ACCT 3121 CH1&2_001

ACCT 3121 CH1&2_001 - ACCT 3121: Cost Analysis and...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 4
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 6
Background image of page 7
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: ACCT 3121: Cost Analysis and Control. ACCT 3121 Problem Set 2 Chapters 1 and 2 Andrew A. Christie E. J. Ourso College of Business Administration Louisiana State University Baton Rouge, LA, 70803—6304 August 29, 2009 © Copyright: 1990 to 2009 Instructions Approach to questions: Written questions can frequently be answered by 'very few' words. This ranges from two or three words to several short sentences. If you feel compelled to 'run off at the mouth' and write a page and a half, you probably do not understand the material. Cooperation: I encourage you to discuss questions and answers with your peers; form study groups. Former exam questions: To provide perspective on the standards expected, homework sets include some former exam questions. These have FEQ in parenthesis after them. ACCT 3121 Problem Set 2 2 ACCT 3121 Problem Set 2 1. Introduction to Firms and Management Systems 1.1 Agreements (FEQ) Consider the following types of agreements. 1. A treaty between two governments. 2. A contract between a firm and a foreign government. 3. A contract between a firm and its own government. _, A ‘ _ = . . , \ a z' - Wh i W'- 4. A contract between two private parties in a country with an ineffective legal system. . . , , , >1. ’ (f, 1,) /\ (“Oh (2116,“ 5 5. A contract between two pr1vate parties In a country With an effective legal Eyéteijfi‘; if W Required: it ,2. "‘”T;"'"f7*'1<i ; _ . emlogct», a. Use two words to describe the main aspect of the differences among these agreements? _W‘q . . . 3.; , » ‘ I “"9 .u CHEN b. Whlch agreements are most llkely to be wrltten? , Z7 , aelx p j' ‘ 0. Rank the five agreements based on the difference in part one from easiest to hardest to enforce. There is some ambiguity in the rankings, so justify your rankings. 1.2 Agreements (FEQ) Barry Bonds two most important home run balls are number 73 of the 2001 season, which set a single season record, and number 600 of his career. Both balls are subject to legal actions. A California judge agreed to lock up number 600 in a safe in the Solano County sheriff‘s department. Three men are suing Jay Arsenault, their former friend and co-worker, on the grounds that he accepted tickets to the August 9, 2002 game on the condition that, if he got the ball, he'd share its value. The men suing Arsenault say they have a witness that he promised to split the value should he get the ball. Arsenault denies ever making that promise and believes the ball is his, according to his lawyer, Steven D. Woodson. Legally, it's a question of whether Jay Arsenault promised to split the value of the ball in exchange for the tickets and if so, whether that was a binding contract. Under California law, oral promises are contracts under most circumstances, with some exceptions for real estate and the sale of expensive goods. However, there is an exception that recognizes that friends chatting might not be serious. Basically, the law does not deal well with the fringes between social and business activities. 1. Is there a contract in these two cases?5 If so, what type of contract is this? 2 What do you learn about contracts from this case? 3. Why do you think that there are exceptions for real estate and expensive goods? 4 Why do you think that the participants in the number 600 dispute did not put their agreement in writing? ACCT 3121 Problem Set 2 2. Principles of Organization Design 2.1. Recognizing Externalities In each of the following situations, indicate whether there is an externality, and if so, whether it is a positive or negative externality. Provide a one word description (characterization) of the externalit . Situation Externality? (Y or N) Sign? (+ or -) Description applicable in their new jobs. from about $50,000 to $150,000. low rice, low 2.2. One division of a firm has a higher proportion of entry level employees than other parts of the firm, and provides extensive training. The division terminates employees who do not meet minimum standards. Some of the remainder stay with the division, but about a third transfer to other parts of the firm. While the transferees receive more training in their new positions, they report that much of the initial training is A chemical firm produces one basic product, which is then used in five subsequent processes by other divisions. Impurities in the base product cause more frequent replacement of catalysts in the other processes. The cost of replacing the catalysts ranges The world’s automakers appear to strive to increase quality in all their divisions. An alternative approach is to have a high price, high quality brand (Audi) and a ualit brand Volkswaen). l Sources of Organization Problems In the following table, put an X in the appropriate boxes to indicate which rows and columns are related. Externalities Inconsistent Objectives \_ . (7&1?) Knowledge 7‘? 5+ “Q. (“A ‘mf‘, r .- t. n f. my! -, ACCT 3121 Problem Set 2 4 2.3. Organization design flaws (FEQ) The following ‘Offsides’ illustrates organization design flaws. What are they and how would you fix them? Distinguish causes and effects. Pam t it}: mt>>r~xvt~hr> ~ [crux/owe (\ 3pm. ‘iii‘x._é.t/‘{i (3L ‘Es‘z‘fi-trra. 49449! 2»? 2.4. Organization design flaws (FEQ) Q9, The Dean of the business school at Southern Famous University evaluates the performance of \3\\ . department chairs based on how much money they raise from donors. The chairs’ annual salary W \R) increases depend on whether they raise more money than the prior year. The faculty at the ($3) ‘ university are charged for personal long distance calls made from the university. Each month the (QJV . faculty members write checks to reimburse the university for these personal expenses. The chair sq of the accounting department treats the telephone reimbursements received from the faculty as \ donations. 1. Is this a control problem or a decision making problem? 2. Would your answer to part 1 be different if this had occurred in the marketing department; explain. 3. What organization design flaws does this illustrate? r WM} i69¢9v :. WOW 60W?) W #049». it) still (dew WW3) Shims“; ~W (mum m m, banned 6%.. infant. SEES rascal, 00*” WW} WV} New. “My \(yv . ACCT 3121 Problem Set 2 5 2.5. Organization design flaws (FEQ) What organization design flaw is illustrated in the following Dilbert? DiLBEFiTg’ l) Swtt Adams ,- Gilliam: WA? fimma Goa _ , V emblems? :§:;§;T:If!):;ki¥1f‘ I s a - mefifi Fm mi . -‘. 3 2x, . pm a, ‘ i . L 3 9A3$IT§VLE t N», _ ; 5T 05 was ma aha; w 2.6 Over-fishing (FEQ) “l A frequent complaint of environmental groups is that the oceans are 'over-fished'. Take this claim at face value. 1. Explain why the over—fishing occurs. 2 In general terms, what type of economic problem is this? 3. How, if at all, can this problem be solved in the public sector (world at large)? 4 Is the over-fishing problem different from human treatment of other wild creatures, such as elephants, rhinos, tigers and gorillas? 5. Is it an accident that we farm fresh water fish, but not salt water fish? 6. How, if at all, is this question relevant to organization design? l 7. What solutions to this type of problem exist within firms? How do the solutions correspond to solutions available in the public sector? 2.7 Business Plan (FEQ) Use no more than THREE words to characterize the organizational issues raised by the following Dilbert. N0. THEY PREFER 70 SEE us FAIL so THEY LOOK {5000 m DID YOU GET ALL OF THE DEPARTMENT HEADS TO SIGN OFF ON QUE BUSINESS- PLAN? How CAN EM WE SPEED FAILING U? THIS AS FAST PROCESS? A5 I CAN Mme THERE'S M,an MONEY INTHE BUDGET Eon. THEM. acemdamfiacmom ' w: «a: nmsm km Math-2:1, by LIPS, IM. www.clilbencom v/ fl!) :1 MA {’1 ,ll its (Mai ML \\‘ L 2.8 ACCT 3121 Problem Set 2 6 . (a x; x M Socialism (FEQ) An economics professor said he had never failed a single student before but had once failed an entire class. The class had insisted that socialism worked and that no one would be poor and no one would be rich, a great equalizer. The professor then said OK, we will have an experiment in this class on socialism. All grades will be averaged and everyone will receive the same grade so no one will fail and no one will receive an A. After the first test the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. But, as the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided there was no reason to prop up their lazy classmates. The second test average was a D! No one was happy. When the 3rd test rolled around the average was an F. The scores never increased as bickering, blame and name calling all resulted in hard feelings and no one studied for anyone else. All failed to their great surprise and the professor told them that socialism would ultimately fail because the harder you try to succeed the greater the reward but, when a government takes all the reward away no one will try or succeed. Required: Take this out of the context of politics and think of it as a group performance problem either in the classroom or in a firm. 1. What is the economic problem? ana mu 4136+ £frylggtf£gl 2. How would you solve this problem?» Cowthg (BTW) bagak GLOSS {who -6000 - \ gnu?» @ériwm cm (Mamas an (90 fig gamma ‘ k 2.9 Viking Raider #1 (FEQ) j W\ PROVE Consider the following Hagar. 1. Use the terminology of chapter two to provide an economic description of the contract in the Hagar; Also, provide a colloquial translation of the economic description. 2. Under what circumstances is such a contract a good choice. a V0] {3.1an mg kg m [mm (42.:qu (Wm m 3. Describe another way that Hagar could contract with his soldiers. D raffle Lthch$EOcZL§r mpm gqgvaLQtwA/bw Cmtpursafium, Hag cu (g Ugmej 0‘ 0 ’(Wdcliir 14028 GHQ +6191; f0 Calmqflyeafg/a [@ “0+ (Stowe m 7W {9) .3276 “E'Miitlr rperllwmafl u. . homes is gum/u ,~ 13qu 01 float raw eel-m awe/mgr ,W 6521mm m can-mes if {Performance 13 \/'*p Cow/\WNSSA T toN bageol (m WWKQr gr 140+ 0c. Mir, ACCT 3121 Problem Set 2 7 2.10 Cendant CEO compensation (FEQ) Per. C _ Cendant Corp provides the following services, some of which are international: travel and real estate; hotel franchising; vacation ownership; car rentals; retail mortgage origination; corporate employee relocation services; and travel information processing. {WCLLB ‘l’o (‘OmFli ranch In 2002 Cendant announced that the CEO’s pay would be cut by more than 50% starting in 2002, and that it plans to issue fewer stock options in the future. The CEO agreed to forfeit annual stock—option grants in exchange for a bonus based on the company's net income. Including the bonus, the CEOs income is expected to be around $15M Per year' I 3cm?“ dig: gill“; mymflw Q flCr . ; , . :0 \8 only) Anal ze the chan es that Cendant has made to its or anization desi n. \‘T‘EQCWIE m “fwd-M y g . g g 0 J»? YTJW-~\.C0Wllmwlm‘w/ r/ 1_ What effects are these changes likely to have? \l/ Lu E l ’I/ . i. - - T ’ I \K'\ 7 x - " . Lp _ Depeilczeo lemmas/4 r. 9N. vlJ—ldflmw‘g \r Eagppovla filat _ What other chan es would ou make in concert With those described? . \. . g y Most go hog/2d j Why do you think Cendant owns these lines of business? (21¢: ‘ i m i a dyajnfojga/waé C, ‘y . \ z‘) K. (a;va '0!) mm [W .‘ Wm ( , . . » t . _. How do you predict that Cendant is orgafii ed. pgcg’fimflwé’l ’(U’r/ “0% ll 1301101 Jc’i‘ao How would you compensate the managers of indmmy? >//€.“éch+f a h" ‘5‘ , Cn@yfi\ y‘ \.. 2.11 The Sahel (FEQ) C/ M» 4) «mm {A . _ / mm [9th 323 mm We. _ _ _ coma/W9 (X3 Cc Lolwok’ 4,; (’WK—(I‘y'vl’ 1», {l The Sahel is a narrow band of sem1-ar1d land south of the Sahara, and take 1ts name (shore) from P‘" 4 Arabic. Loosely, the Sahel stretches the width of Africa. One tribe in the Sahel is the Fulani. The Fulani are renowned cattle herders whose young men spend about eight months each year grazing their cattle over hundreds of miles across several national borders. As the Fulani graze their herds, local farmers allow the herds to feed on the stubble in maize and millet fields that have been harvested. While grazing, the cattle drop dung in the fields. (u My (gr/{cs "QQ! +1 \i 1.42 r},fi2f rte/l _ , _ . 3&0?le ( car-7‘34 As many as 700 elephants mlgrate approxrmately 800 miles through the Sahel in search of water mm Hg) and food. They eat and trample the crops of people who are subsistence farmers. The farmers try and protect their crops by building walls and fences, but these are ineffective. P???) 1. Provide economic explanations of why the farmers allow the Fulani to graze their cattle ‘ ; on the stubble. immcr gets fertilizer from (111“th j 491'“ CI 0i $.chbe able (OHM Pam \li The PM i oats +th (“attli fecl'erew l WM“ ’ a , L A enforce the contracts between the' ulani and the farmers? M Old-1Q; O‘Cl‘f’ "‘ 2. Was a legal system needed to‘ _ enforcing (WWW 13"- 3 What do you think the farmers attitude is to ‘preserving’ elephant herds? ExplaircifOfl'T (KW? / fm‘w is a a“ 7“ 4 Would the farmers attitude to elephants change if they could own the elephants? v\'/\/‘/\” \[A. h {BE—ntM~ééiiH£—~QMQ_M owitgfittaaaa—tmfimmmm TM [Pi/Liam}, W W, W8 W3 hum Cm i\ It’d-t omega; Us ,,. (9) [\lo)gmpll.c‘.+ Mi? / r (amber; 3 “0+ Claw; “EM” ‘M‘L‘PWM'LK W4 Ough’bbjfng "Emir Soura as” ll’lCOfl/kfl, ClOH’l’ Cam! ~H¢Vi \g Q \ (B {Q 30% land) 06 UJ‘CLfi 10M owl/P (VI/dd w/ 0 “ma @(LQQS Hot 680:: tth Bow. / {DU} i yo} ...
View Full Document

Page1 / 7

ACCT 3121 CH1&amp;2_001 - ACCT 3121: Cost Analysis and...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online