Question 1:

Suppose that your group is the executive sales team for Starbucks. The CEO has just proposed lowering the price of regular coffee and increasing the price of specialty coffee drinks. The belief is that our customers are sensitive to a price change of regular coffee but much less sensitive to a change in the price of specialty coffee. As such, your team is tasked with providing an analysis on this proposal. In order to provide your analysis, you need to find out if the CEO’s theory about customer behavior, and their sensitivity to price changes for regular and specialty coffee, is correct. In order to find out how sensitive customers are to a price change, you will need to calculate the price elasticity of demand, describe what that means, and evaluate the impact on revenues.

For this activity, use the standard percent change formula (also known as the point method).

You have been given the following data on prices and changes in quantity demanded.

Regular Coffee:

Current Price per cup: $2.00 and quantity sold per month is 1 million

Proposed Price per cup: $1.80 and estimated quantity sold per month is 1.5 million

Specialty Coffee:

Current Price per cup: $4.00 and quantity sold per month is 50 million

Proposed Price per cup: $4.40 and estimated quantity sold per month is 47 million

Part 1: Find the elasticity of demand for regular and specialty coffee.

Part 2: Find the total change in revenue for regular and specialty coffee.

Part 3: Use a demand curve graph to explain the change in revenue. You only need to show the demand curve on your graph.

You may upload a picture/file of your graph or use the creately template.

Review the case of Paradise Hills Medical Center, below. The CEO has asked you for a recommendation. What will you tell him? PARADISE HILLS Medical Center is a 500-bed teaching hospital in a major metropolitan area of the South. It is known throughout a tri-state area for its comprehensive oncology program and serves as a regional referral center for thousands of patients suffering from various forms of malignant disease. Paradise Hills is affiliated with a major university and has residency programs in internal medicine, surgery, pediatrics, obstetrics/gynecology, psychiatry, radiology, and pathology, all fully accredited by the Accrediting Commission for Graduate Medical Education. In addition, Paradise Hills also has an oncology an oncology fellowship program, a university-affiliated nursing program, as well as training programs for radiology technicians and medical technologists. All of these teaching programs are highly regarded and attract students from across the nation. Paradise Hills enjoys an enviable reputation throughout the area. It is known for its high-quality care, its state-of-the-art technology, and its competent, caring staff. While Paradise Hills is located within a highly competitive healthcare community, it boasts a strong market share for its service area. Indeed, its oncology program enjoys a 75 percent market share and its patients provide significant referrals to the surgery, pediatrics, and radiology programs as well. Paradise Hills is a financially strong institution with equally strong leadership. Its past successes, in large part, can be attributed to its aggressive, visionary CEO and his exceptionally competent management staff. But all is not as well as it seems to be at Paradise Hills. While the oncology program still enjoys a healthy market share, it has been slowly but steadily declining from its peak of 82 percent two years ago. In addition, the program's medical staff are aging and some of its highest admitting physicians are contemplating retirement. The oncology fellowship program was established a few years ago in anticipation of this, but unfortunately, thus far the graduates of this program have not elected to stay in the community. Of most concern to the CEO and his staff is the fact that the hospital's major competitor has recently recruited a highly credentialed oncology medical group practice from the Northeast and has committed enormous resources to strengthening its own struggling oncology program. Last week the board of trustees for Paradise Hills had its monthly meeting with a fairly routine agenda. However, during review of a standard quality assurance report, one of the trustees asked for clarification of a portion of the report indicating that 22 oncology patients had received radiation therapy dosages in excess of what had been prescribed for them. The board was informed that the errors had occurred due to a flaw in the calibration of the equipment. The board was also informed that the medical physicist responsible for the errors had been asked to resign his position. The question was then asked if the patients who were recipients of the excessive radiation had been told of the error. The CEO responded that it was the responsibility of the medical staff to address this issue and it was their decision that the patients not be informed of the errors. The board did not concur that the responsibility for informing the patients of the errors rested solely with the medical staff and requested that the administrative staff review the hospital's ethical responsibility to these patients, as well as its liability related to this incident, and report back to the board within two weeks. The CEO and his management staff responsible for the radiology department and the oncology program met with the medical staff department chairmen for internal medicine and radiology, the program medical directors for oncology and radiation therapy, and the attending oncologists. The CEO reported on the board discussion related to the incident and the board's request for a review of the actions taken, specifically the decision to not inform the affected patients. The physicians as a whole agreed that the adverse effects of the accidental radiation overdose on the patients were unknown. Therefore, they argued the patients should not be told of the incident. These are cancer patients and they don't want or need any more bad news, the oncologists argued. “Let's face it, these patients are terminal.” “Informing the patients of this error will only confuse them and destroy their faith and trust in their physicians and in the hospital,” they added. Furthermore, they claimed, informing the patients of the errors may unnecessarily frighten them to the extent that they may refuse further treatment and that would be even more detrimental to them. Besides, argued the physicians, advising the patients of potential ill effects just might induce these symptoms through suggestion or excessive worry. Every procedure has its risks, insisted the chairman for radiology, and these patients signed an informed consent. Physicians know what is best for their patients, the attending oncologists maintained, and they will monitor these patients for any ill effects. The department chairman for internal medicine volunteered that, in his opinion, this incident is clearly a patient-physician relationship responsibility and not the business of the hospital. Besides, added the chairman of radiology, informing the patients would “just be asking for malpractice litigation.” The medical director for the oncology program then suggested that the board of trustees and the management staff “think long and hard” about the public relations effect of this incident on the oncology program. “Do you really think patients will want to come to Paradise Hills if they think we're incompetent?”, he asked. The CEO conceded that he supported the position of the medical staff in this matter and he, too, was especially concerned about preserving the image of the oncology program, but “his hands were tied” since the board clearly considered this an ethical issue and one that would be referred to the hospital's ethics committee for its opinion. The physicians noted that if indeed it was the subsequent recommendation of the ethics committee that these patients be informed, then realistically, that responsibility would rest with the patient's primary care physician and not with any of them. Reference: Perry, F. (2002). The Tracks We Leave, Chicago, IL: Health Administration Press, pp. 1-3

1. Assume that you are the chief financial officer at Porter Memorial Hospital. The CEO has asked you to analyze the proposed capital investments-Project X and Project Y. Each project requires a net investment outlay of $10,000, and the cost of capital for each project is 12 percent. The project’s expected net cash flows are:

Year          Project X                     Project Y

0                (10,000)                       (10,000)

1                6,500                           3,000

2                3,000                           3,000

3                3,000                           3,000

4                1,000                           3,000

1. Calculate each project’s payback period and net present value.
2. Which project (s) is financially acceptable? Explain your answer.

Please include the input that would be used in a financial calculator if it is needed.

If the Chief Executive Officer (CEO) of a financial institution finds ways to increase the asset-capital leverage of the institution during the boom years, how can we use the relationship between the return on assets, the return on capital and the asset-capital leverage for banks and financial institutions to explain how this would affect the share price and hence the shareholders' return?

If the CEO's bonus is linked with the institution's profit in that year, how would this affect the CEO's bonus? How would this affect the risk of the financial institution in the long run?

COST MANAGEMENT :Jay Banning, CEO and a major stockholder of Banning Inc., was unhappy with its operating results for the past year. The company manufactures two environmentally friendly industrial caliber cleaning machines used primarily in automobile repair shops, gas stations, and auto dealerships. The master budget and operating results for the year (000s omitted except for the selling price per unit) follow:

Required:

1. Compute the contribution margin flexible-budget variance, contribution margin sales volume variance, contribution margin sales quantity variance, and contribution margin sales mix variance for each product and for the firm.

Interview an upper level manager (e.g., CEO, CFO, CID, IT manager) in a hospital, or other health care facility that has instituted electronic medical records. Your interview should be 30 mintues in lenght and may be completed face-to-face or over the phone. The interview should focus on the implementation of the EMR system, including: factors that influenced the organization to institute the EMR system. Resistance to the decision-making process. Obstacles experienced during the inital EMR rollout. Overall impact on quality in health care since instituting the EMR.

Write a 1000, 1,250 word paper summarizing the interview and the interviewee's perspectives on the four points above. This paper should also include a brief history of electronic medical records in the health care industry. How does the information gained in the interview match up with your readins/research on the subject? This paper should cite at least three references, and should be in APA 6th edition.

Central Adventures

Fatima Hopkins, the CEO of Central Adventures, is having difficulties with all three of her top management level employees. With one manager making questionable decisions, another threatening to leave, and the third likely ‘in the red’, Fatima is hoping there is a simple answer to all her difficulties, and needs some advice from her accountant on how to proceed.

Central Adventures owns and operates three amusement parks in Michigan: Central Funland, Central Waterworld, and Central Treetops. Central Adventures has a decentralized organizational structure, where each park is run as an investment center. Each park manager meets with the CEO at least once annually to review their performance, as measured by their park’s ROI. The park manager then receives a bonus equal to 10% of their base salary for every ROI percentage point above the required rate.

Central Funland is an outdoor theme park, with twelve roller coaster rides and several other attractions. This park has first opened 1965, and most of the rides have been in operation for 20+ years. Attendance at this park has been relatively stable over the past ten years. The park manager of Funland, Janet Lieberman, recently shared with Fatima a proposal to replace one of their older rides with a new roller coaster, a hybrid steel and wood rollercoaster with a 90 degree, 200 foot drop and three inversions. The proposal indicated that the ride would cost $8,000,000 with an estimated life of 20 years. In addition, this new style of coaster would require additional maintenance, costing $125,000 each year. However, it projected that this new attraction would boost attendance, earning the park an additional $1,190,000 per year in revenues. Janet ultimately decided not to invest in this new attraction.

Central Waterworld is an indoor water park, operating year-round. Run by park manager David Copperfield, Waterworld was built in 2016 and has increased attendance by 20% every year since. David recently sent you an email complaining that, based on the current bonus payout schedule, Janet Lieberman’s bonus last year was significantly higher than his. He points to the increasing attendance, and says that his park is being punished for having opened so recently (his park assets are much more recent than the roller coasters at Funland). He currently has an employment offer from another company at the same pay rate, which he says he will accept if his performance is not appropriately acknowledged.

Central Treetops includes a high ropes course and has a series of ziplines that criss-cross over the Chippewa River. For many years, it was a popular venue for corporate team-building activities, so it is equipped with a main indoor facility with cafeteria and overnight guest rooms. 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 close it - permanently. Central Adventures has a $86,000 mortgage payment on the land and buildings for Treetops, which would still need to be paid if the park is closed. Incidentally, you recently had a conversation with the regional head of the YMCA, who would like to open a summer camp in the central Michigan region. If you decided to close Treetops, you are fairly certain that you could lease that land to the YMCA for $250,000 annually.

A partial report of this year’s financial results for Central Adventures shows the following:

In addition to the information above, there are $2,542,920 in corporate costs, which are currently allocated evenly between the three parks. These costs are primarily due to employee benefits costs, which are billed at the corporate level. If the Treetops park is closed, the allocated corporate costs would decrease by $12,000. Central Adventures has a required rate of return of 12 percent (set at the company’s weighted-average cost of capital) and are subject to 18% income taxes.

Fatima needs to see this year’s performance results before she can make any decisions. Is David’s complaint about the performance evaluation metrics valid? Is that also affecting management decisions in the form of Janet’s rejection of the proposed new rollercoaster? And is the company better off without Treetops? She sets off to the company accountant’s office to help get some answers.

a. Create a multilevel income statement for Central Adventures.

b.   Calculate the current annual ROI, residual income and EVA for the three parks.

c. Did Janet Lieberman (the Funland park manager) make the ‘right’ decision (i.e., was it in Central Adventure’s overall best interest for Funland to reject the new rollercoaster)? Explain your answer. Provide the appropriate financial analysis(es) to support your conclusion.

d.   Is David Copperfield’s (the Waterworld park manager) complaint valid? Or would a different performance metric tell the same story?

e. Provide a recommendation on whether to close Treetops. Provide the appropriate financial analysis to support your conclusion.

f.    Provide a recommendation on a different allocation base for corporate overhead.

You are the recently hired CFO of MicroMash.  Bill Bates, the CEO wants your advice on the sale of a new spreadsheet software called Xcellent.  In conjuction with a two week promotion of at Office Depot stores, customers will be able to purchase the software and have the ability to return the item and receive a full refund up until 6 months from the purchase date.  Please discuss the proper accounting treatment for this transaction; 20,000 units were sold in the two week period with a cost of $120.

As the new chief executive officer (CEO), you have put many things in place at the Mucho County Healthcare System, and it has been in operation now for 3 years. Reflect on the work that you have done so far.

What do you think were the major managerial failures at the Mucho County Healthcare System? What could it have done better to command good care outcomes and patient experience?