Subway’s $5 Footlong

The idea for Subway’s $5 footlong sandwich was conceived by a Subway restaurant owner over 5 years ago.  The sandwich is now a cornerstone of Subway’s marketing campaign.  In fact, some people within Subway believe that every time a competitor markets a $5 product, the customer thinks of Subway.

As a direct result of offering a $5 footlong (not $4.99), weekend sales increased anywhere from 17 – 30%.  The idea was test marketed and then later rolled out across the country.

Questions:

1. Which costs are likely the most important costs for a local Subway restaurant?  Which costs are likely the most important costs for the Subway?

2. Describe three ways that CVP analysis might be used by Subway to meet different profit goals.

3. Describe how activity-based costing might be beneficial to Subway.

(Retrievable online at http://feedroom.businessweek.com/index.jsp?auto_band=x&rf=sv&fr_story=968e65464a680411cedca043d4d5abd05453e971)

Learning from Beyonce

“Learning to sing from Beyoncé” is the way one student explains how it feels to learn about personal finance from the co-founder of a multi-billion dollar hedge fund.  The former banker and trader takes time to teach students from Harlem about personal finance.  His theme is personal responsibility and he believes that the biggest obstacle facing these students is access to knowledge.  So, he’s taken matters into his own hands by meeting with a group of sophomore, junior, and senior students from a local high school.

They meet once a week after school to learn about mortgages and investing.  But perhaps the most important thing they’re learning is that it’s OK, and even desirable, to ask questions.

Their experiences are giving them to confidence to make good decisions, to ask questions, and to seek additional knowledge.  Their success will ultimately be measured by their financial happiness and the control they’re able to exert over their financial futures.

Questions:

1. Name three areas of personal finance (credit cards, mortgages, investing, etc.) you’d like to know more about.  What can you do to expand your knowledge in these areas?

2. Have you ever considered volunteering your time to help others in your community?  Has this article changed your mind?

3. The students in the video share what they’re learning with their parents.  How can you share what you’re learning in college with your parents?  What have your parents taught you about personal finance?

(Retrievable online at http://feedroom.businessweek.com/index.jsp?auto_band=x&rf=sv&fr_story=968e65464a680411cedca043d4d5abd05453e971)

Financial Assassins

“White collar crime” is commonly defined as a crime committed by a respectable person, usually with an education and a higher standing in society, in the performance of his or her occupation or area of expertise. It is frequently considered a victimless crime as no one is physically injured in the execution of the crime. If an individual defrauds a bank or an insurance company out of funds, who is hurt? Robert and Kathy Lang Albright, victims of a temporary bookkeeper who embezzled hundreds of thousands of dollars from their business, learned that many people are hurt. Because of the crime, they were forced to let 20 people go from their small company that manufactures faux plants for hotels, offices, and other businesses. Embezzlers, explains Kathy Albright, are “financial assassins”.

1. Who are the victims of the alleged fraud committed against Atrium Foliage?

2. What elements of trust and action allowed the alleged crime to persist through the duration of eighteen months?

3. The alleged theft through embezzlement exceeded $850,000 and the lawsuit for forgery and fraud is for at least $95,577. How is this difference explainable or justifiable?

(Retrievable online at 

http://www.ajc.com/business/businesses-are-prey-to-391984.html)

Avatar Accounting

A working knowledge of accounting is helpful for almost any career endeavor. In real estate, for example, brokers must have a thorough understanding of the numbers involved in the decision-making process.  Real estate brokers traditionally determine whether a buyer can make payments to a bank, identify tax benefits of a purchase, and even determine whether cash flow from an industrial property justifies a purchase price. The accounting expertise of real estate brokers is now finding relevance in new frontiers like Second Life, an online virtual community. In Second Life, real estate entrepreneurs are applying their accounting knowledge when they rent real estate “sim” islands to other Second Life avatars. With their understanding of accounting, entrepreneurs are making real-world profits and finding financial success in a non-traditional market.

1. What ethical concerns might a seller of “sim” real estate consider?

2. Are the real estate stakeholders of a “sim” transaction the same as the stakeholders in the real world?

(Retrievable online at http://money.cnn.com/video/news/2010/03/17/n_real_estates_second_life.cnnmoney/)

Green Accounting Roadmap

A new report by Ceres, a leading coalition of investors, environmental and public interest organizations in North America, stresses that companies must make immediate envrionmental improvements to remain competitive in the 21^st century global economy.  Sustainable performance, not short-term environmental initiatives, will position companies to plan and innovate in an increasingly resource-contstrained economy.  Included in the report is a roadmap for integrating sustainability into the “DNA of business – from the boardroom, to copy rooms, and across entire supply chains”. Also detailed in the report are examples of how PepsiCo, IBM, General Mills, and other corporations are aligning their practices with four key chapters of the Ceres Roadmap – governance, stakeholder engagement, disclosure, and performance.

1.  How might an organization report its environmental intiatives to the public? 

2. The Ceres report proposes tying carbon emmission goals to executive  compensation. Can you think of any other environmental incentives a company might adopt to remain competitive in a “green economy”?

 (Retrievable online at http://www.ceres.org/Page.aspx?pid=1227)

Good News for Accounting Graduates

Good news for accounting graduates! A nationwide survey of 3,500 accounting, finance, and human resource executives indicated that, in 2010, the majority of accounting and financial businesses that were impacted by the economic crisis are likely to hire accounting and financial candidates in 2010. About half of the survey respondents said they anticipated hiring support, staff, and management-level employees.  Another interesting finding of the survey was that over one third of respondents were in favor International Financial Reporting Standards (IFRS).

QUESTIONS:

1. If large, public-sized companies are moving toward adoption of IFRS, what implication does IFRS have on SMEs (small and medium-sized entities)?

2.  What steps might you take to become more familiar with IFRS?  Investigate the web to find resources that will continually provide you with the most recent IFRS updates.

Roger Russell, Senior Editor, Accounting Today,  (c) 2010. (Retrievable online at http://www.webcpa.com/news/Accounting-Staff-Levels-Should-Rebound-This-Year-53569-1.html)