Question: How might the social value of low

> Suwon Pharmaceuticals invests heavily in research and development (R&D), although it must currently treat its R&D expenditures as expenses for financial accounting purposes. To encourage investment in R&D, Suwon evaluates its division managers using EVA.

> Several years ago, Seville Company acquired Salvador Components. Prior to the acquisition, Salvador manufactured and sold automotive components to third-party customers. Since becoming a division of Seville, Salvador has manufactured components only for

> Division managers at Asher Company are granted a wide range of decision authority. With the exception of managing cash, which is done at corporate headquarters, divisions are responsible for sales, pricing, production, costs of operations, and management

> Refer to the facts in Problem 14–39. Assume that Pitt’s performance measurement and bonus plans are based on residual income instead of ROI. Pitt uses a cost of capital of 12 percent in computing residual income. In Problem 14–39 Refer to the facts in P

> Refer to the facts in Problem 14–37. Assume that Pitt’s performance measurement and bonus plans are based on residual income instead of ROI. Pitt uses a cost of capital of 12 percent in computing residual income. In Problem 14–37 Oscar Clemente is the m

> Oscar Clemente (Problem 14–37) is still assessing the problem of whether to acquire LSI’s assembly machine. He learns that the new machine could be acquired next year, but if he waits until then, it will cost 15 percent more. The salvage value would stil

> Refer to the data in Exercise 14-34. In Exercise 14-34 Back Mountain Industries (BMI) has two divisions: East and West. BMI has a cost-of-capital of 15%. Selected financial information (in thousands of dollars) for the first year of business follows:

> By mistake, the production supervisor transposed the digits on the production report and reported a higher percentage of completion for each inventory component. Assume that there was no beginning inventory. What is the effect of this error on the follow

> Refer to the data in Exercise 14-34. In Exercise 14-34 Back Mountain Industries (BMI) has two divisions: East and West. BMI has a cost-of-capital of 15%. Selected financial information (in thousands of dollars) for the first year of business follows:

> Back Mountain Industries (BMI) has two divisions: East and West. BMI has a cost-of-capital of 15%. Selected financial information (in thousands of dollars) for the first year of business follows: a R&D is assumed to benefit two periods. All R&D

> Upper Division of Lower Company acquired an asset with a cost of $600,000 and a four-year life. The cash flows from the asset, considering the effects of inflation, were scheduled as follows: Year ________________Cash Flow 1 . . . . . . . . . . . . . .

> Refer to the information in Exercise 14-30. In computing ROI, this division uses end-of-year asset values. Assume that all cash flows increase 10 percent at the end of each year. This has the following effect on the assets’ replacement

> Refer to the data in Exercise 14-30. Assume that the division uses beginning-of-year asset values in the denominator for computing ROI. In Exercise 14-30 The Caribbean Division of Mega-Entertainment Corporation just started operations. It purchased depr

> The Caribbean Division of Mega-Entertainment Corporation just started operations. It purchased depreciable assets costing $30 million and having a four-year expected life, after which the assets can be salvaged for $6 million. In addition, the division h

> Refer to the facts in Exercise 14-28, but assume that Noonan has been leasing the machine for $60,000 annually. Assume also that the machine generates income of $42,000 annually after the lease payment. Noonan can cancel the lease on the machine without

> Noonan Division has total assets (net of accumulated depreciation) of $3,300,000 at the beginning of year 1. One of the assets is a machine that has a net book value of $300,000. Expected divisional income in year 1 is $495,000 including $42,000 in incom

> Refer to the information in Exercises 14-25 and 14-26. In Exercises 14-25 and 14-26 Ocean Division currently earns $780,000 and has divisional assets of $3.9 million. The division manager is considering the acquisition of a new asset that will add to pr

> Ocean Division currently earns $780,000 and has divisional assets of $3.9 million. The division manager is considering the acquisition of a new asset that will add to profit. The investment has a cost of $675,000 and will have a yearly cash flow of $168,

> Under which of the following conditions will the first-in, first-out (FIFO) method of process costing produce the same cost of goods manufactured as the weighted-average method? a. When goods produced are homogeneous. b. When there is no beginning invent

> The following data are available for two divisions of Solomons Company: The cost of capital for the company is 8 percent. Ignore taxes. Required a. If Solomons measures performance using ROI, which division had the better performance? b. If Solomons m

> A division is considering the acquisition of a new asset that will cost $720,000 and have a cash flow of $252,000 per year for each of the four years of its life. Depreciation is computed on a straight-line basis with no salvage value. Ignore taxes. Req

> Refer to Exercise 14-20. The results for year 2 have just been posted: In Exercise 14-20 Eastern Merchants shows the following information for its two divisions for year 1: Required Compute divisional operating income for the two divisions. How well

> Eastern Merchants shows the following information for its two divisions for year 1: Required Compute divisional operating income for the two divisions. Ignore taxes. How well have these divisions performed? Eastern Western Sales revenue Cost of sal

> “Residual income solves some of the problems with ROI, but because it is an absolute number, it is difficult to compare divisions. We should use residual income divided by assets and then we would have the best of both measures.” Do you agree with this s

> “Every one of our company’s divisions has a return on investment in excess of our cost of capital. Our company must be a blockbuster.” Comment on this statement.

> Management of Division A is evaluated based on residual income measures. The division can either rent or buy a certain asset. Might the performance evaluation technique have an impact on the rent-or-buy decision? Why or why not? Will your answer change i

> “I think that EVA is the best performance measure. I am going to recommend that we evaluate all managers, of plants, divisions, subsidiaries, up to the chief executive officer (CEO), using it.” Do you think this statement is appropriate? Explain.

> How would you respond to the following comment? “Residual income and economic value added are identical.”

> “Failure to invest in projects is not a problem when you use ROI. If there is a good project, corporate headquarters will just tell the division manager to invest.” What are the difficulties with this view?

> A friend owns and operates a consulting firm that works for a single client under one consulting agreement. The consulting firm bills the client monthly for charges incurred. She asks you whether you would recommend a job costing or process costing syste

> The chapter identified some problems with ROI-type measures and suggested that residual income reduces some of them. Why do you think that ROI is a more common performance measure in practice than residual income?

> What problems might there be if the same methods used to compute firm income are used to compute divisional income? Does your answer depend on the type of business a firm is in?

> What impact does the use of gross book value or net book value in the investment base have on the computation of ROI?

> How does residual income differ from ROI?

> Give an example in which the use of ROI measures might lead the manager to make a decision that is not in the firm’s interests.

> How is divisional income like income computed for the firm? How is it different?

> What are the advantages of divisional income as a business unit performance measure? What are the disadvantages?

> The following exchange occurred just after the finance staff at Diversified Electronics rejected a capital investment proposal. David Parker (Product Development): I just don’t understand why you rejected my proposal. We can expect to m

> Refer to Problem 9-51. Jean Sharpe decides to gather additional data to identify the cause of overhead costs and figure out which products are most profitable. She notices that $30,000 of the overhead originated from the equipment used. She decides to in

> Chocolate Bars, Inc. (CBI), manufactures creamy deluxe chocolate candy bars. The firm has developed three distinct products: Almond Dream, Krispy Krackle, and Creamy Crunch. CBI is profitable, but management is quite concerned about the profitability of

> We have discussed two methods for process costing, weighted average and FIFO. Your colleague recommends last-in, first-out (LIFO) process costing to the controller as a new system. The controller is concerned about the recommendation because the cost rec

> Brighton, Inc., manufactures kitchen tiles. The company recently expanded, and the controller believes that it will need to borrow cash to continue operations. It began negotiating for a one-month bank loan of $500,000 starting May 1. The bank would char

> The MBO technique has been criticized for putting too much emphasis on achieving goals (ends) and not enough on the methods that people use to achieve them (means). Do you think this is a flaw in the technique, or in the way managers apply it? How would

> Why is self-awareness important for being a good manager? Can you think of some negative consequences that might result from a manager with low self-awareness?

> Both China and India are rising economic powers. How might your approach to doing business with China, a communist country, be different from your approach to doing business with India, the world’s most populous democracy? In which country would you expe

> Use Herzberg’s two-factor theory to explain why motivation seems to be high and turnover low at Mars, based on the information provided in the chapter opening example.

> What specifically would the experience of living and working in another country contribute to your skills and effectiveness as a manager in your own country?

> Do you think it is wise for a top executive to fire a manager who is bringing in big sales and profits for the company but not living up to a cultural value of “showing respect for employees”? Explain.

> Why do you think empowerment increases motivation? Do you see any ways in which a manager’s empowerment efforts might contribute to demotivation among employees? Discuss.

> Describe the primary differences between manufacturing and service technology. How do these differences influence the type of structure that will be most effective?

> Do you think it’s possible for someone to develop a global mindset if they never live outside their native country? How might they do that?

> 1. What evidence do you see of a global mindset in these managers? List at least three examples of global thinking provided in the video. 2. Referencing the common traits of an MNC described in the text, explain why you think Black Diamond is or is not

> Walt Disney Company has four major strategic business units: movies (including Pixar and Touchstone), theme parks (Walt Disney World and Disneyland), consumer products (the Disney Store), and television (the ABC/Disney Television Group and ESPN). Place e

> What is the virtual network approach to structure? Is the use of authority and responsibility different compared with other forms of departmentalization? Explain.

> Why do you think research has shown that idea champions are so essential to the initiation of change? Could they be equally important for implementation?

> A new business venture must develop a comprehensive business plan to borrow money to get started. Companies such as FedEx and Nike say they did not follow the original plan closely. Does that mean that developing the plan was a waste of time for these ev

> A manager of an international chemical company said that few new products in her company were successful. What would you advise the manager to do to help increase the company’s success rate?

> As a manager, how might you deal with an employee who is always displaying negative emotions that affect the rest of the team? How might you use an understanding of attributions and emotional contagion to help you decide what to do?

> Somnio, a start-up running shoe company in California, decided to start selling its products around the world from the very beginning. In general terms, name some of the challenges a start-up company such as Somnio might face internationally.

> Do you think it is realistic that BOP business practices can have a positive effect on poverty and other social problems in developing countries? Discuss.

> Why do you think many people are so frightened by globalization? Based on what is occurring in the world today, do you expect the globalization backlash to grow stronger or weaker over the next decade?

> Do you think it makes sense for a company such as Sears Holdings Corp., which has numerous shabby Sears and Kmart stores in need of makeovers, to focus resources on building the online business at the expense of its bricks-and-mortar business? Discuss.

> The openness of wikis is both their strength and their weakness. As a business owner, why might you want to take advantage of this new technology? How might you guard against its potential problems, such as vulnerability to mistakes, pranks, self-serving

> Which of the four components of emotional intelligence do you consider most important to an effective manager in today’s world? Why?

> Should a multinational corporation operate as a tightly integrated, worldwide business system, or would it be more effective to let each national subsidiary operate autonomously? Why?

> Aaron Alexis, the former Navy reservist who went on a shooting rampage in September 2013 and killed 12 people at the Washington Navy Yard in Washington D.C., had a history of mental instability, but he was carrying a valid security clearance. How would y

> Big data analytics programs (analyzing massive data sets to make decisions) use gigantic computing power to quantify trends that would be beyond the grasp of human observers. As this use of this quantitative analysis increases, do you think it may decrea

> What is ISO certification? Why would a global company like General Electric want ISO certification?

> Why do some organizations seem to have a new CEO every year or two, whereas others have top leaders who stay with the company for many years (e.g., John Chambers at Cisco)? What factors about the manager or about the company might account for this differ

> Why do you think Mary Parker Follett’s ideas tended to be popular with business people of her day, but were ignored by management scholars? Why are her ideas appreciated more today?

> How might the teaching of a management course be designed to help people make the transition from individual performer to manager in order to prepare them for the challenges they will face as new managers?

> What do you think is your dominant decision style? Is your style compatible with group techniques such as brainstorming and engaging in rigorous debate? Discuss.

> How would you apply systems thinking to a problem such as poor performance in your current academic studies? To a problem with a romantic partner or family member? Try to identify all the elements and their interdependencies.

> Some people say an organization could never be “prepared” for a disaster such as the shooting at Sandy Hook Elementary School, the Japan nuclear disaster, or the huge BP oil spill in the Gulf of Mexico. Discuss the potential value of crisis planning in s

> Why would small business ownership have great appeal to immigrants, women, and minorities?

> What are the major differences between manufacturing and service organizations? Give examples of how each type might benefit from using Web 2.0 tools such as wikis and social networks.

> LivingSocial started with one “daily deal,” a $25 voucher for $50 worth of food at a Washington D.C., area restaurant. Since then, the company has grown at breakneck speed, has 46 million members in 25 countries, and has acquired a dozen companies that o

> Fortune magazine and the Hay Group found that a clear, stable strategy is one of the defining characteristics of companies on the list of “The World’s Most Admired Companies.” Why might this be the case?

> 1. List the three broad management skill categories and explain which skills are needed most for each of the Camp Bow Wow leaders highlighted in the video. 2. Which activities at Camp Bow Wow require high efficiency? Which activities require high effecti

> How do you feel about having a manager’s responsibility in today’s world characterized by uncertainty, ambiguity, and sudden changes or threats from the environment? Describe some skills and qualities that are important to managers under these conditions

> In September 2013, Tokyo Electric Power Company (Tepco) reported highly contaminated water leaking from a storage tank at the Fukushima nuclear power plant crippled in a March 2011 earthquake and tsunami. From what you know of the ongoing Fukushima disas

> Suggest some personal traits that you believe would be useful to a business leader today. Are these traits more valuable in some situations than in others? How do you think traits differ from strengths?

> Over the past 20 years, entrepreneurship has been the fastest-growing course of study on campuses throughout the United States. Do you think it is possible to teach someone to be an entrepreneur? Why or why not?

> Describe the benefits of using social media to help a start-up gain traction during the early stages of its life cycle. What are some possible disadvantages of using social media?

> Consider the six characteristics of entrepreneurs described in the chapter. Which two traits do you think are most like those of managers in large companies? Which two are least like those of managers in large companies?

> 1. What are some of the entrepreneurial traits found in the two Bissell brothers that help make them successful? Are there any skills or traits you think they could improve upon? 2. How would you summarize the steps the brothers took to launch their busi

> The chapter described studies that show that people work harder and better for managers who put the interests of others above their own. Why might this happen? Do you believe being more of a “giver” than a “taker” will translate into greater career succe

> As an administrator for a medium sized hospital, you and the board of directors have decided to change to a drug dependency hospital from a short term, acute care facility. How would you go about executing this strategy?

> The technique of stakeholder mapping lets managers classify which stakeholders they will consider more important and will invest more time to satisfy. Is it appropriate for management to define some stakeholders as more important than others? Should all

> The chapter suggests that optimism is an important characteristic for a manager, yet some employees complain that optimistic managers cause them significant stress because they expect their subordinates to meet unreasonable goals or expectations. How mig

> How might understanding whether an employee has an internal or an external locus of control help a manager better communicate with, motivate, and lead the employee?

> Lana Lowery, a regional manager for a 100-person inside sales staff, notices that the team’s best performer is struggling. Her sales are down 20 percent from a year ago, and she frequently arrives late for work, looking upset. Lowery needs to find out wh

> Experts say that organizations are becoming increasingly decentralized, with authority, decision-making responsibility, and accountability being pushed farther down into the organization. How will this trend affect what will be asked of you as a new mana

> Why can an event such as the Hawthorne studies be a major turning point in the history of management even if the idea is later shown to be in error? Discuss.

> Which do you think would be more effective for shaping long-term ethical behavior in an organization: a written code of ethics combined with ethics training or strong ethical leadership? Which would have more impact on you? Why?

> Do you believe it is ethical for organizational managers to try to get access and scrutinize the Facebook pages of employees or job applicants? Discuss.

> A survey found that 69 percent of MBA students view maximizing shareholder value as the primary responsibility of a company. Do you agree? What do you think this finding suggests about the ethical and socially responsible stance of corporate managers ove

> 1. Does Mike Boyle appear to be self-aware? How does his level of self-awareness affect the way he runs his business? 2. As you watch the video, focus on Marco’s comments about himself and Mike’s comments on Marco. Then use the four components of emotion

> Assume that Southern University decides to: (1) raise its admission standards, and (2) initiate a business fair to which local towns people will be invited. What types of plans might it use to carry out these two activities?

> 1. Alex Patterson notes that our educational system is often focused on individual achievement, but when we go out into the work world as adults, almost all of us are required to work in teams. In what ways does this early focus on individual work make i