1. For this exercise, you will discuss the issues below in the context of Costco Wholesale Corporation. You should go to the web page Costco Wholesale Investor Relations and click on the 2011 Annual Report. In the table of contents you should at a minimum read/review the following sections: Financial Highlights; Letter to Shareholders; Business Overview; Managements' Discussion and Analysis of Financial Condition and Results of Operations; and, the Consolidated Income Statement.
a) Cite evidence that Costco provides, which indicates that it may or may not be incorporating a balanced scorecard approach in its management philosophy.
b) Given the information provided discuss evidence of critical success factors for Costco. Make sure that your answer is in the context of our class discussion of critical success factors.
c) In reviewing Costco's Consolidated Income Statement identify one example for each of the following:
- Direct manufacturing labor
- Direct manufacturing materials cost
- Manufacturing overhead
- Selling expense
- Administrative expense
2. For this exercise you will use the web pages for Costco. Suppose you have decided to start a small business selling snacks from vending machines. Lynn University has allowed you to place a vending machine in the Ritter Building. Rental for the space will cost $300 per month. You will purchase the vending machine and the snack products at Costco.
a) Assume the following for this machine at the Ritter Building:
- You will purchase the cheaper of the two vending machines offered by Costco. This machine will be depreciated over three years on a straight line basis.
- Delivery costs will be $100 per month.
- You will sell Oreo Cookies, Cheese and Peanut Butter Crackers, Famous Amos Chocolate Chip Cookies, and Cheez-It Cracker Snacks. On average the costs of these snacks will be $.53 per unit.
- The vending machine price for these snacks will be $1.00.
- Other monthly costs are $150.
- Your tax rate is 35 percent.
How much revenue each month does the machine need to produce for you to earn $300 after taxes each month? After making your computations does this seem like a good business venture for you?
b) Assume that instead of placing a machine at the Ritter Building, you will place a machine in the Library. For the purpose of this analysis assume the following:
You will purchase the more expensive vending machine, also depreciated over three years.
- Delivery costs will be $150 per month.
- Other monthly costs will be $200 per month.
- In addition to selling the above snack items, you will also sell water and soft drinks, which on average will cost you $.60 per unit.
- The vending machine price for the beverages will be $1.50. You expect to sell three beverages for each snack product.
- The rental cost will remain at $300 per month.
- The tax rate is still 35 percent.
How much revenue each month does the machine need to produce for you to earn $450 after taxes each month? After making your computations does this seem like a good business venture for you?
3. Suppose that you have been hired as the regional manager for Publix food stores. Prepare a memo for your store managers explaining a cost of quality report. In your memo give two examples for each of the costs that would be found in the report. Be specific to a Publix grocery store.