Moveover Motors Ltd (MML), located in Melbourne, produces and sells a medium-sized family car called the Moveover Magnet. The company has been producing cars for the Australian market for over 30 years and began exporting a limited number of cars to the United States about 10 years ago. MML is a subsidiary of a Polish multinational that has not been satisfied with the losses that the company has been making in the last few years. The parent company in Poland is threatening to close the Australian factory unless MML can produce a profit in the next year of operations. The factory currently has a capacity to produce 50,000 cars per year but all realistic estimates of its market size, including the exports to the United States, suggest that it will not sell more than 30,000 cars per year in any of the next 5 years.

Jane Woodall, MML's CEO, was very concerned about MML's poor profitability. She asked Lester Bush, financial controller and Max Lemond, production manager, to see if there were ways to reduce costs and improve profitability.

Lester analysed the cost structure of MML and found the following:

Manufacturing costs:

Variable cost- $15,000 per car

Fixed cost- $450,000,000 for 30,000 cars, or $15,000 per car

Selling and administrative expenses: Variable cost- $5,000 per car

Fixed cost- $180,000,000

During the year end 30 June 2017, MML sold 28,000 Moveover Magnets for $40,000 each.

Lester considered the fact that the capacity of the factory significantly exceeds the production levels and realised that significant savings could be made in both the production and administrative fixed expenses if some of the factory were disposed of. He estimated that by reducing the capacity to 30,000 cars per year, the fixed manufacturing costs would fall to $300 million and the fixed administrative costs would decrease to $160 million.

Before Lester could report back to Jane, Max returned with a proposal to reduce the variable costs to 30% of revenues by reducing the costs MML incurred for safe disposal of wasted metals. Lester was concerned that this would expose the company to potential environmental liabilities and he let Max know it.

Lester: Max, we would need to estimate the potential environmental costs and include them in your Analysis.

Max: You can't do that. We are not violating any laws. There is some possibility that we may have to incur environmental costs in the future, but if we bring it up now, this proposal will not go through because our senior management always assumes these costs to be larger than they turn out to be. The market is tough, and we are in danger of shutting down the company. I don't want all my colleagues to lose their jobs. The only reason our competitors are making money is because they are doing exactly what I am proposing...

3. Discuss the ethical issues involved

A) Who are the stakeholders?

B) Is the production manager, Max, acting ethically? Which of the principles set out in the Code of

Ethics for Professional Accountants have been violated?

C) What are Lester's ethical obligations?

D)What should Lester do? Critically evaluate each course of action.

Study the case below and answer the questions given at the end:

BMW: Marketing Subsidiaries in Foreign Markets

BMW is a German manufacturer of high-quality motor cars, About half of its sales are in the German market, with the other half from exports. In reappraising Its markets and distribution strategy both in Germany and abroad, the company believed that its multiple layers of distribution were causing inefficiencies in its marketing efforts.

BMW Germany

Originally, BMW had a dual distribution system in Germany. It employed a strong wholesaler system along with direct distribution by BMW to large dealers. This system seemed to work effectively because BMW's market share in Germany doubled in 10 years. However, the company found share competitive distortions with this dual approach. For example, the wholesalers that received the same commission for wholesale transactions as for retails sales had gone into direct competition with retailers. The larger direct dealers sometimes sold more than the wholesalers but received the smaller dealer discount. The problems arising from BMW's distribution strategy caused the company to abolish its German wholesaler network. BMW expanded its direct dealer system to replace the business formerly handled by the wholesalers.

BMW Abroad

The company was planning to initiate a more direct selling method in its foreign markets as well as at home. It realized the need for care in order not to disturb existing import channels. However, the company believed that it was desirable to replace the present independent importers in foreign markets with company-owned marketing subsidiaries. The independent importers buy the cars from Germany and then resell to accredited dealers --- who sell them to the public, In moving to company-owned marketing subsidiaries, BMW was following the international marketing approach of Volkswagen and Daimler-Benz (with Mercedes). One of the major arguments presented for going direct was that BMW could save the 15 percent commission the company paid to its importer distributors in foreign markets.

France

In line with its new policy of more direct distribution in foreign markets, BMW formed its first marketing subsidiary in France. BMW Import SA replaced the former independent French importer (which had been called BMW France but now was renamed SFAM France). SFAM France continued to sell BMW cars to consumers through its retails outlets in Paris and in the provinces. Sales to dealers henceforth were made only by BMW Import SA, the company's wholly owned marketing subsidiary. This seemed to be successful in France.

United States

In implementing its new direct marketing approach in the U.S marker, BMW faced two alternatives. It could either take-over its present U.S. importer-distributor or establish a new and separate BMW marketing subsidiary as in France. The company wondered which of these alternatives would be best for the important U.S. market. BMW had about 250 dealers in the United States.

a) Do you see any disadvantage for BMW in going to direct distribution in foreign markets?

b) What advantages might the company realize by operating through its own marketing subsidiaries?

c) In marketing the decision for the U.S. market, what questions would you ask? What variables would you consider?

• IBM annual report for the fiscal year ended as on 2018 gives disclosures related to its management of foreign exchange risk under Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations on page no. 66 under the head Currency rate fluctuations and on page no. 67 Foreign Currency Exchange Rate Risk.
• Types of hedging instruments the company uses are forward contracts, futures contracts, interest rate swaps, cross currency swaps and options depending on underlying exposure.
  The company issues debt in the global capital markets to fund its operations and financing business. To manage these mismatches and to reduce overall interest cost, the company may use interest-rate swaps to convert specific fixed-rate debt issuances into variable-rate debt and to convert specific variable rate debt issuances into fixed-rate debt.
• The Company hedges net investments in foreign operations. A large portion of the company’s foreign currency denominated debt portfolio is designated as a hedge of net investment in foreign subsidiaries to reduce the volatility in stockholders’ equity caused by changes in foreign currency exchange rates in the functional currency of major foreign subsidiaries with respect to the U.S. dollar. The company also uses cross-currency swaps and foreign exchange forward contracts for this risk management purpose.

Pepsico is in the retail beverage industry. It has operations in over 200 countries and territories and employees 267,000 people (Pepsico, 2019). Just under half of those employees are in the United States.

Management of foreign exchange risks

            Pepsico discusses how they manage their foreign exchange risk in the Risk Management Framework section of their 10-K. 43% of their net revenues from last year came from operations outside of the United States (Pepsico, 2019). 2018 had an unfavorable foreign exchange, which reduces Pepsico’s net revenue by 1%. The unfavorable exchange came from the devaluing of Russian rubles, Turkish liras, and Brazilian reals against the US dollar.

            Pepsico manages their risk for fluctuation of exchanges rates through strategies that include global purchasing programs, productivity incentives and hedging. Any cash flows from risk reduction activities are included on their cash flow statement as operating activities.

Hedging types and instruments

            Pepsico’s strategies for hedging include using derivatives and debt instruments (Pepsico, 2019). The most common derivative they use are forward contracts with terms of no more than two years. The debt instruments utilized to maintain favorable interest rates are rate swaps, cross currency interest swaps, and treasury locks.

Effectiveness of foreign exchange hedges

            Pepsico has become more successful over the last several years effectively utilizing hedges. This can be seen when analyzing the foreign exchange loss. The better they become at predicting changes, the better hedge positions that can get on the market. In the end this will lead to smaller losses on foreign transactions and higher net revenue.

Required:

Discuss the differences noted in how IBM handles foreign exchange risk. Speculate as to why there are differences based on what has been researched about IBM and what was posted about Pepsico .

Write a narrative description highlighting the demographic changes seen in the Cumberland community in Illinois to explain the complete Data Template below for the general public. ? Demographics: Include the total number and percent of each in the Data Template below to gather data for both the county, state, and national data from both the 2000 and 2010 Census to show how the county has changed from the last Census as well as how it compares to the demographics of the state and the nation. The data template MUST be included as an appendix in your paper. ? Total Population (include the percent change in population from the 2000 to the 2010 Census) ? Age Distribution (use other similar parameters if unable to find the exact same in your research) ? Under 1 Year ? 1 to 5 Years ? 6 to 13 Years ? 14 to 17 Years ? 18 to 24 Years ? 25 to 49 Years ? 50 to 64 Years ? 65 to 84 Years ? 85 Years and Older ? Females 15 – 44 Years ? Gender ? Median Age ? Racial & Ethnic Composition ? Hispanic ? White (Non-Hispanic) ? Black ? Asian/Pacific Islander ? Socioeconomic Status (include total number and percentage of each) ? Median Household Income ? Persons Below 100% of Poverty Level ? Persons Below 200% of Poverty Level ? Households with Social Security Income ? Households with Public Assistance Income ? Unemployed Persons 16 Years & Older ? High School Graduates 25 Years & Older ? College Graduates 25 Years & Older.

Community Description Data Template

Pick any two questions (each question should be half a page)

10. Globalization seems to have brought benefits for almost everyone, though one exception is African farmers. Blocked from global food markets by trade restrictions, Africans cannot take part in the prosperity globalization has brought to the rest of the world. Many of the health crises such as AIDS, malnutrition, and even starvation are clearly linked to poverty. Moreover, many of Africa’s nations are politically unstable. If African farmers had better access to global markets, what would the implications be for African societies, nations, and economies?

11. Explain how our standard of living depends upon our level of real GDP per person but there might not be a one-to-one relationship between the standard of living and real GDP per person. Give examples of things that can effect one but not the other.

12. "If country A has a higher level of real GDP per person than country B, then people in Country A must enjoy a higher standard of living than people in Country B." Is this statement true or false and explain your answer.

13. Explain the relationship(s) between full employment, cyclical unemployment, the natural unemployment rate, and potential GDP.

14. For the past decade, the unemployment rate in Western Europe has been higher than the unemployment rate in the United States. Based on this fact, is the natural unemployment rate larger in Western Europe or in the United States? Why might the natural rates differ between the two areas?

15. In the late 1970s, the inflation rate was over 10 percent per year. Many home mortgage lending institutions had mortgages outstanding that had been made in the 1960s at nominal interest rates of around 5 percent per year. Many of these lending institutions failed; what can explain the high failure rate of lenders in the late 1970s?

16. CPI is not necessarily a reflection of how all consumers experience inflation. How does your personal market basket compare to that of the average American household? Given that college students may rely on more fixed incomes than most groups (financial aid), why do price trends pose more of a problem for this group?

17. Policymakers (especially the Federal Reserve) tend to focus more on core inflation when designing policies. Why core inflation is a useful measurement for the government or economists?

18. Classical growth theory is based on the work of Thomas Malthus, an economist from the early nineteenth century. Very few modern-day economists would refer to themselves as Malthusians. The persistence of this viewpoint represents what one can only refer to as the triumph of despair over experience. At some point in history, Malthusian theory might have been applicable. But certainly since the industrial revolution, parents have chosen to have fewer children. And this shift only gets stronger as economic growth advances. Is the assumption correct that the population growth rate is primarily determined by economic growth with a positive relationship?

19. Is there convergence or divergence in standards of living amongst nations?

20. What is the role of economic growth for economic inequality?

Xenia Distribution, Incorporated

Xenia Distribution, Incorporated is a privately-held company operating in Ohio since 1990. Xenia makes all of its sales to customers on a credit basis, requiring payment within 30 days. Xenia uses the allowance method to estimate the amount currently uncollectible for its accounts receivable. During 2020, Xenia recorded a monthly provision of 1% of credit sales of as an estimate for uncollectible accounts receivable. However, at year-end, an aging of accounts receivable is prepared and the allowance for uncollectible accounts is adjusted based on an analysis of that aging. At December 31, 2019, the adjusted balance of the allowance for uncollectible accounts was $31,900, and the balance of accounts receivable was $282,400.

During 2020, Xenia wrote-off $23,400 of customer accounts that were deemed to be uncollectible, due to customers declaring bankruptcy or experiencing financial difficulties so severe that extensive collection efforts were not successful. One customer’s account with a $9,200 balance, which had been written-off in August 2018, was subsequently collected from the customer in July 2020. Xenia maintained the same monthly provision of 1% of credit sales throughout all of 2020. Monthly credit sales for 2020 are as follows:

January            77,700

February          89,400

March             55,200

April                38,900

May                 47,500

June                 63,400

July                  99,200

August             92,300

September        87,800

October            82,900

November        84,300

December         81,400

Total cash collections of accounts receivable during 2020 (not including the collection of the previously written-off account) were $859,000.

In preparation for its year-end closing process, Xenia’s controller prepared the following aging of accounts receivable as of December 31, 2020, assigning probabilities of collection based on discussions with Xenia’s credit manager:

                                         Percentage of

Age of Account Receivable       Accounts Receivable     Probability of Collection                     

0-30 days past due                          75%                                  95%                

31-60 days past due                         15%                                 85%                

61-90 days past due                           6%                                  70%                

Greater than 90 days past due           4%                                 10%                            

Requirements

a) Prepare an analysis computing the unadjusted balance in the allowance for uncollectible accounts as of 12/31/20.

b) Prepare the year-end adjusting journal entry to record bad debt expense based on the

December 31, 2020 aging of accounts receivable.

Anyone know how to do it in a Excel?

On January 2, 2019, TI enters into a contract with Drewry Corp. to build a new piece of equipment. The contract price is $3,200,000, and construction is expected to take 18 months. Drewry is billed and pays $1,600,000 of the contract price on January 2, 2019, and will pay the balance at completion.

TI estimates that the cost of construction will be $2,300,000.

Drewry includes two performance bonuses in the contact:

The bonuses are payable when a U.S. patent is approved and when international distribution is approved.

On the date the contract is signed, TI estimates that there is an 80% chance it will receive U.S. patent protection by March 15, 2020, but only a 30% chance that the equipment will be approved for international distribution.

TI received a U.S. patent on the equipment design on November 15, 2019, and immediately billed Drewry and received its bonus payment. On December 31, 2019, TI has incurred $1,840,000 of contract costs and is 80% complete. TI won approval for international distribution on January 15, 2020, and completed the equipment project on April 15, 2020, at a cost of $2,300,000.

Required:

General Journal Instructions

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GENERAL JOURNAL

Score: 7/363

Points:

1.33 / 69

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