M’Hudi Winery

A clinical psychologist, her ‘armchair farmer’ husband and their family launched an internationally successful wine label — without capital, farming experience or wine-making knowledge. The company is the first South African winery wholly owned and managed by a Black South African family.

Question:

1. How did the Rangaka’s decide on their particular farm? Discuss the costs or benefits of this approach?
2. How long did it take before the farm was producing a drinkable wine? How did Malmsey keep the winery afloat financially during the early years?
3. From a strategic perspective, does naiveté usually benefit a new entrepreneur? How does the article contend that this helped in this particular case?
4. One hectare is equivalent to 2.47 acres and the Rangaka’s have 21 hectares that produce 14,000 cases (12 per case) of wine per year. If the average price of 6 bottles is $52.38, what is the winery’s total revenue per year?

Source:

Pitman, J. (2011). M’hudi Wines: Malmsey Rangaka, Entrepreneur Magazine: South Africa, Dec. 14 (Retrievable online at http://www.entrepreneurmag.co.za/advice/women-entrepreneurs/women-entrepreneur-successes/m%E2%80%99hudi-wines-malmsey-rangaka/)
CNN Video. (2012). A Family of Winemakers. Jan. 30 (Retrievable online at www.cnn.com/videos).

What are you doing in the Summer of 2014?

Country singer Dolly Parton is set to expand her entertainment empire and open a water-snow theme park in Nashville, Tennessee. The 66-year-old launched Dollywood in the Pigeon Forge area of Tennessee in 1986 and added a water park next door in 2001. Now Parton is working on a new addition to her popular attractions and she announced plans for the new $50 million venture on E! online.The new, as of yet unnamed park, will be opened in the Spring or Summer of 2014.

 

Questions:

1.  In general, how would you book the $50 million dollar costs?
2. How should these costs be classified on the financial statements?
3. What is Dolly’s Secret regarding Dollywood?

Sources:

Cnn Video. (2012). Dolly’s New Adventure, Jan. 19 (Retrievable online at http://www.cnn.com/video/#/video/bestoftv/2012/01/19/exp-dollys-new-adventure.cnn)

King, Dennis. (2012) Dolly Parton’s Dollywood Secret. News OK, Jan. 24 (Retrievable online at http://newsok.com/dolly-partons-dollywood-secret/article/3642804)

Insulting Discounts: The Costa Concordia Saga

The owners of the Costa Concordia are offering survivors of the disaster a 30 percent discount off future cruises as they battle to stave off law suits expected to cost hundreds of millions of pounds. As the body of a 12th victim was found inside the hull of the £370 million, 1,000 ft vessel, survivors call the discount offer “insulting.” The most recent victim was found wearing a life jacket on the fourth deck, close to a muster station.

 

Question:

1.  What was the difference between net income for Carnival from 2010 to 2011?

2.  What did Carnival attribute this drop in income to?

3.  What is Carnival’s connection with the Concordia and why is Carnival seeing a downturn in bookings this year?

 

CNN Video. (2012). Carnival Cruise Lines Takes Financial Hit, Jan. 16 (Retrievable online at http://www.cnn.com/video/#/video/world/2012/01/16/pkg-boulden-cruise-ship-business-after-concordia.cnn)

 

Duffin, C., R. Mendick, N. Squires, and V. Ward (2012). Costa Concordia: ‘Insulting’ Cruise Offer to Survivors, The Telegraph, Jan. 24 (Retrievable online at http://www.telegraph.co.uk/news/worldnews/europe/italy/9030212/Costa-Concordia-insulting-cruise-offer-to-survivors.html)

Watch that Password!

Zappos began emailing its 24 million customers Sunday, advising them that its site had been hacked, and some customers’ personal details and account information likely stolen. Despite Zappos’ data breach notification to consumers, the company hasn’t yet answered several key questions, such as detailing when the data breach occurred, the length of time for which attackers may have had access to its systems, or how the breach was finally detected. Zappos also hasn’t indicated whether it will offer identity theft monitoring services to affected customers.

Source:

Hartman, C. (2012). Zappos Hacked, 24 Million Accounts Exposed, 5min LifeVideopedia, January 16 (Retrievable at http://www.5min.com/Video/Zappos-Hacked-24-Million-Accounts-Exposed-517248590)

Schwartz, M. (2012) Zappos Hack Exposes Passwords, InformationWeek, Jan. 17 (Retrievable online at http://www.informationweek.com/news/security/attacks/232400441)

Questions:

1. According to the video, what is Zappos known for?
2. What advice is being given to the compromised account holders? Does it sound like the accounting information system was breached?
3. Who owns Zappos and what industry are they in? What type of contingent liabilities could this breach expose Zappos to?

First-Class Travel Has Never Been So Good, For Those Who Can Afford It!

Though first class represents less than 5 percent of all seats flown on long-haul routes, and business class accounts for 15 percent, those seats combined to generate 40 to 50 percent of airlines’ revenue, according to Peter Morris, the chief economist at Ascend, an aviation consulting firm. After its merger with Continental last year, United Airlines kept its first-class cabin only on some international routes that used to be served by United but not on those flown by Continental. It is also installing new flat-bed seats across its fleet in business class.

Questions:

1. According to the video, what was the price of a coach seat versus a business class seat versus a 1st class seat on a flight from the U.S. to Zurich, Switzerland?
2. Based on your answer in #1, assume that a plane going to Zurich has 230 coach, 50 business seats, and 20 first-class seats? What would be the gross revenue?
3. Based on your answer in #2, what would the expenses be in order to achieve a 50 percent net revenue?
4. How many times more is a first-class seat as compared to a coach seat, based on your answer in #1?
5. Discuss how you think an airline decides to configure its seating options. What is the linkage between this type of decision and cost or managerial accounting?

Source:
Mouawad, J. (2011). Taking First-Class Coddling Above and Beyond, The New York Times, Nov. 20 (Retrievable online at http://www.nytimes.com/2011/11/21/business/taking-first-class-coddling-above-and-beyond.html?pagewanted=1)

Video. (2011). In First Class, A World Apart, New York Times Video (Retrievable online at http://video.nytimes.com/video/2011/11/21/business/100000001182807/in-first-class-a-world-apart.html)

Sears and Kmart Close Stores

Sears Holding Corp. is ending the year on a bitter note. The company, which earlier this week posted a list of 79 out of the up to 120 Sears and Kmart stores it plans to close and was then downgraded by Fitch Ratings, is now watching its stock bleed out to a new low.

In mid-day trading in New York, the beleaguered retailer’s stock was down to $32.20, heading for its fourth straight daily drop and less than half of the year-earlier price of $74.15.

Questions:

1. Why did Fitch downgrade the company? Specifically, what was the downgrade?

2. Explain what Sears may have to restructure, besides closing stores.

3. Based on the article, what are the projections for the 4th quarter earnings?

4. Calculate the percentage drop in the stock price.

Source:

Staff (2011). Sears, Kmart Closings: Shares Slide To New Low On Fitch Downgrade, Los Angeles Times, Dec. 30 (Retrievable online at http://latimesblogs.latimes.com/money_co/2011/12/sears-kmart-closings-shares-slide-to-new-low-on-fitch-downgrade.htmlhttp://latimesblogs.latimes.com/money_co/2011/12/sears-kmart-closings-shares-slide-to-new-low-on-fitch-downgrade.html)

NBC Video (2011). More than 100 Sears and Kmart Stores to Close, Dec. 27.

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

Amy’s Kitchen in the Small Business Spotlight

Amy’s Kitchen started in 1987 as one of the first frozen food companies for vegetarians. Naming the company after their daughter, Amy, Rachel and Andy Berliner worked as a team and started the company on a shoestring budget. Their first product, vegetable pot pie, has now led to over 88 frozen meals and in 1999, they introduced a grocery line that now includes canned soups, beans and chili as well as jarred pasta sauces and salsas.

Questions:

1. Go to Amy’s Website at (http://www.amys.com/). What is the thing that you like most about it? Is the company publicly or privately held?

2. Based on the website, who was the chief accounting executive for the company and what title did that person hold? Discuss whether this title agrees or disagrees with your textbook and why. From looking at the executives on the website, can you draw an organizational chart of the company? Why is this important?

3. What were the pieces of advice that the owners offered to small business owners in the video? Do you agree or disagree? Discuss.

Source: MSNBC video (2011), Learning from the Pros: Amy’s Kitchen, November 13 (Retrievable online at http://www.openforum.com/videos/learning-from-the-pros-amys-kitchen)

Ever Thought About Operating A Franchise?

Tired of not getting paid what you’re worth (or not paid at all) and want to start your own, already-proven business? That’s what is intriguing about franchising. Pick a brand, pay your money, take your chances, and then you’re an entrepreneur. Running day-to-day operations and turning a profit is another matter, of course. However, success starts with picking the right system, because there are roughly 3,500 franchises to choose from.

Questions:

1. The video talked about the top five types of franchises, but what are the top 10 actual franchise companies? (See http://www.entrepreneur.com/franchise500/index.html)
2. Look at the Forbes article. What four variables supported their recommendation for the best investments in franchises?
3. Now look at the Forbes “In Pictures: The Top 20 Franchises To Start,” which is hyperlinked in the article. Which one interests you and why? Use your accounting knowledge to explain. Discuss the risks and challenges involved.

Source: MSNBC video (2011), Top Five: Franchise Trends, Dec. 18 (Retrievable online at http://www.openforum.com/videos/top-five-franchise-trends)

Davis, L. and M. Farrell (2011). The Top Franchises for the Money, Forbes.com, January 18 (Retrievable online at http://www.forbes.com/2011/01/18/best-franchises-for-the-buck-entrepreneurs-finance-franchise.html)

A Good Deal?

Show them the money and you, too, could live at The Plaza in New York City! Life at the city’s storied hotel is kush no matter what, but this newest listing is giving new meaning to the high life. Curbed directed our attention to the Astor Suite, a four-bedroom, six-bath rental, which is currently being offered for $165,000 per month. Yes, that makes it New York’s most expensive rental on the market.

Questions:

1. If as the video indicated, the apartment is worth $55M today, what percent of the value is the owner willing to accept in annual rent? How does this compare to the rent to value ratio of an average furnished apartment in your area?

2. Assuming that the owner’s renovations were $5M, what percentage annual return will the owner receive on his investment, if he is able to sell it for $55M? How would he record the journal entry?

3. Based on the square footage stated in the article, what is the sales price per square foot? Look online and find a home with similar square footage that is furnished and discuss how it compares. What are some of the qualitative differences that the buyer be paying for in The Plaza apartment, as compared to the one you found for sale online?

Source:

Zeveloff, J. (2011). At $165,000 A Month, This Is The New Most Expensive Apartment Rental In New York, Business Insider, Dec. 8 (Retrievable online at http://www.businessinsider.com/most-expensive-apartment-rental-new-york-astor-suite-plaza-2011-12)

Knutsen, E. (2011). Only at the Plaza Could They Charge $165,000 a Month for An Apartment, The New York Observer, Dec. 8 (Retrievable online at http://www.observer.com/2011/12/only-at-the-plaza-could-they-charge-165000-a-month-for-an-apartment/)

CNN Video, New York’s Most Expensive Rental, Dec. 15

The Cost of Sweet Music

Manuel Rodriguez III owns the century-old family business of the same name, heir to a tradition of guitar manufacturers which dates back to 1905 when his grandfather gave up fishing in Cadiz to dedicate his life to his musical passion. Now the Spanish guitar factory is looking beyond Europe to keep the company competitive.

Questions:

1. According to the video, by what percentage has the workforce been reduced by in the Spanish factory? How does this compare to the percentage quoted in the article? What does Manuel attribute this reduction to?
2. Discuss the processes Manuel discusses in terms of cost accounting, both at the Spanish and China factories, and how these impact the company’s costs.
3. Based on the figures given in the article concerning the lower range guitars, construct an annual income statement.

Sources:

Castellanos, C and C. Ruano. (2011) Spanish Crisis Won’t Silence Manuel Rodriguez Guitars, Reuters.com, Apr. 7 (Retrievable online at http://uk.reuters.com/article/2011/04/07/uk-spain-guitars-idUKTRE73641V20110407)

CNN Videos. (2011). Spanish Guitar Factory Eyes Investment, Dec. 8 (Retrievable online at www.cnn.com/videos)

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