Name _______________________

The exam covers Chapter 6 of the textbook and the two documents on ambiguity that are posted on BB.

EXAMPLES. Before answering the exam questions, read through this “Examples” Section. It shows you what you have to do on the exam.

Directions: Each sentence or passage below is ambiguous: it has two distinct meanings. Type on the answer sheet two complete sentences that express these distinct meanings (= a and b) of the original sentence. (This process is disambiguation.) Make sure the sentences you use as your answers are sufficiently distinct from each other and do not repeat the ambiguity exhibited by the original sentence.

EX1: “Go quickly and tell his family that he and his friend are risen from the dead and they must hide.”

a. Tell his family that they (his family) must hide from those “risen from the dead” (he & his friend).

b. Tell his family that “he and his friend,” the ones who have risen, are the ones who must hide.

EX2: “The children told the police that their teacher had committed horrible acts. That was unfair.”

a. It was unfair that the teacher did those horrible things.

b. It was unfair that the children told the police that the teacher did the acts (they were lying).

NOW the exam. Each question is worth four points. So, each disambiguating sentence is worth 2 points.

Directions: Each sentence or passage below is ambiguous: it has two distinct meanings. Type on the answer sheet two complete sentences that express these distinct meanings (= a and b) of the original sentence. (This process is disambiguation.) Make sure the sentences you use as your answers are sufficiently distinct from each other and do not repeat the ambiguity exhibited by the original sentence.

(The sources of the sentences are totally irrelevant.)

1. [Saul Bellow] “As we walked, I held his old skinny arm by the elbow, where the ulna and the radius bones intimately meet each other, promising to keep in touch.”

a.

b.

2. [House] “The doctor asked her how often she picked her nose during her appointment.”

a.

b.

3. [The New Yorker] “Narcolepsy may be more prevalent in college students than thought.”

a.

b.

4. [A parody of The Wizard of Oz] “Only bad witches go to hell.”

a.

b.

5. [Noam Chomsky] “I love ambiguity more than most linguists.”

a.

b.

 

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You are applying for a managerial position at an innovative and rapidly growing company. This is a dynamic company that wants an individual who adds value to the organization. Managers at this company wear many hats, so the position requires managing products, people, and financial aspects of running the company.

As part of the interview process, you are required to make a presentation covering four different topics, one per module for this course.

You choose the company and the new product that you want to showcase in your presentation. It can be real or fictitious (based on an industry). This is for background purposes only. The presentation is to showcase your abilities and what you can contribute to the organization.

IBIS World (access on the Portal through the Online Classroom & Library, Additional Library Resources link) and BizStats have estimates of cost of goods sold and some other categories of operating expenses. Information about contribution margins is not available, but adding new products typically mean incurring both fixed and variable costs. Consequently, cost of goods sold is a reasonable estimate. Net operating income as a percentage of sales or some variation thereof may also be relevant if the new product is expected to contribute significantly to the bottom line. As a candidate for a position you would not have internal information available, but being resourceful and being a skilled researcher are desired traits for the position. IBIS World also has a wealth of other market statistics that may be helpful. Use listed background material and other resources as needed.

Required:

Include the following items in your presentation.

• Present an idea for a new product.
• Describe the product.
• Show some cost estimates and pricing suggestion for this product based on research.
• What approach would you use to determine selling price (for example cost plus or target costing)? It is important when choosing a design.
• Explain your rationale for the pricing approach.
• Show expectations of growth and potential profit. 

SLP Assignment Expectations

Submit a PowerPoint presentation or a Word Document. A PowerPoint presentation should have no more than six slides and a Word document cannot exceed two pages. Use words, tables, and graphs to make a succinct presentation. Document all sources and provide links at the end. It is acceptable to add another slide or page to list the sources.

 

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Assignment Overview

The Annie Smith Dance Center

The Director of Annie Smith Dance Center is asking for assistance with the financial aspects of running a professional group of performers. She wants financial information presented in an easy to read format and a better understanding of the profitability of the concerts and the organization as a whole.

The Annie Smith professional group features three styles of dance concerts each year. Two of the dance concerts showcase a different genre. The third performance is a Christmas Spectacular, which is the most popular and is therefore scheduled every year. The table below provides information about expected ticket sales for the performances.

	Lower Orchestra Section (A)	Upper Orchestra Section (B)
Descriptions	No. of Seats.	Ticket Price	Tickets sold per performance	No. of seats	Ticket Price	Tickets sold per performance
Hip-Hop Performance	150	$85	100%	450	$50	90%
Jazz and Tap Dance	150	$85	100%	450	$50	60%
Christmas Spectacular	150	$125	100%	450	$50	100%

Ms. Smith has prepared a tentative schedule for the coming season. The table below also shows the type and number of performances and direct cost per type of concert.

Descriptions	Number of Performances	Cost per Dance Concert (direct fixed costs)*
Hip-Hop Concert	10	$48,000
Jazz and Tap Dance	5	86,000
Christmas Spectacular	20	22,000
Total Direct Fixed Costs		$156,000

*Examples of direct fixed costs are costumes, rehearsals, royalties, guest artist fees, choreography, and salaries of production staff, music, and wardrobe for each of the concerts. This amount does not change with the number of performances.

Additional costs:

Variable costs associated with each performance are shown below.

Musicians	$6,100
Rental of auditorium	2,500
Dancers’ compensation	6,700

Annual general administrative and operating costs for the dance center are:

Administrative staff	$185,000
Insurance	25,000
Marketing	115,000
General office expenses	90,000

Case Assignment

Required:

Computations (use Excel)

• Summarize key financial information in a table as shown below.

Title
Name of Dance Concert	Revenues/ Performance	Variable Costs/ Performance	Contribution Margin/ Performance	Number of Performances	Total Contribution/ Type of Dance Concert	Direct Fixed Costs	Segment Margin/ Type of Concert
1.
2.
3.
Total

• Use the information in the table you completed to compute the number of performances required to break even for each concert. Do not include general and administrative expenses. These are separate computations for each dance concert.
• Compute break even for the organization as a whole (include all fixed expenses) and express the result in revenues instead of the number of performances.
• Ms. Smith wants the Dance Center to generate at least $200,000 in operating profit. What level of revenues does the performance group need to achieve to meet this goal? Prepare an income statement in good format to support the computations.
• Give a recommendation about changes Ms. Smith can implement to achieve the target profit. Support your idea with computations.

Memo (use Word)

Write a 4- or 5-paragraph memo to the owner of the dance center to assist her in interpreting the financial analysis. Start with an introduction and end with a recommendation. Each of the four or five paragraphs should have a heading.

Short Essay (use Word)

Start with an introduction and end with a summary or conclusion. Use headings.

• What are some shortcomings of multi-product even analysis?
• How does demand and resource constraints affect this type of analysis.

Assignment Expectations

Each submission should include two files: (1) An Excel file and (2) a Word document. The Word document shows the memo first and short essay last. Assume a knowledgeable business audience and use required format and length. Individuals in business are busy and want information presented in an organized and concise manner. 

 

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Second part of the presentation. See background information for the Module 1 SLP.

Required:

Include the following items in your presentation:

• What about special pricing for some markets or customers?
• Determination of customer profitability.
• Show effect on revenues and profitability based on stated assumptions.
• Potential advantages and disadvantages, both financial and non-financial. 

SLP Assignment Expectations

Submit a PowerPoint presentation or a Word Document. A PowerPoint presentation should have no more than six slides and a Word document cannot exceed two pages. Use words, tables, and graphs to make a succinct presentation. Document all sources and provide links at the end. It is acceptable to add another slide or page to list the sources.

Combine the submissions from prior module(s) into one file before uploading to the SLP 2 Dropbox.

 

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Assignment Overview

Coffee Maker’s Incorporated (CMI)

Three divisions of a CMI are involved in a dispute. Division A purchases Part 101 and Division B purchases Part 201 from a third division, C. Both divisions need the parts for products that they assemble. The intercompany transactions have remained constant for several years.

Recently, outside suppliers have lowered their prices, but Division C refuses to do so. In addition, all division managers are feeling the pressure to increase profit. Managers of divisions A and B would like the flexibility to purchase the parts they need from external parties at a lower cost and increase profitability.

The current pattern is that

• Division A purchases 2,700 units of product part 101 from Division C (the supplying division) and another 1,300 units from an external supplier.
• Division B purchases 1,100 units of Part 201 from Division C and another 700 units from an external supplier.
• Note that both divisions A and B purchase the needed supplies from both the internal source and an external source at the same time.

The managers for divisions A and B are preparing a new proposal for consideration.

• Division C will continue to produce Parts 101 and 201. All of its production will be sold to Divisions A and B. No other customers are likely to be found for these products in the short term, given that supply is greater than demand in the market.
• Division A will buy 2,000 units of Part 101 from Division C at the existing transfer price; and
• 2,000 units from an external supplier at the market price of $900 per unit.
• Division B will buy 900 units of Part 201 from Division C at the existing transfer price; and
• 900 units from an external supplier at $1,800 per unit.

Division C Data Based on the Current Agreement

Part	101	201
Annual volume (units)	2,700	1,100
Transfer price/unit	$1,000	$2,000
Variable expenses/unit	$700	$1,200

The fixed overhead for Division C is $1,200,000.

Case Assignment

Required:

Computations (use Excel)

• Set up a table similar the one below to compute the difference between the current situation and the proposal for Divisions A and B. 

Division A
	Current Situation	Proposal
	No. of Units	Purchase Price	Total Purchases	No. of Units	Purchase Price	Total Purchases
Internal purchases	2,700		$	2,000		$
External purchases	1,300			2,000
Total cost for Part 101			$			$
Savings to Div. A						$

• Compute the operating income for Division C under the current agreement and the proposed agreement.
• Is the revised agreement a good idea? Support your answer with computations.

Memo (use Word)

Write a 4- or 5-paragraph memo to the division manager explaining the analysis performed. Start with an introduction and end with a recommendation. Each of the four or five paragraphs should have a heading.

Short Essay (use Word)

Start with an introduction and end with a summary or conclusion. Use headings.

Evaluate and discuss the implications of the following transfer pricing policies:

• Transfer price = cost plus a mark-up for the selling division
• Transfer price = fair market value
• Transfer price = price negotiated by the managers

Why is transfer pricing such a significant issue both from a financial and managerial perspective?

Assignment Expectations

Each submission should include two files: (1) An Excel file and (2) a Word document. The Word document shows the memo first and short essay last. Assume a knowledgeable business audience and use required format and length. Individuals in business are busy and want information presented in an organized and concise manner. 

 

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