Remember Driver’s Ed? Things have Changed!

Mercedes-Benz has long been at the forefront of creating safer cars and now they are aiming to create safer drivers. In December 2011, the company opened the its first driving school in the U.S. called Mercedes-Benz Driving Academy. Mercedes has three more in Europe). This school is located on Third Street in downtown Los Angeles. Open to drivers of all ages, its primary focus is teenagers, who want to get their California driver’s licenses and drive Mercedes in the process. The cost of the academy’s integrated program is $1,390, which includes 15 hours of online training, 10 hours in the classroom, five hours of workshops and 16 hours of behind the wheel coaching. The driving schools that the Bloomberg video showed are typically more expensive and generally focus on defensive driving skills of more experienced drivers.

Questions:

1. Based on the video, what types of return investments do you think the luxury car makers are receiving from their “driving schools”?
2. What types of costs would be involved in the luxury car driving schools shown in the video?
3. Go to http://exoticsracing.com/ and customize your ultimate driving experience. What was the most interesting thing you noticed about this company?
4. For the Mercedes-Benz Driving Academy, what would be some fixed costs and what would be some variable costs? Can you think of any mixed costs that the company might have? Would these be different for Exotics Racing School?

Source:

Bloomberg Video. (2012). Extreme Test Drives, May 10.

Jorrey, K. (2012) Luxury car maker sets new standard for driving school. The Acorn, April 26 (Retrievable online at http://www.theacorn.com/news/2012-04-26/Business/Luxury_car_maker_sets_new_standard_for_driving_sch.html)

Resume Padding

On Monday, May 7, Yahoo apologized to its employees for discrepancies about its CEO, hired in January. Apparently, Scott Thompson, does not have a computer science degree after all, even though that information was included in an SEC filing and in several public bios about him.

Questions:

1. If Thompson allowed false information about his educational background to linger in his bio, should he be treated just like any other employee who did the same? Discuss.
2. Why didn’t this issue come up in a background investigation of the CEO before he was hired? Discuss.
3. What should Thompson have done if it truly was an error? Discuss.
4. Look at the slide show regarding padded resumes (at http://www.washingtonpost.com/business/economy/yahoo-ceo-isnt-the-only-leader-who-has-fudged-resume/2012/05/10/gIQARucmFU_gallery.html?tid=ts_biz#photo=1) What one thing surprised you most in this slide show?

Sources:
McGregor, J. (2012). Yahoo’s CEO Scott Thompson’s Incorrect Resume Raises Questions for Tech Company’s Board. The Washington Post, May 8 (Retrievable at http://www.washingtonpost.com/blogs/post-leadership/post/yahoo-ceo-scott-thompsons-incorrect-resume-raises-questions-for-tech-companys-board/2011/04/01/gIQAXUB5AU_blog.html)

Staff (2012). Yahoo CEO Isn’t the Only Leader Who Has Fudged Resume – Slide Show. The Washington Post, May 10 (Retrievable online at http://www.washingtonpost.com/business/economy/yahoo-ceo-isnt-the-only-leader-who-has-fudged-resume/2012/05/10/gIQARucmFU_gallery.html?tid=ts_biz#photo=1

Bloomberg Video (2012). Will CFO Tim Morse Head Yahoo?, May 9.

Student debt

Ninety-four percent of students who earn a bachelor’s degree borrow to pay for higher education. This is up from the 1993 statistics that show only 45 percent of students borrowed money to pay for a bachelor’s degree. This borrowing includes loans from the federal government, private lenders and relatives.

Questions:

1. Explain why Rajeev V. Date, deputy director of the Consumer Financial Protection Bureau, likens excessive student borrowing to risky mortgages. Do you agree or disagree? Discuss.
2. According to the article the average 2011 student debt is $23,300. Look at the interactive map and find your university. How does the 2010 debt for your university compare to this amount?
3. Go through all colleges for all years (2004-2010). What do you notice about the change in the distribution of the data over this period? Be as specific as possible.
4. Look at the related slide show about Kelsey Griffith (http://www.nytimes.com/slideshow/2012/05/13/business/20120513DEBT_SS.html?ref=business). How does her debt compare to the debt on the interactive map for her university?
5. Realistically, how much will Kelsey have to earn per month in order to live and pay back her student loan? What is the typical length of a school loan?

Sources:

Staff (2012). Student Debt at Colleges and Universities across the Nation, Interactive Map – The New York Times, May 12 (Retrievable online at http://www.nytimes.com/interactive/2012/05/13/business/student-debt-at-colleges-and-universities.html?ref=business)

Martin, A. and A. Lehren. (2012). A Generation Hobbled by the Soaring Cost of College. The New York Times, May 12 (Retrievable online at http://www.nytimes.com/2012/05/13/business/student-loans-weighing-down-a-generation-with-heavy-debt.html?_r=1)

Bloomberg Video. (2012) Student Loan Debt.

Cooking the Books – TSA style?

This week, the House Committee on Oversight and Government Reform released information about the Transportation Security Administration wasting taxpayers’ money; this time they point to a Texas warehouse holding more than 5,000 pieces of security equipment, valued at upwards of $180 million.

Questions:

1. What percentage of equipment has been stored for more than one year?

2. Based on the information in the article and video, what recommendations would you make if you worked for the inspector general’s office?

3. Representative Issa thinks that the TSA has “cooked the books.” Based on your knowledge of accounting and red flags of fraud, do you agree or disagree? Provide your reasoning.

Source:

CNN videos. (2012). TSA Cooked the Books, CNN.com, May 9 (Retrievable online at www.cnn.com/video

Fox, L. (2012). TSA Puts Millions of Dollars of Equipment in Storage, U.S. News, May 9 (Retrievable online at http://www.usnews.com/news/articles/2012/05/09/tsa-puts-millions-of-dollars-of-equipment-in-storage)

Doctorow, C. (2012). TSA Waste and Corruption: The Greatest Hits, BoingBoing, May 9 (Retrievable online at http://boingboing.net/2012/05/09/tsa-waste-and-corruption-the.html)

Power to the Employees

While it is traditionally rare for employee-shareholders to exercise their voting power, the winds may be shifting. According to Morgenson, employee-shareholders are banding together to vote against executive pay in this proxy season. Although she is not sure what actual impact their votes had, at Citigroup, shareholders as a group voted down the $15 million paycheck for Vikram Pandit.

Questions:

1. Based on Morgenson’s article, what employee-shareholder action is going on at Wal-Mart?
2. Based on Morgenson’s article, what employee-shareholder action is going on at Verizon?
3. What did you find to be the most interesting item in the article?

Source:

Morgenson, G. (2012). Employees, Too, Want a Say on the Boss’s Pay. The New York Times, April 21 (Retrievable online at http://www.nytimes.com/2012/04/22/business/employees-too-want-a-say-on-the-bosss-pay.html?_r=1&hp)

Hospital Costs

Two years ago, Augie Hong, who works for an investment firm in San Francisco, awoke with severe abdominal pains. He went to an ER at the hospital closest to his house and was diagnosed with acute appendicitis. He wasn’t worried about the cost because he had health insurance from his employer. However, when he got the bill, it was $59,283, including $5,264 for the doctors. According to the Healthcare Blue Book, this amount was six times the fair price for his area.

Questions:

1. What is the range of fees for a routine appendectomy in California?
2. What was Mr. Hong’s mistake and what should he have done?
3. Under the Affordable Care Act, what are hospitals suppose to do by 2014?
4. What do experts advise consumers to do regarding hospital charges?

Source:

Rabin, R.C. (2012). The Confusion of Hospital Pricing. The New York Times, April 23 (Retrievable online at http://well.blogs.nytimes.com/2012/04/23/the-confusion-of-hospital-pricing/?ref=health)

Lunch Money Fraud

How low can you go? Otis Josey, a 54-year old Detroit man, allegedly told a pre-school girl that he worked at a radio station and was raising donations for a children’s hospital charity. In exchange for a donation, he would give the donor a gift card. Police say he literally cheated the 5-year old girl out of her $5 lunch money in exchange for a fake $20 gift card to Chuck E. Cheese.

Questions:

1. Read the article by Ray Martin. What is one of the most reported gift card scams?
2. What does Martin recommend that you should do with an unwanted gift card?
3. How do most companies recognize the revenue from gift cards? What journal entries are involved?

Sources:

NBC Video.(2012). Man accused of selling child fake Chuck E. Cheese gift card, NBC News, April 26 (Retrievable at http://video.msnbc.msn.com/nbc-news/47178295/#47178295)

Martin, R. (2011). Attention Shoppers: Avoid this Gift Card Scam. CBS News, December 15 (Retrievable online at http://www.cbsnews.com/8301-505145_162-57343690/attention-shoppers-avoid-this-gift-card-scam/)

Visit msnbc.com for breaking news, world news, and news about the economy

General Services Administration (GSA) Scandal

A hearing on an extravagant government conference in Las Vegas will enter its second day on Capitol Hill on Tuesday, April 17. During Monday’s session, a House committee heard from officials accused of wasting taxpayer money on fancy meals and over-the-top entertainment. The GSA inspector general, Brian Miller, says he believes the behavior he uncovered could possibly be criminal and he wants the Justice Department to investigate possible bribes and kickbacks.

Questions:

1. According to the video, what were some of the reasons for out-of-control spending?
2. Compare this government scandal to a similar corporate scandal. Discuss any differences or similarities.
3. What types of controls should have been in place to prevent this overspending situation?
4. What issues do identify as criminal offenses? Discuss.

Source:

MSNBC video. (2012). GSA Under Investigation for Frivolous Spending, April 16. (Retrievable online at http://www.msnbc.msn.com/id/31510813/ns/msnbc_tv-the_dylan_ratigan_show/#47066004)
Cordes, N. (2012). Bribes, kickbacks in GSA Scandal? CBS News, April 17 (Retrievable online at http://www.cbsnews.com/8301-505267_162-57415052/bribes-kickbacks-in-gsa-scandal/)

Visit msnbc.com for breaking news, world news, and news about the economy

Salute to Tax Day

According to Adam Davidson (et. al), if economists ran the tax system, there would be virtually no exemptions or loopholes. But instead, he submits, businesses, rich people, Congressmen and attorneys spend a shockingly large amount of time lobbying for tax breaks or exploiting the loopholes that exist. The tax code in 1913 was 27 pages long and has grown to 5,296 pages as of last year.

Questions:
1. According to Mr. Davidson’s (et.al) survey, what is the easiest way to cheat on your taxes? Discuss.
2. Discuss what you found to be the most interesting deduction that a taxpayer attempted to take and why.
3. According to the article, what percentage of taxes did the IRS collect in 2006. If the 14% shortfall amounted to $385 billion, how much in dollars did the government collect in 2006?
4. What was the reason for the shortfall in collections?

Source:

Davidson, A., J. Goldstein, C. Kenney, and D. Kedmey. (2012). What’s the Easiest Way to Cheat on your Taxes. The New York Times, April 3 (Retrievable online at http://www.nytimes.com/2012/04/08/magazine/whats-the-easiest-way-to-cheat-on-your-taxes.html?src=me&ref=magazine)

Fed Up with Scorched-Earth Tactics

A lot of people and companies are upset with Amazon these days. At the end of February, The Educational Development Company (EDC) announced that it would remove all of its titles from the online retailer’s listings because of their predator selling practices. Amazon would buy EDC’s books from a distributor and discount them to the bone. The problem is that this creates problems with other retailers who want to carry the company’s titles, as well as with EDC’s network of independent sales agents, who market its books from their homes.

Questions:

1. According to the article, what other company removed its e-books from Amazon?
2. Assume that you own a small publishing company. Do a cost/benefit analysis of selling books on Amazon. Discuss your results in terms of short-term and long-term profitability.
3. Explain how you think that EDC sales model with its 7,000 “consultants” might work and how they record their revenue for these type of sales.

Source:

Streitfeld, D. (2012). Daring to Cut Off Amazon. The New York Times, April 15 (Retrievable online at http://www.nytimes.com/2012/04/16/business/media/amazons-e-book-pricing-a-constant-thorn-for-publishers.html?_r=1&hp)

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