BUS 630 Week 1 DQ 2 Kranbrack Corporation To purchase this material link Week-1-DQ-2-Kranbrack-Corporation 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 company’s 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 company’s 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.

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 period’s reported earnings?  Do you believe Gallant’s 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 Dell’s 2005 Form 10-K. You do not need to print this document in order to answer the questions.  What is Dell’s 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 Dell’s 10-K report? (Hint: Focus on pages 34-35, 59, and )  Is Dell a merchandiser or a manufacturer? What information contained in the 10-K supports your answer?

 What are some examples of direct and indirect inventoriable costs for Dell? Why has Dell’s 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 Dell’s 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 Dell’s 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. For more courses visit our website