Group Exercises
2-1. A technological revolution is occurring throughout business. Technology is changing the way work is being performed.. Microprocessor-controlled manufacturing is changing blue-collar work on the shop floor, and more recently, advanced information technology has begun to change white-collar work.
- How is technology transforming your intended profession,be it accounting, engineering, manufacturing, management, marketing, or some other profession?
- How are these changes affecting the skills and /or knowledge necessary for a person entering the profession.
- What impact is technology having on the following industries: automobile manufacturers like General Motors,large comprehensive hospitals like Cleveland Clinic, financial institutions like Chase Manhattan Bank, retail firms like Wal-Mart, airlines like American Airlines, and universities like The University of Michigan?
- What impact are these changes having on the mix of costs between fixed and variable costs ? How do these changes affect the profitability of these industries?
2-2. Technological change in American industry has had a major impact on the way business is conducted. Major shifts in business cost structure are taking place.
Your group should discuss the effects of these changes on the future of American corporations. Answer the following questions:
- which type of business will be most likely to respond successfully to technological changes: large or small corporations? Why?
- What will be the effect on the profitability of businesses of these changes? Will business become more or less profitable and why?
- Given the large fixed costs of technology-will corporations become more marketing oriented? (With large fixed costs: each sale will result in a larger marginal profit per unit. The marginal profit is the marginal revenue minus the marginal or extra costs of producing or purchasing the product. Thus a small increase in sales will result in a larger percentage increase in profits. More marketing should result in more sales).
2-3. Each member of the group should obtain an annual report of a publicly traded company. Each person should select a company in a different industry. For each company calculate for the two most recent years the following:
- cost of sales as a percentage of sales
- general and administrative costs as a percentage of sales
- other costs as a percentage of sales
- net income as a percentage of total sales
For each company- tell what lessons you learned in reviewing the annual report. What was the most surprising matter you found in the financial numbers about your company?
Examples of different industries would include manufacturing, retail, and financial services.
Internet Exercises
2-4. As of May 1996, all publicly traded companies are required to file most of their financial documents with the Securities and Exchange Commission(SEC) electronically. The SEC's electronic data base of corporate information, called Edgar is available at www.sec.gov/edgarhp.htm.
Edgar includes quarterly and annual filings of Forms 10-Q and 10-K. Users of the Edgar data base have prompt on-line access to these financial statements.
The chapter contains financial information on Planet Hollywood ( a restaurant chain), and a clothing company ( Benneton). Use the Edgar data base to select restaurant chains and a clothing company,and compare and contrast these companies with Planet Hollywood ,and Benneton in terms of the cost of sales as a percentage of sales, and the other cost categories mentioned in the textbook. Be alert to differences in the business structure of the companies you select compared to the two in the text.
Each member of the group should select one restaurant company and one clothing company , and be prepared to discuss his or her findings.
Instructions -after selecting the Edgar web site- search the Edgar database- next proceed to the Edgar CIK ( Central Index Key) look-up and enter the name of the company. The company's unique CIK number will appear. Use this number to search the Edgar archives,and select the financial information desired.
2-5. Rutgers University has a web site- RAW ( Rutgers Accounting Web) which is a repository of a voluminous accounting data. The address is www.rutgers.edu/Accounting/raw.htm. I searched under the term overhead costs. Four case studies -- Cases from Management Accounting Practice -- appeared. Your group should select the first case -- Centerior Energy A . Review the case discuss it among your group, and answer the first two questions at the end of the case.
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