BUS 630 Week 1 DQ 2 Kranbrack Corporation

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BUS 630 Week 1 DQ 2 Kranbrack Corporation To
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rporation M.K. Gallant is president of
Kranbrack Corporation, a company whose stock is
traded on a national exchange.  In a meeting with
investment analysts at the beginning of the year,
Gallant had predicted that the companys earnings
would grow by 20 this year.  Unfortunately,
sales have been less than expected for the year,
and Gallant concluded with two weeks of the end
of the fiscal year that it would impossible to
ultimately report an increase in earning as large
as predicted unless some drastic action was
taken.  Accordingly, Gallant has ordered that
wherever possible, expenditures should be
postponed to the new year including canceling
or postponing orders with suppliers, delaying
planned maintenance and training, and cutting
back on end-of-the-year advertising and travel. 
Additionally, Gallant ordered the companys
controller to carefully scrutinize all costs that
are currently classified as period costs and
reclassify as many as possible as product costs.
The company is expected to have substantial
inventories of work in process and finished goods
at the end of the year. 
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• Comment on the following questions.  Respond to
  at least two of your fellow students postings.
• Why would reclassifying period costs as product
  costs increase this periods reported earnings?
• Do you believe Gallants actions are ethical? 
  Why or why not?
• Assgnt.    The questions in this exercise are
  based on Dell, Inc.  To answer the questions, you
  will need to download Dells 2005 Form 10-K. You
  do not need to print this document in order to
  answer the questions.
• What is Dells strategy for success in the
  marketplace? Does the company rely primarily on a
  customer intimacy, operational excellence, or
  product leadership customer value proposition?
  What evidence supports your conclusion?
• What business risks does Dell face that may
  threaten its ability to satisfy stockholder
  expectations?  What are some examples of control
  activities that the company could use to reduce
  these risks? (Hint Focus on pages 7-10 of the
  10-K.)
• How as the Sarbanes-Oxley Act of 2002 explicitly
  affected the disclosures contained in Dells 10-K
  report? (Hint Focus on pages 34-35, 59, and
  76-78.)
• Is Dell a merchandiser or a manufacturer?  What
  information contained in the 10-K supports your
  answer?

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• What are some examples of direct and indirect
  inventoriable costs for Dell? Why has Dells
  gross margin (in dollars) steadily increased from
  2003 to 2005, yet the gross margin as a
  percentage of net revenue only increased
  slightly?
• What is the inventory balance on Dells January
  28, 2005 balance sheet? Why is the inventory
  balance so small compared to the other current
  asset balances? What competitive advantage does
  Dell derive from its low inventory levels? Page
  27 of Dells 10-K reports a figure called the
  crash conversion cycle. The cash conversion cycle
  for Dell has consistently been negative.  Is this
  a good sign for Dell or a bad sign? Why?
• Describe some of the various types of operating
  expenses incurred by Dell.  Why are these
  expenses treated as period costs?
• List four different cost objects for Dell. For
  each cost object, mention one example of a direct
  cost and an indirect cost.
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