ACCT201 Lecture Notes - Lecture 1: United Nations Economic And Social Commission For Asia And The Pacific

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bronzedog844

20 Mar 2021

School

University of the District of Columbia

Department

Accounting

Course

ACCT201

Professor

Craig Kapp

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Document Summary

In the time when there is sharp economic contraction then there is shutdown of some firms or there is less need for the labor in the country. This situation results in the lay-offs of the employees. Thus the employees and the labor unions make lobbies and call for the protection of their jobs from the foreign competition (cernat, l and m madsen 2011). When the there is protection from imports of the goods from the foreign countries then the demand for the local product is protected. This protected demand for the local products creates demand for the labor and the lay-offs are reduced. Moreover protection from the import of the labor from other countries will also protect the jobs in the country (cernat, l and m madsen 2011). On other hand during the boom period, there is demand for the labor in the country and people don"t worry much about their jobs.

Related Questions

INVENTORY MANAGEMENT FOR PHARMACEUTICAL INDUSTRY
Brazilâs pharmaceutical market, the second largest in the emerging world, is growing at a 28 percent compounded annual rate. In 2010, the value of the prescription drugs sold to Brazilâs middle class was $8 billion, mostly for unpatented medications. According to McKinsey report1, the middle class prefers to rely on public health services, whose physicians prescribe only generic drugs. Moreover, it reported that cost-conscious middle-class patients ask pharmacists to switch their medications to less expensive generics even when physicians prescribe branded drugs.

As a result, global pharmaceutical companies have concluded that they must focus on low-cost strategy for generics and branded generics. Nine of the largest local pharmaceutical films in Brazil (Ache, Biolab, Cristalia, Libbs, EMS, BioNovis, Hebron, Eurofarma and Orygen) have invested BRL538 million (USD174.3 million) during the first five months of 2015, focusing mainly on the production of biosimilars and generics2.

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http://www.mckinsey.com/insights/health_systems_and_services/capturing_the_brazilian_pharma_opportunity https://www.ihs.com/country-industry-forecasting.html?ID=1065999088

Campinas is a city in State of Sao Paulo, Brazil. To the north are a series of coastal towns that are growing very quickly. In 1998, PharmaDist Co.-a pharmaceutical wholesaler serving nine largest local pharmaceutical producers) opened a distribution center in Campinas to supply pharmaceuticals and related products to retail pharmacies, hospitals, dispensing doctors and a few other outlets. In the past, deliveries of pharmaceuticals in this remote area had been made directly by manufacturers, but the growing population had encouraged wholesalers to open. Now there is a mature industry giving an efficient delivery service from centralized warehouses.
As more pharmaceutical wholesalers arrived the market has become increasingly competitive. PharmaDist is one of the main wholesaler companies in the area. It is now classified as a medium-sized private company which is run efficiently and gives a good service to customers. The three main activities of PharmaDist are:
â order taking and processing
â stock holding and control
â delivery to customers.

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http://www.mckinsey.com/insights/health_systems_and_services/capturing_the_brazilian_pharma_opportunity https://www.ihs.com/country-industry-forecasting.html?ID=1065999088

To ensure his companyâs continuing success, Orlando Marcelo, the CEO is always looking for improved performance. A short while ago he was concerned that the cost of deliveries to customers was rising. The distribution system had been reviewed occasionally as the company grew, but it was essentially designed for a much smaller operation.
Orlando hired a management consultant to give advice on improving the transport operations. The consultant did some work which suggested areas for improvement, and his final report suggested that the company look at its stock holding policies. Orlando looked at the stock control system, which was based on standard software provided by SOFT seven years earlier. This had been updated and expanded twice, and still seemed to work quite well. Unfortunately, a close examination showed that stock levels had actually been drifting upwards for some time. The purchasing department explained that the company was successful because it had a reputation for reliability and service. A customer could e-mail, fax or telephone an order and delivery would be guaranteed during the next working day. Unfortunately PharmaDist had occasionally run out of stock and had let down customers (their own lead time from manufacturers averaged about a week). To ensure 97% service level, the purchasing department had adopted a policy of keeping two weeksâ demand in reserve stock, but for some reason this seemed to be drifting up to three weeksâ demand. The same ordering procedure was used for all items. This was based on the purchasing departmentâs view that the most important factor was average demand over the past five weeks. This value was used as a forecast of future demand. Then a reorder level was set as:
Reorder level = Forecast Ã (lead time + safety stock) Ã Factor
where Factor is a variable between 1 and 2 to give a subjective view of the itemâs importance and the supplierâs reliability. Order quantities are really set by the number of staff in the purchasing department. Three people work in the department, each processing up to sixty orders a day. In 200 working days a year they can process 36,000 orders. As there were 4000 items in stock, each item can have an average of 9 orders a year. To add another element of safety, each order was made big enough to last about eight weeks. The system was largely automated, and nobody really checked its performance. Items were usually in stock when they were needed, so managers did not look at the details of the operations. Unit costs varied between one dollar and several hundred dollars, and no one had calculated cost of stock holding or ordering.

Demand for Item Week 1 2 3 4 5 6 7 8 9 1 53 284 252 27 145 1235 567 121 987 2 64 301 260 32 208 1098 664 87 777 3 82 251 189 23 177 987 548 223 743 4 41 333 221 22 195 1154 602 304 680 5 73 276 232 27 211 1559 530 76 634 6 18 259 195 30 179 1209 650 377 655 7 40 242 217 31 205 993 612 156 598 8 53 310 225 23 187 1313 608 198 603 9 52 311 186 28 156 1405 596 94 621 10 21 336 265 23 182 1009 637 355 564 11 67 258 245 25 171 985 555 187 559 12 50 277 212 28 169 1237 589 209 519 13 22 263 224 31 210 1119 601 304 485 14 37 277 233 28 182 1124 584 295 483 15 36 275 235 28 182 1117 580 315 463 16 34 273 236 29 182 1110 576 335 442 17 32 271 238 29 181 1103 572 354 422 18 31 269 240 29 181 1096 568 374 402 19 29 267 242 29 181 1089 564 394 381 20 22 272 243 30 184 1105 568 430 359 Mean 43 280 230 28 183 1152 588 259 569 Standard Deviation 18 25 22 3 17 144 34 112 154 Reorder level 302 1220 1050 160 1120 6100 2520 900 4400 Order quantity 450 2000 1500 245 1450 7900 4500 1950 6400 Unit cost (USD) 45.25 10.2 8.75 32.6 12.25 6.5 28.5 36 4.2

1. How well do you think the existing inventory control system works? What are the current annual total costs for the selected items?
2. What policy would you suggest to reduce the total costs? What is the anticipated gain?
3. Orlando Marcelo is keen to make progress in this area. What would you advise him to improve their inventory management system?

lavendermarten37

Present and justify your own view as to how Robert Wallaceshould resolve the dilemma in which he finds himself. (750 WORDESSAY QUESTION)

Robert Wallace graduated from Indiana University in 2002 with aBA in history and certification to teach high school socialstudies. He went right to work as a teacher, but after a few yearshe found himself increasingly frustrated with his work from thestandpoint both of professional fulfillment and financial reward.With his wifeâs encouragement, he returned to school to seek anaccounting degree. Karen Wallace is an RN, and she and Robert feltthat her earnings as a nurse would suffice for themselves and theirtwo children until he was ready to return to the workforce.

Robert finished his MBA in 2010, but his search for a positionwent slowly, partly because of the recession but also because, atage 35, he was a good deal older than those he was competingagainst. After a succession of part-time bookkeeping jobs, hefinally landed a solid position with the accounting firm of CharlesCaldwell and Company. He was assigned to the Caldwell office inHamilton, Indiana (population 35,000). Besides Robert there is justone other accountant in the office: Jerry Bragg, who is a partnerin the company and thus Robertâs boss.

Charles Caldwell and Company is a long-established firm, whichis still run by its 74-year-old founder. It has traditionally beenstrong throughout Indiana but in recent years has faced toughcompetition from the big national accounting firms. Just lastspring Mr. Caldwell summoned all of the partners to a meeting inwhich he reviewed the situation. His words were relayed down toRobert and all of the other employees. âThe only way we can beatthis competition,â said Mr. Caldwell, âis to provide morepersonalized and diligent service. This will be appreciated,especially in the smaller towns. Our survival depends on the localofficesâ keeping their customers happy.â

All these events provide the background to the painful dilemmain which Robert Wallace now finds himself. Several months ago heconducted an audit of the local bank. Because this was his firstmajor project, he was especially meticulous. Rather than justreview randomly selected loan files, he went through all the bankâsloans in order to gauge any financial vulnerability. No seriousproblems were found. More recently, Robert audited a local tractordealership. The dealership is owned by one Oliver Bigelow, who isalso the president and chief shareholder in the bank. Mr. Bigelow,a lawyer, has an interest in several other businesses as well. Byany reckoning he is the richest and most powerful man in town.

The audit of the tractor dealership is what disclosed theproblem. In the files for Robert to examine, the managerinadvertently left the record of a sizable loan from the bank.This, as Robert immediately understood, presented three majorproblems. First, because business at the dealership was poor, theloan was likely to be in default quite soon. Next, and far moreimportantly, the circumstances of the loan were highly irregular.Mr. Bigelow was, in effect, loaning money to himself. The normalprocess by which any prospective loan would be evaluated couldhardly occur, since Mr. Bigelow could see to it that the loan wentthrough. Finally, there was the fact, seemingly connected with thepreceding, that the record of the loan had been removed from thebankâs audit file. Robert had examined every loan in that file. Heknew the tractor loan was not in there. He now wondered what otherloans to businesses of Mr. Bigelowâs might have been concealed.

Robert brought this disturbing news to Jerry Bragg. Hissuperiorâs reaction shocked him. He was ordered to drop the matter.âI will take over the audit of the dealership,â said Bragg. âI willtalk to Bigelow and see to it that the loan is taken care of. Ithas to be handled discreetly. We cannot afford to alienate Bigelow,or we will be out of business in this town.â

Robert protested that it is not an accountantâs job to âfixâthings but rather to certify financial soundness or (as in thiscase) the lack of it. But Bragg cut him short: âIâm in charge ofthis office. Itâs my responsibility, not yours. If you intend tokeep working for this company, then you stay out of this matter,starting right now.â

Without saying anything more, Robert left Braggâs office. He hadno idea what he should do. He hated the thought of losing this job.Should he âblow the whistleâ? If so, to whom? How far was heobliged to carry it?

Shipyard Progres^{^[1]}

Introduction

Shipyard Progres is located alongside the Winscotencanal in theprovince of Groningen, in the north of the Netherlands. Since 1837,when the business was established, it has been engaged mainly inbuilding ships for what is nowadays called Shortsea shipping.Progres specializes in multipurpose dry-cargo vessels, but itsometimes builds other types of ships as well, such as tankers forliquefied gases and chemicals, tugs, fishing boats, and ferries.The shipyard has about 140 permanent employees and its sales over2000 amounted to approx. â¬25 million.

Progres and the other shipyards in the north of the Netherlands,most of which are located alongside the Winscotencanal, concentrateon building relatively small sea-going vessels. Progres is one ofthe largest shipyards alongside the Winscotencanal. Like the othershipyards in the north of the Netherlands, Progres contracts out aconsiderable portion of its work to all kinds of specializedsuppliers, such as engineering firms and wainscotingbusinesses.

Despite fierce international competition, Progres and severalother shipyards in the north of the Netherlands have managed tokeep going for the past fifteen years. Their success is largely dueto their great expertise, innovativeness, and the fact that theyspecialize in high-quality types of ships. The total turnover ofDutch shipyards specializing in ârelatively smallâ sea-goingvessels was approx. â¬400 million in 1999.

However, the shipyards alongside the Winscotencanal, includingProgres, have to contend with limitations on the dimensions of theships to be built. These limitations relate to the draught and âbecause of the maximum opening of the bridges between the shipyardsand the sea â the width of the ships, in particular. For variousreasons, the dimensions of ships for the shipyardsâ main customershave gradually been increasing more and more. Most of thesecustomers are small shipping companies, family businesses in theNetherlands and a few other countries in North-West Europe, whichhave done business with the shipyards for a long time.

The increasing size of the ships means that some of the shipsrequired by the usual customers can no longer be built by theshipyards alongside the Winscotencanal, or at least cannot becompleted there by them. Their inventiveness has resulted in anincrease in the maximum dead weight of their ships (expressed astons deadweight all told (DWAT) and tons deadweight cargo carrying(DWCC)), in which shipowners are particularly interested. However,slowly but surely the shipyards have reached the limit of what isfeasible without the stability of the ships being affected, e.g.Progres cannot build ships of over 6,000 to 6,500 DWAT at theshipyard alongside the Winscotencanal. The shipyards realize thatin the long run this situation may lead to big problems. They willmiss out on orders for large ships and at some stage some of theirloyal customers might place all of their orders elsewhere.

For many years the shipyards have examined and discussed thepossibility of a joint investment in a large, capital intensive,offshore shipyard in Eemshaven harbour in the north of Groningen.Their consultations have not yet led to any concrete results,despite inducements offered by Dutch and European authorities. Onthe one hand, the shipyards know that they have to rely on eachother to find the best possible solution to the problems caused bythe increasing dimensions of the ships they build. On the otherhand, the owners of the shipyards â mostly families which have beenshipbuilders for generations â have always been used to runningthings their way. Moreover, to a certain extent the shipyards arecompetitors.

A dock in Eemshaven harbour

Financially and technically speaking, Progres was one of thestrongest businesses alongside the Winscotencanal in 1999. Becausethe shipyards had been making little headway with their plans forbuilding an offshore shipyard, the board of Progres decided to takeit upon itself to explore the possibility of building âlargeâ shipselsewhere.

A temporary and relatively inexpensive solution was the purchaseof an existing dry dock â which could be moored in Eemshavenharbour â where Progresâs ships could be assembled and completed.In that case, sections built by Progres alongside theWinscotencanal would be transported by tugboat to Eemshaven harbourand assembled there, after which the ship would be completed. Allthis would obviously lead to certain organizational and technicalcomplications. However, the board of Progres did not think thatthere would be any insurmountable problems.

After a detailed analysis of the anticipated revenue and expenseresulting from the purchase of the dock, the board of Progresreported the data mentioned in Table 1 to the supervisory board ofProgres during a meeting in February 2000. The supervisory board,which had to assess the project, had decided to limit itself to therevenue and expense over the next five years, because it could notsay anything with certainty about the following years.

During the supervisory board meeting Chris van der Burg,financial manager of Progres, explained the dry dock project. âOfcourseâ, he said, âit would be wrong to make light of thedifficulties of working at two locationsâ.

In addition, he stressed the necessity of constantly obtainingsufficient orders for large ships and the rather low cost of thesimple plans. The enthusiastic financial manager said that the netcash flows in Table 1 (i.e. additional annual inflows minusadditional annual outflows) were, as usual at Progres, ratherconservative estimates.

âAssuming that the data in the table are correct and Progresâscost of capital amount to 11%, the dry dock will be an attractiveinvestment to us, even if there should be a temporary slump in thedemand for newly built shipsâ, Van der Burg added.

Table 1 Estimated net cash inflows after the purchase of a drydock (â¬ million)

2002	1.0
2003	1.4
2004	1.9
2005	1.5
2006	1.2

At the end of 2001 an amount of â¬ 4,1 million would be requiredfor the dock and further investments in Eemshaven harbour. The netcash inflows in Table 1 would be coming in at the end of eachyear.

The investment and the strategy of Progres

After the plans had been presented during the supervisory boardmeeting, those present ended up discussing much more than the drydock project. During the lively discussion numerous pots of tea andcoffee and lots of biscuits were brought in, and the box of cigarsand cigarettes on the conference table was opened. It was not longbefore the conference room was blue with smoke. The nonsmokingpolicy pursued by the government for many years had evidently notyet had an impact on the board and supervisory board ofProgres. During this discussion Jan Smit,general manager of Progres, said the following.

âThis project is completely in line with our strategy and that'swhy it is a good idea to start building larger ships and developingan extra production site. We want to keep focusing on the marketfor high-quality ships, where arguments for purchasing such a shipare quality, flexibility and expertise rather than low prices.Also, we want to keep up our profits and keep supplying relativelysmall Shortsea shipping vessels for containers and other dry cargoto our current customers, mostly from the Netherlands, Germany andthe United Kingdomâ, Jan said.

âIn additionâ, Jan continued, âwe want to retain or attractcustomers for relatively large Shortsea shipping vessels. We wantto enter new geographical markets as well as pay more attention totypes of ships that we have not really focused on until now. Ourexpertise will be required for those types of ships and may resultin good profit margins. So we will be trying to specialize in awider range of ships, particularly gas tankers. To that end, wewill increasingly be focusing on customers outside North-WestEurope. The dock may be one of the means of achieving all ourgoals. If we invest in the dock, we will have to strive for ahigher average building cost of the ships and try to increase theannual output from five to seven ships now to a total of eight totwelve ships in about three yearsâ time. The average building costof the Shortsea vessels and tankers that we can build at thepresent location is now about â¬8 million. An amount somewherebetween â¬4 million and â¬6 million is for our shipyardâ.

âBy the wayâ, Van der Burg added, âwhen we were calculating thefigures for the dry dock project in Table 1, we hardly took accountof that desirable increase in output. Being sensible men fromGroningen, we did not want to be too optimisticâ.

âLet me tell you more about our future after investing in thedockâ, Smit said enthusiastically. âTo be able to build more shipsand new types, we will also have to invest in increasing knowledgeof building new types of ships, phasing production processes at twolocations, and marketing. Most of our current buyers are loyalcustomers. We know them and maintain good relations with them.Chris or I visit them when they have had good or bad news. Ofcourse we should keep doing that. But we must take far more activesteps to approach prospective customers, especially outside Europe,for expensive and more profitable types of ships, likegastankersâ.

âTo be able to supply high-quality products and make the most ofthe dock, we will have to improve our employeesâ expertise all thetime, because it is one of our great strengths. If the employeesalways know the latest production techniques, we will be able touse the latest in cutting, forming, welding, and coating, andcontinue doing a good and efficient job. Internal production andcontracting out must become even more efficient and flexibleprocesses than they are now, particularly because we will havestaff on two production sitesâ.

âLuckily, most of our employees are quite enthusiastic about ourplans. Many of our employees will have to commute more because ofthe two locations, but I am sure most of them will not mind. Thereare strong bonds between a lot of our employees and our business,sometimes these bonds have existed for generations. Our employeesare proud of our products and they know we value our employees. Weemploy down-to-earth, discerning men and women of few words. Butthey know very well what innovations are necessary to the future ofour business â and to their jobs. It is our experience that changeshardly ever cause problems among our employees, partly because theyknow that we do not talk rubbish to themâ.

âI have touched on a number of things that we will be faced within the coming years. Clearly, quite a lot of factors play animportant part in the dry dock project. It will not be easy toincorporate the project into our strategy and turn it into a realsuccess. I do realize there may be problems in store for us; we donot yet know what is going to happen. But it is clear that wecannot keep talking about an offshore shipyard forever withoutdoing anything about itâ, Smit concluded.

Balanced scorecard: means of concretizing and realizingthe strategy of Progres?

âMaybe it is time for a drink nowâ, supervisory director JopGerards sighed, when Smit had finished. âBut first I would like togo into what you have said, Janâ, Jop, who was a professor ofmanagement accounting, added immediately.

âGood short-term financial results do matterâ, Jop said. âBut weshould also check regularly what the project contributes to thestrategy of Progres. The point is whether Progres will achieve itslong-term goals and stay healthyâ.

âThe possibilities outlined by youâ, he said, âshow that weshould see the project in a much wider context, so not only as arelatively simple solution to problems caused by the presentlocation. I am not really concerned about the amount of moneyinvolved in the dock; Progres is sure to come up with the money.No, what I am concerned about is that we should focus regularly andsystematically on the subjects you have just brought up with somuch enthusiasm. Now we have been philosophizing about these thingsthis afternoon, we must make sure that we will discuss them againsoon. Especially because what you have just said, Jan, is soimportant. The supervisory directors, myself included, should talkthings through tooâ.

âThe significance and consequences of the dock to the strategywe have recently decided on obviously cannot be expressed infinancial figures only. If our profit over next year were â¬3.5million, it would be a wonderful result. But how was that profitrealized and how is the business doing in general? That isimportant too. The strategy of Progres seems quite clear, we havediscussed it once or twice with small groups of people who workhere. But what exactly do we want to achieve and what should ourmessage be for the heads of the office, the sales department, thedesign department, and the production teams? Can we say to them:look, this is the strategy of Progres, you had better get cracking?Or should we be more specific and say to them: look, this is thestrategy, that is the direction Progres is going in and that may bethe consequences for your department, we think. To my mind, weshould ask them there and then: are you fine with that or do youdisagree?â

âOf course we can use our strategy to indicate that we want toinnovate, enhance marketing, and constantly improve our productionprocessesâ, Jop continued. âThat is all very well, but what does itmean exactly? Should we also specify the profit on the new types ofships to be made five years from now? And how do we determine intwo yearsâ time that we are on the right track? If we succeed indefining more concrete goals on the basis of our strategy, I wouldalso like to know exactly how those different goals areinterconnected. Actually, I believe I am getting more and moreenthusiastic about such an approach, while talking about itâ.

âSo you are sayingâ, Jan Smit responded, âthe goals Chris and Ihave thought and talked about among ourselves should be put down onpaper. That we should consult with our people. And that we shouldcheck regularly whether what we wanted to achieve through the dock,is actually becoming a reality. We should not only focus onobtaining orders and then making sure that we get the new ships offthe slipway on timeâ.

âYesâ, Jop Geerards said, âwe should talk regularly with eachother. We need not philosophize every month, but it could be veryuseful to do it once or twice a year. The balanced scorecard mightbe a good tool for us, although it has been criticized by someacademics and businesses that have been using it. Of course thereis no magic formula, but our ambitions, the boardâs enthusiasm, andour personnelâs positive attitude make me think that we could besuccesful in developing a scorecard. In any case, we should thinkit over. Perhaps you, Chris, and your financial staff could developfurther ideas and the first concrete elements of such ascorecardâ.

CASE REQUIREMENT:

Please write a brief report on thefollowing.

1. Assuming that it is now the end of 2001, pleasecalculate the internal rate of return on the investment in the drydock, using the data mentioned in the Progres case (see Table1).

Give a detailed example of the calculation of Progresâssafety margin, i.e. calculate the decrease in annual net cashinflow which does not result in an internal return which is lowerthan Progresâs cost of capital. Comment briefly on the results ofyour calculations and on Progresâs preferred method of evaluatingthe project, i.e. evaluation based on data about net cashinflows.

2. Please describe briefly and in general terms what thebalanced scorecard is and what its developers, Kaplan and Norton,see as its aims.

3. Using the available data â and any reasonableassumptions â, please give an example of a concrete balancedscorecard (BSC) for Progres. Develop this BSC without necessarilyincluding any figures in your BSC. Put forward arguments for thegoals and indicators included in your BSC and describe therelationships you expect to exist between the goals and indicatorsin the four perspectives of the BSC. Give a clear explanation ofthe contents of your BSC.

4. Please discuss to what extent the way in whichProgres is being run is conducive to the implementation of abalanced scorecard. Discuss how the implementation and use of thebalanced scorecard by Progres relates to the use of two levers ofcontrol described by Simons, namely diagnostic control andinteractive control.

^{^[1]} Authors: Henk J. ter Bogt and G. Janvan Helden, Faculty of Economics, University of Groningen (theNetherlands).

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ACCT201 Lecture Notes - Lecture 1: United Nations Economic And Social Commission For Asia And The Pacific

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