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Essay Instructions: ? Coffee shop Industry – its history/definition 1 pages

? Competitors THE FOLLOWING 4- their history/background; strategic leadership, vision and mission (as in stated by the company) 3 pages

1. Dunkin' Donuts history/background; strategic leadership, vision and mission
2. Panera Bread history/background; strategic leadership, vision and mission
3. Caribou Coffee history/background; strategic leadership, vision and mission
4. MacDonald’s history/background; strategic leadership, vision and mission

Essay Instructions: Coffee Maker's Incorporated (CMI).Two divisions of a CMI are involved in a dispute. Division A purchases Part 101 and Division B purchases Part 201 from a third division, C. Both divisions need the parts for products that they assemble. The intercompany transactions have remained constant for several years.Recently, outside suppliers have lowered their prices, but Division C is not lowering its prices. In addition, all division managers are feeling the pressure to increase profit. Managers of divisions A and B would like the flexibility to purchase the parts they need from external parties to lower cost and increase profitability.The current pattern is that Division A purchases 3,000 units of product part 101 from Division C (the supplying division) and another 1,000 units from an external supplier. The market price for Part 101 is $900 per unit. Division B purchases 1,000 units of Part 201 from Division C and another 1,000 units from an external supplier. Note that both divisions A and B purchase the needed supplies from both the internal source and an external source at the same time.The managers for divisions A and B are preparing a new proposal for consideration.?Division C will continue to produce Parts 101 and 201. All of its production will be sold to Divisions A and B. No other customers are likely to found for these products in the short term given that supply is greater than demand in the market.?Division C will manufacture 2,000 units of Part 101 for the Division A and 500 units of Part 201 for the Division B.?Division A will buy 2,000 units of Part 101 from Division C and 2,000 units from an external supplier at $900 per unit.?Division B will buy 500 units of Part 201 from Division C and 1,500 units from an external supplier at $1,900 per unit. Division C Data 2012 Based on the Current AgreementPart101201Direct materials$200$300Direct labor$200$300Variable overhead$300$600Transfer price$1,000$2,000Annual Volume3,000 units1,000 unitsRequired:?Calculate the increase or decrease in profits for the three divisions and the company as a whole (four separate computations) if the agreement is enforced. Explain your thought process, comment on the situation, and make a suggestion based on the computations you have made.?Evaluate and discuss the implications of the following transfer pricing policies: ?Transfer price = cost plus a mark-up for the selling division?Transfer price = fair market value?Transfer price = price negotiated by the managers?Why is transfer pricing such a significant issue both from a financial and managerial perspective? Modular Case Assignment ExpectationsIt is important to answer the questions as posed. The discussion should be from 3 to 5 pages and written in a clear and concise manner. Support your discussion with references in APA format. You are encouraged to use Excel or other compatible spreadsheet when computations are involved.Please include citation and reference

Essay Instructions: Coffee Maker's Incorporated (CMI)


Two divisions of a CMI are involved in a dispute. Division A purchases Part 101 and Division B purchases Part 201 from a third division, C. Both divisions need the parts for products that they assemble. The intercompany transactions have remained constant for several years.


Recently, outside suppliers have lowered their prices, but Division C is not lowering its prices. In addition, all division managers are feeling the pressure to increase profit. Managers of divisions A and B would like the flexibility to purchase the parts they need from external parties to lower cost and increase profitability.


The current pattern is that Division A purchases 3,000 units of product part 101 from Division C (the supplying division) and another 1,500 units from an external supplier. The market price for Part 101 is $900 per unit. Division B purchases 1,000 units of Part 201 from Division C and another 500 units from an external supplier. Note that both divisions A and B purchase the needed supplies from both the internal source and an external source at the same time.


The managers for divisions A and B are preparing a new proposal for consideration.

?Division C will continue to produce Parts 101 and 201. All of its production will be sold to Divisions A and B. No other customers are likely to be found for these products in the short term, given that supply is greater than demand in the market.


?Division C will manufacture 2,000 units of Part 101 for the Division A and 500 units of Part 201 for the Division B.


?Division A will buy 2,000 units of Part 101 from Division C and 2,000 units from an external supplier at $900 per unit.


?Division B will buy 500 units of Part 201 from Division C and 1,500 units from an external supplier at $1,900 per unit.



Division C Data 2014 Based on the Current Agreement






Part



101



201




Direct materials



$200



$300




Direct labor



$200



$300




Variable overhead



$300



$600




Transfer price



$1,000



$2,000




Annual volume



3,000 units



1,000 units



Case Assignment


Required:

?Calculate the increase or decrease in profits for the three divisions and the company as a whole (four separate computations) if the agreement is enforced. Explain your thought process, comment on the situation, and make a suggestion based on the computations you have made.


?Evaluate and discuss the implications of the following transfer pricing policies:


?Transfer price = cost plus a mark-up for the selling division



?Transfer price = fair market value


?Transfer price = price negotiated by the managers


?Why is transfer pricing such a significant issue both from a financial and managerial perspective?



Assignment Expectations


It is important to answer the questions as posed. The discussion should be?4 to?6 pages and written in a clear and concise manner. Support your discussion with references in APA format. You are encouraged to use Excel or other compatible spreadsheet when computations are involved.

Essay Instructions: This paper is in 2 seperate parts. Each part should be approximately 1 1/2 pages.

Part #1

It is estimated that while world coffee prices hover around 50¢ per pound, production costs are around 80¢ per pound. According to a report issued in September 2002 by the relief agency Oxfam, prices are at their lowest in 100 years, thereby leaving 25 million farmers in crisis. Banks dependent on the industry are collapsing.

It is ironic that in a world of designer coffees ??" mochas and lattes ??" a worldwide glut of coffee beans has farmers and pickers suffering. One of the hardest hit places is Nicaragua, where the coffee crop is wilting and the people are beginning to starve.

Oxfam accuses the roasting companies ??" Proctor & Gamble, Nestle SA, Kraft Foods Inc., Sara Lee Corp., and Tchibo Holding AG are the biggest ??" of profiting from the crisis and urges them to pay higher prices. The companies reply that they cannot be blamed for the oversupply, and that paying higher prices would encourage farmers to produce more coffee that nobody wants.

The company taking the most heat is Starbucks Corp., the designer-coffee maven, among the top ten coffee buyers in the world. This world-wide chain has a lot to lose if their customers, especially those of college age, see it as a Third World profiteer.

“But the plight of the world’s financially struggling coffee farmer is a complicated one ??" and not all the fault of corporate coffee buyers. Farmers are caught up in the harsh world of commodity markets, where prices are based on supply and demand in a highly fragmented industry. A chronic coffee surplus has resulted in years of low prices.”

Sources: “For Coffee Growers, Not Even a Whiff of Profits,” Business Week, September 9, 2002, p. 110; and World Coffee Prices at 100-Year Low,” New York Times, September 18, 2002.

Questions:

1. Is the market for coffee perfectly competitive?

2. Does the coffee market meet all six conditions of a perfectly competitive market?

3. Which factor is not represented?

4. Do you buy the Starbuck’s argument that paying higher coffee prices will increase demand and will ultimately increase the glut?

5. Are the coffee growers operating at zero economic profit?

Criteria

1.
Describes whether the market for coffee perfectly competitive?

2.
Anwers whether the coffee market meets all six conditions of a perfectly competitive market?

3.
Describes which factor is not represented?

4.
Addesses the Starbuck’s argument that paying higher coffee prices will increase demand and will ultimately increase the glut?

5.
Answers whether the coffee growers operating at zero economic profit in the sense in which the chapter defines it?

Part #2

Governments have several means available to guide and influence competition in the marketplace. These means include government ownership of firms and industrial policy (with respect to laws and taxes).

Choose one of these three main areas of government intervention (i.e., regulation, government ownership and industrial policy).

•Next, research and locate a newspaper or news magazine article that illustrates an example of government intervention in the area you’ve chosen.
•Write a 500 word summary of the article. Submit it to your instructor. The article you use should be recent (less than three years old). Please cite your source and include the URL address/link if applicable.
Include in your paper:

•What prompted the intervention?
•Did the market fail to correct the problem?
•What was, or likely will be, the result of government intervention?

Criteria

1.
Identified an appropriate article regarding one of the three main areas of government intervention

2.
Described what prompted the intervention

3.
Identifies whether or not the market failed to correct the problem

4.
Describes or forecasts the results of the government intervention

5.
Uses correct grammar, spelling and punctuation.