Reference no: EM132288786

Case 1: Purchase Point Media Corporation (PPMC)

INTRODUCTION
This case is based on actual financial projections developed and provided by a publicly traded firm, Purchase Point Media Corporation (PPMC). Carefully examine the PPMC projections, which are presented in a sequence and format suitable for break-even calculation and analysis. After you calculate the break-even point, use additional, publicly available information to come to a decision with respect to market potential.

The increase in the price per share of PPMC stock suggests that, over time, the market may have reacted to their results and analyses, using a comparable methodology.

OBJECTIVES

When you complete this case, you'll be able to
• Identify discernable errors, irregularities, and impropri- eties in style and format within publicly reported data
• Meet financial statement presentation requirements for a specific "real world" example
• Determine whether financial information provided follows generally accepted accounting principles (GAAP) or is presented in "good form"
• Distinguish between the substance and form of financial statements
• Estimate variable and fixed costs for a publicly traded company
• Assess publicly disseminated information from publicly traded companies to determine the feasibility of market potential and market penetration
• Exercise enhanced critical-thinking skills

PROJECT REQUIREMENTS
The project requires three steps to be presented. Step 1 - Identify Form and Substance Errors.
Step 2 - Compute the Purchase Point Media (PPMC) break-even points in terms of carts and stores.
Step 3 - Determine the number of grocery stores for various food chains.
In one Word document, provide individual sections for each Step. This Word document along with the Excel file
(described below for Step 2) will be uploaded when you click on the Take Exam button on your Student Portal to submit your project (described under the "Submitting Your Assignment" later in the instructions).
This Senior Capstone project highlights your knowledge and the skills you have developed over the course of your education. There is nothing "new" to be learned here.

The knowledge and skills required for this project include English Composition, Financial Accounting, Managerial Accounting, Information Literacy and the abilities to think critically, do research and to present your work
in a professional manner.
If you are unsure or don't understand something about the project, then go back to your previous subjects to review.
For example, if you don't remember how to make a proper citation, then revisit your English Composition to see how to make a correct citation. Or, if you don't remember how to calculate a break-even point, go back to Managerial Accounting and review the subject matter pertaining to that concept.
Remember, there is nothing "new" here. Everything about this project you should already know how to do.

Substance versus Form and Critical Thinking

Step 1
In the infamous Enron bankruptcy case, the form of the financial statements prepared by the Enron Corporation
and WorldCom was very professional; however, the substance was lacking, leading to audit and market failures and the eventual bankruptcy of both of these big-cap, or large- capitalization firms. PPMC represents a reverse case, in which the form of the data contained in the PPMC news release and corporate Web site was very poor.

To begin, read the PPMC report, focusing on problems with the form of the report. ("Form" means spelling, punctuation, and capitalization are correct and that the text is grammatically correct. Also, form means that the format of the text as far as font, bold, underlining, indents, and so on are correct.) Prepare a typed, clearly communicated summary of all errors or weaknesses you find in the form of this report. This should be a numbered list. There are well over 30 form errors in the document. (The ways to go about doing this for this step is to think of yourself as an English Composition instructor and a student has turned in a required paper that was written.) Although the PPMC report isn't well-written, don't attempt rewrite the report. Only present a numbered list of the errors found.

To report the numbered list of form errors for this step, each error should have three components:
1. The location of the error.
2. What the error is.
3. How the text should have been written correctly.

Step 2
The PPMC Notes in the document appear to be organized by cost behavior. This is similar to the approach you used in your Managerial Accounting course. You should follow this approach or framework as you compute the PPMC break- even point in terms of carts and stores. Begin with revenues, follow with variable costs (VCs), develop the contribution margin (CM; in aggregate), followed by fixed costs (FCs),
and, finally, compute PPMC's net operating income (NOI) and break-even point in terms of both carts and stores.
On your Student Portal, under the Supplements section of the Senior Capstone subject is a downloadable Excel file titled "Exam 500895- PPMC Excel Spreadsheet".
Step 2 requires that you calculate the break-even points for both carts and stores. Download this file and use it to calcu- late the breakeven points.

Reference the Excel spreadsheet for Step 2 in the Word docu- ment and include the spreadsheet as a separate file when submitting the project. The spreadsheet for the calculations is too large to include in a table in a Word document or be able to read if an Excel spreadsheet is inserted. Therefore, there should be two files submitted for the project - this Word document and the Excel spreadsheet with your work for Step 2.

The majority of the work has been done for you when using the spreadsheet. The setup to be able to calculate the CM, NOI and the break-even points are part of the spreadsheet. What you need to do to interpret the Notes from the PPMC document, input the data into the spreadsheet (be sure to use your "corrected substance" figures/data from Step 1), and do the calculations required to obtain the break-even point for the carts and the break-even point for the stores. (Hint: Some cells in the spreadsheet have comments inserted. Pay attention to these comments. For example, there is a comment in a cell that has the formula to be used to calcu- late the break-even point.)

Step 3
Step 3 requires three items:
1. The ticker symbol for the store chain.
2. The number of stores for the store chain.
3. A Works Cited page for the figures found as the number of stores.
Table 1 should be reproduced as a table in your Word document for Step 3 and the ticker symbol and the number of stores inserted from your own research.

To find the ticker symbol for each of the store chains, it is as easy as opening up Google Chrome as your web browser and typing in the store name followed by "ticker symbol" into the search box. The hits form the search should reveal the ticker symbol for that store. Alternatively, you could use a financial website such as Yahoo Finance, E-trade, and so on to do your searching. All of the stores have a ticker symbol with the exception of one which is a private company.

Using your own research skills and abilities, determine the number of grocery stores for each store chain. How you go about doing this is up to you and your research skills.

Here is what you are looking for as far as the number of stores is concerned:

• You are looking for the most "current" information. However, current doesn't mean today.
For example, if store A (which has 10 stores) took over store B (which had 3 stores) in a merger, then B is no longer in business. The number of stores for A will be 13 as of today because it is still in business. The number of stores for B will be 3 which is how many it had before the merger. That is the most current for B - not zero.

As another example, if a store declares bankruptcy, it all depends upon the bankruptcy status. If the store is in Chapter 11, which is reorganization then the number of stores will be the current information. If the store is in Chapter 13, which is a closing of the business, then the number of stores will be zero.

Be aware that the solution to the number of stores in the table is kept current, but that doesn't mean that data will all be "as of today." It is possible that the most current information might be 2015 or 2016. It all depends upon your research and what is available. Finding the correct information is the purpose behind doing research.

One other thing to watch out for in doing your research is a "name change." If a store changes its name, then list both the old name and the new name and the current information available for the number of stores.

• You should rarely use third party sites such as Google Finance, InvestSnips, Investopedia, Wikipedia, newspa- per articles, and so on as these don't have the most current and accurate information. You should use infor- mation from the business web site, SEC filings, Annual Reports, and so on for the most applicable, relevant and current information.

• Lastly, this step involves research. "Research" is not doing a quick search and picking a web site or two and going with what is found. Research is looking at quite a few sources and thinking critically about what is found as to relevancy, currency and accuracy. For example, one web page may say "about 500" stores, but, another page on the website will say "536 stores" exactly. Or one web site might have information from March 2016 and another might have information from December 2016. Which is more current and relevant? The December 2016 web site. Not only do you need to do research, but, you also must think critically about the information you find.

Along with Table 1, a Works Cited page needs to be included for Step 3. This is Standard English Composition. Work and/or figures that are not your own need to be cited as part of a paper.

If no citations are provided or the citations are not properly formatted, this becomes "Plagiarism" which is unacceptable at Penn Foster or in the workplace.

• There should be a correctly formatted citation for each fig- ure for the number of stores for the grocery store chain.
This is standard for English Composition and should fol- low MLA or APA formatting. If you do not remember how to make a correct citation, do a search on the Internet for "Purdue OWL" and when you get there search the OWL (Online Writing Lab) site for "MLA Works Cited: Electronic Sources (Web Publications)" as this is the most likely source you will use and refresh your memory. Alternatively, you can search Penn Foster's Library for the Purdue Owl web site and/or telephone and speak with an English Instructor.

• The web address provided for the citation should take the reader directly to the web page where the number of stores can be found. The reader should not have to search for your information. Do not provide a generic web address such as the homepage of a web site unless the actual number of stores is on that web page.

Case 2: Motomart

INTRODUCTION
The Motomart case is designed to supplement your Managerial/ Cost Accounting textbook coverage of cost behavior and variable costing using real-world cost data and an auto-industry- accepted cost driver. Unlike textbook problems, this data is real. It won't necessarily produce a clear solution when you attempt to analyze cost behavior and apply scatter-plot, high-low, and regression methods to separate mixed costs into their fixed and variable components. This case also illustrates that Financial Accounting decisions and methods can have an influence on Cost Accounting and Managerial applications and decisions.

OBJECTIVES
When you complete this case, you'll be able to
• Explain the importance of accrual accounting and proper application of the matching principle for the computation of contribution margins and break-even points
• Apply knowledge of generally accepted accounting principles (GAAP) to a specific real-world example
• Integrate statistical analyses and scatter plots, line graphs, and regression to determine the reliability of financial information prepared for external use
• Use analytical review procedures to examine a firm's financial statements
• Apply critical-thinking skills to real-world business circumstances

REQUIREMENTS
The project requires five steps to be presented.
Step 1 - Provide comments on a 5 year Income Statement. Step 2 - Discuss patterns in expense items.
Step 3 - Identify High/Low activity levels. Step 4 - Compute cost equations.
Step 5 - Summarize your findings.
In one Word document, provide individual sections for each Step. This Word document along with the Excel file (described below) will be uploaded when you click on the Take Exam button on your Student Portal to submit your project (described under "Submitting Your Assignment" later in the instructions).
This Senior Capstone project highlights your knowledge and the skills you have developed over the course of your educa- tion. There is nothing "new" to be learned here.
The knowledge and skills required for this project include English Composition, Financial Accounting, Managerial Accounting, Business Statistics and the abilities to think crit- ically and to present your work in a professional manner.

If you are unsure or don't understand something about the project, then go back to your previous subjects to review. For example, if you don't remember how to use the High/Low Method, the revisit your Managerial Accounting to refresh your memory on how to use the High/Low Method

Remember, there is nothing "new" here. Everything about this project you should already know how to do.

On your Student Portal, under the Supplements section of the Senior Capstone subject is a downloadable Excel file titled "Exam 500896 - Motomart Excel Spreadsheet".
• The Excel file provides a detailed example of what needs to be done for one of the expenses in order to fill out the figures required in Steps 3 & 4. You will include this Excel file as part of your project submission along with the Word document you create to present this project.
o There is a "60 Months" worksheet that has the 60 months of data already entered. There is also a "Sample" worksheet that an example of how to cal- culate the R-sq.
o There is a "PLOT - SALARY" worksheet that shows how the FC, VC and R-sq figures are calculated for Salary.
o There is also a "high&low" worksheet for help with the high/low method in Step 3.
o Complete and include the Excel spreadsheet. You will need to create new worksheets for each of the other expenses following the example to calculate the figures needed for Table 5.

Operating Profits and Semi-Fixed Expenses
Step 1
First, using Tables 2-4, note the pattern of operating profits (or losses) over the five-year period. Then focus only on the semi-fixed expenses contained in Table 2. Do any amounts appear to be odd? (Think about whether the figures are right or wrong. What is it about the individual numbers that is not "right"?) Next, briefly comment on the five-year pattern or trend for operating profit/loss measures. You should be able to respond to this step in a few well-written sentences.

Step 2
Focus only on the detailed semi-fixed expense contained in Table 3. Are there any unusual or odd patterns you might note in this detailed financial data? There are 5 expenses that have an oddity about them which doesn't make sense. Similar to Step 1, what is it about the individual numbers that is not "right"? There are 4 expenses that "stick out" as not being cor- rect and one that has an unusual pattern. attention. You should be able to respond to this requirement in a few well- written sentences. Briefly comment on only the most obvious or apparent measures or patterns, by expense item.

Step 3
Identify the high and low measures in each column, just as you would in preparation for application of the high-low method or technique. For example, in Table 3 the high measure for the cost driver (NRVS) is 280 NRVS in month 13 and the low measure is 31 NRVS in month 12. Repeat this process for each of the eight separate semi-fixed expense columns and also for the total expense column. Insert a table for Step 3 to present your findings. The table should have three columns;
1. Expense
2. High Figure
3. Low Figure
After the high and low measures have been identified in each column, try to match each expense column's high and low measure, separately, to the highs and lows identified in the NRVS column. They won't match. Don't try to correct the data, but comment on the potential for application of the high-low technique. What happens when the high and low activity level doesn't match the high and low expense measure? Does this prevent you from correctly applying the high-low technique?
Don't overanalyze this data, because there's a problem with it and you don't have sufficient information to correct it. Merely summarize your observations and unsuccessful attempts to match the high and low NRVS months (identified above), separately, with each of the high and low expense measure months. You should be able to do this in a very few well- written sentences.

Step 4
Using the Excel file "Exam 500896 - Motomart Excel Spreadsheet" as per the instructions found above under the "Project Requirements", reproduce and complete the following Table 5 and answer the four questions. The Excel file pro- vides an example of how to arrive at the figures that need to be entered into the Table. You will create new worksheets for each of the remaining expenses. Do the work to arrive at the figures for each expense. Be sure to include the Excel file as part of your submission to "backup" the data presented in the Table in the Word document being submitted.

The Excel spread sheet, while it will be included in your sub- mission for the project, will not be graded. It is supporting documentation for what is being presented in the Word docu- ment. Only the information that is in the Word document will be graded.
The FC and VC should be rounded to the nearest dollar. The R-sq is a percentage figure carried out to 2 decimal places.

Table 5
Column Expense FC VC r-sq
1 Salaries $106,866 -$110 4.10%
2 Vacation
3 Advertising and training
4 Supplies/tools/laundry
5 Freight
6 Vehicles
7 Demonstrators
8 Floor planning
Computed total
9 Total

Complete the cost equations for the table. Use the R-squared as the single measure of "goodness of fit." Don't attempt to improve your results with the elimination of "outliers" or "influential outliers." As you complete Table 5, answer the following questions:
1. What problems did you encounter?
2. Are the R-squared measures high or low?
3. Are the slopes negative or positive?
4. Are your conclusions consistent with those from the high-low effort?

Step 5
Summarize your findings by answering the following questions:
1. Can the Motomart data be used to prepare a reliable financial forecast? Why or why not?
2. If Motomart is included in the very large database used to prepare the financial forecast that supports the reloca- tion of Motomart closer to Existing Dealer, what concerns might present themselves with respect to the remainder of the database used for this forecast?
3. Would you rely on this forecast?

Attachment:- Capstone.rar