Chapter 18, Problem 1MC

The OakTree Group is a 75-year old company founded in Hong Kong. The Group comprises of two majorbusinesses: a publishing business known as Fairmont Publishing and an insurance business namedGeneralife. The Group is currently organized in a decentralized manner with two businesses running asinvestment centers. However, with the recent retirement of many senior staff in OakTree, the CEO is verymuch concerned regarding the performance of the company under a new generation of leadership. In fact,the CEO is considering the possibility of restructuring the Group into a centralized structure.Fairmont Publishing is organized as a divisional structure with the presence of two divisions: Printed Mediaand Online Media. The following are summary financial information for 2019 and 2020:   Printed Media Online Media   2019 2020 2019 2020 sale $18900 $19320 $25200 $26880 SG&A expenses $6590 $6520 $6092 $8564 Current assets $5670 $6600 $4050…

Exeter Group is a large retail company that has brick-and-mortar outlets throughout the Southeast. They have been in business for many years, but two years ago started an online sales channel to offset slowing in-store sales. The human resources (HR) department at Exeter handles tasks for the two divisions that make up Exeter: Retail and Online. Retail Division manages the company's traditional business line. This business, although still profitable, is currently not growing and may be shrinking slightly. Online Division, on the other hand, has experienced double-digit growth from the beginning. The cost allocation system at Exeter allocates all corporate costs to the divisions based on a variety of cost allocation bases. HR costs are allocated based on the average number of employees in the two divisions. There are two basic activities in the HR Department. The first is employee maintenance (payroll administration, benefits, and so on), which is an ongoing activity and requires the…

The OakTree Group is a 75-year old company founded in Hong Kong. The Group comprises of two majorbusinesses: a publishing business known as Fairmont Publishing and an insurance business namedGeneralife. The Group is currently organized in a decentralized manner with two businesses running asinvestment centers. However, with the recent retirement of many senior staff in OakTree, the CEO is verymuch concerned regarding the performance of the company under a new generation of leadership. In fact,the CEO is considering the possibility of restructuring the Group into a centralized structure.Fairmont Publishing is organized as a divisional structure with the presence of two divisions: Printed Mediaand Online Media. The following are summary financial information for 2019 and 2020:   Printed Media   Online Media   2019 2020 2019 2020 sale $18900 $19320 $25200 $26880 SG&A expenses $6590 $6520 $6092 $8564 Current assets $5670 $6600 $4050…

Betty’s Fashions operates retail stores in both downtown and suburban locations. The company has two responsibility centers: the City Division, which contains stores in downtown locations, and the Mall Division, which contains stores in suburban locations. Betty’s CEO is concerned about the profitability of the City Division, which has been operating at a loss for the last several years. The most recent City Division income statement follows. The CEO has asked for your advice on shutting down the City Division’s operations. If the City Division is eliminated, corporate administration is not expected to change, nor are any other changes expected in the operations or costs of the Mall Division.

The directors of Ribs Co, a listed company, are reviewing the company’s current strategic position. The firm makes high quality garden tools which it sells in its domestic market but not abroad. Over the last few years, the share price has risen significantly as a firm has expanded organically within its domestic market. Unfortunately, in the last 12 months, the influx of cheaper, foreign tools has adversely impacted the firm’s profitability. Consequently, the share price has dropped sharply in recent weeks and the shareholders expressed their displeasure at the recent AGM. The directors are evaluating two alternative investment projects which they hope will arrest the decline in profitability. Project 1: This would involve closing the firm’s domestic factory and switching production to a foreign country where labor rates are a quarter of those in the domestic market. Sales would continue to be targeted exclusively at the domestic market. Project 2: This would involve a new investment…

Haglund Department Store is located in the downtown area of a small city. While the store had been profitable for many years, it is facing increasing competition from large national chains that have set up storeson the outskirts of the city. Recently the downtown area has been undergoing revitalization, and the ownersof Haglund Department Store are somewhat optimistic that profitability can be restored.In an attempt to accelerate the return to profitability, management of Haglund Department Store is inthe process of designing a balanced scorecard for the company. Management believes the company shouldfocus on two key problems. First, customers are taking longer and longer to pay the bills they incur usingthe department store’s charge card, and the company has far more bad debts than are normal for the industry. If this problem were solved, the company would have more cash to make much needed renovations.Investigation has revealed that much of the problem with late payments and unpaid…

Mercury, Incorporated, produces cell phones at its plant in Texas. In recent years, the company's market share has been eroded by stiff competition from overseas. Price and product quality are the two key areas in which companies compete in this market. A year ago, the company's cell phones had been ranked low in product quality in a consumer survey. Shocked by this result, Jorge Gomez, Mercury's president, initiated an intense effort to improve product quality. Gomez set up a task force to implement a formal quality improvement program. Included on this task force were representatives from the Engineering, Marketing, Customer Service, Production, and Accounting departments. The broad representation was needed because Gomez believed that this was a companywide program and that all employees should share the responsibility for its success. After the first meeting of the task force, Holly Elsoe, manager of the Marketing Department, asked John Tran, production manager, what he thought of…

Stark and Company is a manufacturer that sells robots predominantly in the Asian market. Times have been tough for the auto industry and Stark and Company is no different. The company is under tremendous pressure to turn a profit. Several years ago, as analysts were predicting a large downturn in the robot industry, Stark decided to purchase a smaller niche robot maker in the hopes of capturing a different segment of the consumer market and to better learn the manufacturing processes of other robot makers. Starks still operates as two separate divisions, Classic and New Age, with each division manager employing a different manufacturing philosophy. The Classic manager is concerned with low input costs and quantity in production in addition to brand recognition and robot power. The New Age manager is concerned with quality and innovation in manufacturing, fuel-efficient and environmentally friendly robots. SAC continued to suffer losses even with the addition of the New Age division.…

Triangle company has acquired a controlling interest in Golden Company. After athorough study, Triangle Company noted that the Golden Company was tooconservatively managed and had thought that with an aggressive leadership, thesales volume, the rate of return on sales and the rate of return for thestockholders can be improved. Accordingly, the company had invested heavily inmodern equipment and has promoted additional sales volume.The new management has been in control for the last three years and hereunderare the comparative data based on the annual report submitted under the oldand new management. OldManagement NewManagement Current assets P 640,000 P 900,000 Plant assets, net of depreciation 335,000 1,940,000 Total assets P 975,000 P 2,870,000 Current liabilities P 185,000 P 623,500 Long-term notes payable - 1,000,000 Mortgage payable 75,000 250,000 Capital stock 250,000 250,000 Retained earnings 465,000 746,500 Total equities P 975,000 P 2,870,000 Net sales P…