Dorsey Scott MU Company manufactures and bottles a collection of health-oriented fruity beverages. Dorsey’s CFO. Rozella, recently signed a series of new contracts with several dozen large universities to serve as the sole external beverage supplier on these campuses. Although the company has never internally conducted or externally disclosed any sustainability activities. Dorsey’s CEO. Les, has a strong hunch that the company would be wise to look into the idea of sustainability, given its recent significant growth in the university market. Therefore, Les and Rozella assigned Dorsey’s team of five interns to spend their summer internships creating Dorsey s first corporate sustainability report.
Required:
- 1. CONCEPTUAL CONNECTION Briefly explain the most likely reason(s) that Les believes Dorsey would be wise to begin looking into sustainability at this time.
- 2. CONCEPTUAL CONNECTION List and describe three challenges that the internship team might face in creating Dorsey s first corporate sustainability report.
- 3. CONCEPTUAL CONNECTION List and describe three benefits that Dorsey or its key stakeholders might enjoy as a result of Dorsey creating and issuing its first corporate sustainability report.
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Chapter 13 Solutions
Managerial Accounting: The Cornerstone of Business Decision-Making
- . Refresh Resorts, Inc., operates health spas in Key West, Florida; Phoenix, Arizona; and Carmel, California. The Key West spa was the company’s first and opened in 1991. The Phoenix spa opened in 2004, and the Carmel spa opened in 2013. Refresh Resorts has previously evaluated divisions based on RI, but the company is considering changing to an EVA approach. All spas are assumed to face similar risks. Data for 2017 are: Q.Refer back to the original data. Calculate EVA for each of the spas, using net book value of long-term assets. Calculate EVA again, this time using gross book value of long-term assets. Comment on the differences between the two methods.arrow_forward. Refresh Resorts, Inc., operates health spas in Key West, Florida; Phoenix, Arizona; and Carmel, California. The Key West spa was the company’s first and opened in 1991. The Phoenix spa opened in 2004, and the Carmel spa opened in 2013. Refresh Resorts has previously evaluated divisions based on RI, but the company is considering changing to an EVA approach. All spas are assumed to face similar risks. Data for 2017 are: Q.Refer back to the original data. Calculate the WACC for Refresh Resorts.arrow_forward. Refresh Resorts, Inc., operates health spas in Key West, Florida; Phoenix, Arizona; and Carmel, California. The Key West spa was the company’s first and opened in 1991. The Phoenix spa opened in 2004, and the Carmel spa opened in 2013. Refresh Resorts has previously evaluated divisions based on RI, but the company is considering changing to an EVA approach. All spas are assumed to face similar risks. Data for 2017 are: Q.How does the selection of asset measurement method affect goal congruence?arrow_forward
- . Refresh Resorts, Inc., operates health spas in Key West, Florida; Phoenix, Arizona; and Carmel, California. The Key West spa was the company’s first and opened in 1991. The Phoenix spa opened in 2004, and the Carmel spa opened in 2013. Refresh Resorts has previously evaluated divisions based on RI, but the company is considering changing to an EVA approach. All spas are assumed to face similar risks. Data for 2017 are: Q. Why might Refresh Resorts want to use EVA instead of RI for evaluating the performance of the three spas?arrow_forwardEve Corporation is considering a significant expansion to its product line. The sales force is excited about the opportunities that the new products will bring. The new products are a significant step up in quality above the company’s current offerings but offer a complementary fit to its existing product line. Sergei Bates, senior production department manager, is very excited about the high-tech new equipment that will have to be acquired to produce the new products. Will Smith, the company’s CFO, has provided the following projections based on results with and without the new products. Without New Products With New Products Sales revenue $10,000,000 $16,000,000 Net income $500,000 $960,000 Average total assets $5,000,000 $12,000,000 Instructions a) Compute the company’s return on assets, profit margin, and asset turnover, both with and without the new product line. b) Discuss the implications that your findings in part (a) have for the company’s decision.arrow_forwardRefresh Resorts, Inc., operates health spas in Key West, Florida; Phoenix, Arizona; and Carmel, California. The Key West spa was the company’s first and opened in 1991. The Phoenix spa opened in 2004, and the Carmel spa opened in 2013. Refresh Resorts has previously evaluated divisions based on RI, but the company is considering changing to an EVA approach. All spas are assumed to face similar risks. Data for 2017 are: Q.Calculate RI for each of the spas based on operating income and using total assets as the measure of investment. Suppose that the Key West spa is considering adding a new group of saunas from Finland that will cost $225,000. The saunas are expected to bring in operating income of $22,000. What effect would this project have on the RI of the Key West spa? Based on RI, would the Key West manager accept or reject this project? Without resorting to calculations, would the other managers accept or reject the project? Why?arrow_forward
- Sunny Nights Inc. is completely powered by the city power grid, but management is considering switching fuel sources in an effort to improve the publics perception of the companys corporate social responsibility. Within the next five years, management wants the company to be completely solar powered and to market this change through company advertising. Upon consulting with Sunny Nights, you have determined that an appropriate course of action is to include this CSR activity as a strategic objective on the companys current balanced scorecard. a. Determine the appropriate performance perspective for the CSR strategic objective. b. Suggest one possible performance metric for the objective. c. Determine an appropriate yearly performance target for the performance metric.arrow_forwardWhen developing its strategy, an organization may need to assess its position at both the business level and the corporate level. A company's business-level strategy focuses on how the firm will compete within a particular line of business. By comparison, the corporate-level strategy considers which industries the company should participate in and how resources will be allocated across those different lines of business. Determine whether the company activities in the following table are examples of business-level or corporate-level strategies. Business- Level Corporate- Level Company Activity Strategy Strategy After first denying that a split was being contemplated, eBay announced that it would spin off its very successful PayPal division, which has now become a separate company. The motivation for the spinoff was for PayPal to fulfill its potential in the booming online payment industry while eBay continues to focus on the online auction business. (Source: Bertoni, S. (2014, September…arrow_forwardStarDucks, Inc (SDUX) is an American coffee company with more than 10,000 coffeehouses operating in the United States. Unlike many of its major competitors, it remained focused only on the production and sale of coffee drinks so far, rather than diversifying into other similar food and beverage lines. Recently, to respond to increasing demands from its customer regarding new products, and to boost the company’s growth, the executive staff has been seriously thinking about entering into a different business line “SDUX Gelato” to realize new growth opportunities. An initial forecasting effort has been done to project the initial investment and subsequent cash flows for the next 5 years: Year 012345 Cash Flow ($000s) -1,750,000 -150,000 420,000 550,000 200,000 125,000 After the initial 5 years, SDUX believes the market will continue in perpetuity: however, given that the segment will reach maturity, it would very likely be a zero growth business. The company uses NPV for capital budgeting…arrow_forward
- Hardy Limited has undertaken research into launching a new product which will take it into a new market area. Hardy feels it has expanded its existing operation to its maximum potential, and it is the market leader in its existing field. The proposed new product would offer new opportunities and, although there is strong competition in its field already, the management feel it can use its existing brand name to break into this product line. The new product is in car cleaning accessories, but will offer items in a single package not currently available. The management believe that,although the proposed product may be relatively short lived, the penetration of new markets is worthwhile as long as the product does not make a loss. Details of the project are as follows: • Market research costs incurred to date amount to £250,000 • Investment in plant at the start: £2,900,000. At the end of the product's life the plant will have a disposal value of £80,000 . The project is estimated to have…arrow_forwardNow let us look at Ipana Oy's operating systems from another perspective. Ipana Oy has found some potential long-time partners in the restaurant business. To optimize the supply chain, the company is negotiating for contracts that would allow all production in the coming years to be sold to these partners. The contracts aim to shift production to 20 liter barrels of beer, which would become the sole product of Ipana Oy. In case the negotiations are successful, Ipana Oy estimates its typical year would look as follows: the quantity shipped to the customer is 18000 units at a price of 300 €/unit. The gross profit percentage is 40 % and the yearly fixed costs are 1500000 €. Additional information: The variable cost per unit [€/unit] for products that would be produced in the scenario above: 180 €/unit The critical sales price in the estimate: 264 €/product The EBITDA (earnings before interests, taxes, depreciations and amortizations) of a typical year : 660000 € Question: Calculate the…arrow_forwardRichmond, Inc., operates a chain of 44 department stores. Two years ago, the board of directors of Richmond approved a large-scale remodeling of its stores to attract a more upscale clientele. Before finalizing these plans, two stores were remodeled as a test. Linda Perlman, assistant controller, was asked to oversee the financial reporting for these test stores, and she and other management personnel were offered bonuses based on the sales growth and profitability of these stores. While completing the financial reports, Perlman discovered a sizable inventory of outdated goods that should have been discounted for sale or returned to the manufacturer. She discussed the Situation with her management colleagues; the consensus was to ignore reporting this inventory as obsolete because reporting it would diminish the financial results and their bonuses. Required: According to the IMA’s Statement of Ethical Professional Practice, would it be ethical for Perlman not to report the inventory…arrow_forward
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