs low?
b. List 2 retailers that build a supply chain to keep cost low-saved millions then discuss how they did it?

Michael Wilson entered into a new business, hotel ownership, by buying a small 24 room hotel and café. The hotel is located in a remote area of Minnesota that is popular for tourists. Michael has hired you for advice.

Michael hired a young couple to run the hotel and café on a daily basis and plans to pay them a monthly salary. They will live for free in a small apartment adjacent to the office. The couple will be responsible for hiring and supervising five part-time personnel who will help with cleaning the rooms, cooking, waiting on customers in the café. The couple will maintain records of rooms rented, meals served, and payments received. They will also make weekly deposits.

Mike is concerned about his lack of control over the records and operations. Mike lives 5 hours away and will only be able to make periodic visits. Mike trusts the couple but wonders if it makes sense to place so much trust in employees.

Mike needs your help to identify possible ways that his motel and café could be defrauded and especially wants assistance to devise creative internal controls to help prevent or detect fraud.

Required

1. What are your two biggest concerns related to possible fraud for the hotel part of the business.   For each concern describe two controls that could reduce the risk.
2. What are your two biggest concerns related to the café part of the business. For each concern describe to controls to reduce risk.