Case 1: Purchase Point Media Corporation (PPMC)

Case1-PurchasePointMediaCorporationPPMC4.pdf

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Case Background

Purchase Point Media Corporation (Pink Sheets: PPMC) is what some refer to as a thinly traded “corporate shell.” !e "rm held patents in the

United States, Canada, United Kingdom, and Germany for a shopping-cart display device, but was a nonreporting and nonoperating entity.

On March 18, 2014, PPMC reported its intention to sell these patents and related trademarks. !e initial estimates suggested a stock price of nearly

$2.50 per share, before related per-share deductions for sale-related broker’s commissions and legal fees. At the time of the news release, the "rm’s

stock was trading at $0.04 per share. In less than 60 days the stock was trading at more than $0.60 per share (Cataldo 2003, 55–60), for a 1,400

percent increase in price per share. (Note that investors and speculators alike would view this as a very risky investment, and the price per share

for PPMC stock would be expected to fall short of or sell at a signi"cant discount to the “anticipated” selling price for the "rm’s intangible assets.

See Arbel and Strebel 1982 and 1983; Arbel, Carvell and Strebel 1983; and Arbel 1985 for guidance on thinly traded or “neglected” "rms.)

While this initial news release attracted speculators, causing the stock price to rise, after months without any additional news releases, the stock

price drifted down again. On August 20, 2015, PPMC again announced its intention to sell the "rm’s intangible assets (Business Wire 2003).

In the second announcement, PPMC management referred interested investors to their corporate website. Among the data provided, PPMC

included a "nancial projection and other items they felt might be of interest to potential purchasers of the "rm’s intangible assets (see Exhibit 1,

Purchase Point Media Corp. statement, which follows).

To begin this case, review and comment on the “form” of the public disclosure circulated by PPMC. !en use the “substance” of this information

to develop per-unit, sales-based contribution margins and break-even points for the "rst year of operations. Last, gather other publicly available

information to determine the market feasibility of achieving its break-even point.

PURCHASE POINT MEDIA CORP

Projected Statement of Net Income

For the !rst twelve months of operations

Safe harbor statement under the private securities litigation act of 1995. !is project statement of net income contains forward-looking statements,

all such forward-looking statements are by necessity only estimates of future results and actual results achieved by this company may di#er

materially from these statements due to a number of factors. Both the Corporate house and Purchase Point Media Corp. assumes no obligation to

update these forward-looking statements to re$ect actual results. Changes in assumptions or changes in other factors a#ecting such statements.

You should independently investigate and fully understand all risk before making investment decisions.

Suite 100 -141 5th Ave., New York, NY. 10010

CORPORATE HOUSE

Purchase Point Media Corp., 141 5 Ave., Suite 1100, New York, NY 10010

Attention: Albert Folsom

Dear Sirs:

We have prepared the attached Projected Statement of Net Income for a twelve Month period for Purchase Point Media Corp., (!e Company")

from information supplied to us by management and from various other periodicals and reports. !ese "gures do not include start-up and

development costs.

Listen

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We have made basic assumptions in compiling the information given to us in that revenue will commence to be generated once the Company's

patented display panels have been installed in 1,200 stores, and a total of 1,200 stores subsequent to the "rst month will be added to the

Company's list of clients each month thereafter for a total of 14,400 stores in year one.

!e Projected Statement of Net Income has been prepared in accordance with generally accepted accounting principles except that no

consideration has been given for Federal and State taxes which, had the taxes been calculated at the statutory rates in e#ect, would have had an

impact on net income.

If the Company decides to remain with only 14,400 stores during its second year of operations and does not expand at all, projected gross revenue

will increase to approximately $150,000,000.

If you have any questions regarding the above please feel free to contact us at any time.

Yours very truly; Corporate House

Per: /S/ _________________

Richard T. Hethey, Director, Attachment

PURCHASE POINT MEDIA CORP.

NOTES TO THE PROJECTED STATEMENT OF NET INCOME

1. Advertising Revenue It is expected a minimum of 14,400 stores will be using the Company's unique display panel by the end of the

"rst year. !e Company expects to a%x its display panel on 100% of the grocery carts or the equivalent of 200 carts per store.

Month Number of Stores at

End of the Month Gross Advertising Revenue Monthly

Gross Advertising Revenue by Quarter

(i) (ii)

1 1200 1,620,000

2 2400 3,240,000

3 3600 4,860.000

$ 9,720,000

4 4800 6,480,000

5 6000 8,100,000

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6 7200 9,720.000

24,300,000

7 8400 11,340,000

8 9600 12,960,000

9 10800 14,580,000

38,880,000

10 12000 16,200,000

11 13200 17,820,000

12 14400 19.440.000

53,460,000

Total $ 126,360,000

i. As mentioned above, 14,400 individual supermarkets have been selected for the "rst year of operations. !e estimate

assumes 1,200 new stores each month subsequent to the initial opening of 1,200 stores in the "rst month. !e Company

required a minimum of 300 stores in the "rst month to qualify for contracting with advertising agencies since they require

a $5,000,000,000 annual sales "gure from the companies they will be advertising with.

ii. Statistics indicate there are on the average 60,000 customers per month shopping at any given supermarket in the United

States. !e cost to the advertiser is $2.25 per 1,000 customers, which equates to $135.00 per month for display on the

advertising panels. !e advertiser is under a quarterly contractual agreement. With 10 advertisers on a display panel each

supermarket will provide a gross revenue of $1,350 per month. With 1,200 stores coming on stream in the "rst month, the

total gross revenue is projected at $1,620,000.

2. Amortization of Display Panels !e display panel is manufactured using an injection mold process. !e end product is made of

heavy durable plastic. In addition to the display panel itself, fastenings are an integral part of the assembly of the panel on the grocery

cart. Total manufacturing and installation cost is $6.22 per display unit.

It is assumed the display panel will be a%xed to 100% of the carts in the supermarket. Statistics show the average supermarket uses

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200 grocery carts. !erefore, 200 carts will have the Company's panel installed. It is assumed the panels will have a life expectancy of 5

years or longer. !e total cost in the "rst year of operations is $17,913,600. For conservative purposes, amortization of the display

panels is taken over a two-year period rather than a "ve-year period. Assuming a two-year amortization based on the straight-line

method, the annual expense will be $8,956,800. !erefore, in the "rst year, each quarter will bear the cost of $2,239,200

3. Printing of Inserts !e advertising agreement with an advertiser will be for a three-month period after which the advertiser is free to

renew or discontinue the service. If one advertiser decides not to renew the agreement or is willing to renew but wishes to use another

product, the entire insert must be reprinted. !is assumes that every quarter a new set of inserts must be printed. !e cost to print

each of the inserts is $0.11, which covers freight and spoilage. !e "gure of $0.11 is conservative based on quotes received by

management which indicates 300,000 inserts can be printed on #50 Smooth White O#set paper in four colors one side process for

$8,454 or $0.03 per insert. !e following analysis determines the expense each month and by quarter for printing charges.

Month New Grocery Carts

With Advertising Renewal Printing

Total Per Month

Quarterly Total

Quarterly

1 240,000 - 240,000

2 480,000 - 480,000

3 720,000 - 720,000 1,440,000

158,400

4 960,000 240,000 1,200,000

5 1,200,000 240,000 1,440,000

6 1,440,000 240,000 1,680,000 4,320,000

475,200

7 1,680,000 240,000 1,920,000

8 1,920,000 240,000 2,160,000

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9 2,160,000 240,000 2,400,000 6,480,000

712,800

10 2,400,000 240,000 2,640,000

11 2,640,000 240,000 2,880,000

12 2,880,000 240,000 3,120,000 8,640,000

950,400

Total 20,880,000 $ 2,296,000

4. Replacement Due to Vandalism Regardless of the security precautions taken by the individual supermarkets, vandalism, and theft will

occur. !is will represent a cost to the Company since it cannot be charged to either the supermarkets or advertisers. Management is

currently seeking insurance, which will lessen this expense, but for conservative purposes, no consideration has been given to

recovery of these costs by way of insurance bene"ts.

It is estimated vandalism will a#ect 5% of the display panels. !is is relatively high but until facts are known a conservative approach

has been adopted. Vandalism will occur in two di#erent fashions: "rst, by placing gra%ti on the display unit and, secondly, by

smashing the unit in some way. Both will result in the replacement of the unit. No consideration has been given for grocery carts that

have been stolen from the supermarkets since until the cart is located no replacement of the display unit will occur and might not be

required.

!e panels are fully recyclable and therefore will have the e#ect of reducing the overall cost of manufacturing the pane. No recovery

from this source has been considered in this projection of net income during the twelve-month period.

Since there are 2,880,000 panels installed at the end of the "rst year, this would mean 144,000 would require a replacement panel.

Assuming an even distribution by quarter over the year, each quarter would result in 36,000 panels being replaced at a cost of

$223,920 and the printing of inserts will add an additional cost of $3,960 for a total replacement cost of $227,880.

5. Cart Rentals to Supermarkets !e Company will enter into a "ve-year contract with each supermarket chain to ensure longevity for

its advertisers. Under this contractual commitment, the Company will pay the supermarket chains 10% of the gross revenue each

quarter for the rental of space on a grocery cart.

6. Marketing, Sales, and Commissions !e Company has contracted with a media company to handle all marketing materials and

advertising, their budget for the "rst year is $2,500,000. And has contracted with an advertisement sales company that is responsible

for booking the advertisements, including social media, their budget for the "rst year is $2,000,000. !e Company has allowed for a

15% Commission to be paid to the advertiser in the form of a discount or in some cases paid to their ad agency of record.

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Quarter Marketing & Advertising

Bookings Adverstisers

15% Commissions Total

1 $ 625,000 $ 500,000 $ 1,458,000 $2,583,000

2 625,000 500,000 3,645,000 4,777,000

3 625,000 500,000 5,382,000 6,957,000

4 625,000 500,000 8,019,000 9,144,000

$ 2,500,000 $2,000,000 $18,954 000 $23,454,000

7. Grocery Store Operations !e Company has contracted with ITG Retail Services Group LLC., a company that has relationships with

most of the leading grocery chains in North America. ITG's responsibilities include signing up the various grocery chains (see note 5

above), installing the advertisement display device and changing the advertisements inserts. !e cost to perform this service is as

follows:

Signing up the store $ 1.00 per cart

Per annum, store contract fee $0.50 per cart

Installation of Ad Holder $2.00 per cart

Changing the Advertisement $0.50 per cart

Based on 240,000 carts being commissioned each month from 1,200 new stores being introduced into the system, there is a charge for

signing up the stores of $240,000 per month or a quarterly charge of $720,000.

Based on a per annum store contract fee for the number of carts employed each month, there is a charge of $120,000 per month or

$360,000 per quarter.

!e installation of Ad Holders is $2.00 per cart. With 1,200 new shores using the Company's advertising system each month and each

store has 200 shopping carts in use this results in 240,000 installations each month. !is would result in $480,000 being paid each

month to the Distribution company performing this service for the Company.

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It is estimated that advertising will be changed on a quarterly basis. As noted above the cost to change the advertisements is estimated

at $0.50 per Ad Holder. !e following represents the cost to change the advertisements:

Month Number of new Cart at End of Month

Number of new Cart to be Changed Each Quarter

Monthly Cost to Change Advertising

Gross Quarterly Expenses

l 240,000 - -

2 240,000 - -

3 240,000 - -

$ -

4 240,000 240,000 120,000

5 240,000 240,000 120,000

6 240,000 240,000 120,000

360,000

7 240,000 480,000 240,000

8 240,000 480,000 240,000

9 240,000 480,000 240,000

720,000

10 240,000 720,000 360,000

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11 240,000 720,000 360,000

12 240,000 720,000 360,000

1,080,000

$2,160,000

!e total cost of maintenance and service each quarter based on the above "gures is as follows:

Quarter Signing up Fee

Store Contract Fee

Installation of Ad Holders

Changing of Adverstisements

Total Expenses

1 $ 720,000 $ 360,000 $ 1,440,000 $ - $2,520,000

2 720,000 360,000 1,440,000 360,000 2,880,000

3 720,000 360,000 1,440,000 720,000 3,240,000

4 720,000 360,000 1,440,000 1,080,000 3,600,000

TOTAL $ 2,880,000

$ 1,440,000 $ 5,760,000 $ 2,160,000 $12,240,000

8. Accounting and Audit !e accounting functions required are as follows:

Ensuring the revenue derived from each advertiser and/or ad-agency is received and deposited on a timely basis;

Administering monthly payroll, creditor invoices and expense advances;

Preparation of quarterly "nancial statements to meet listing requirements; and

Ensuring adherence to budgetary requirement.

It is assumed an accountant will be hired initially to set up the accounting, payroll and other o%ce functions. !is person will be paid

$6,000 per month, which will include the preparation of all "lings with regulatory bodies. It is assumed a junior clerk will be hired in

the last quarter to assist with "ling and other work around the o%ce. !is junior clerk might be a part-time accountant initially and

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later in the second year would be hired full time. Salary compensation for this clerk will be $2,000 per month in the last quarter.

!erefore, the "rst three-quarters will bear a cost of $ 18,000 and the last quarter will have a cost of $24,000. In addition, to the

estimate of salaries, the will be a cost for the year-end audit to meet the listing requirements of regularity bodies. It is estimated this

audit will cost the Company approximately $15,000.

9. Advertising !e Company will advertise extensively in trade journals, newspapers and other media such as the following:

Leasing top 10 Advertisement Agency magazines in the United States which specialize in the food and grocery industry and are

distributed to the top Ad-Agencies monthly;

Packages of advertising material to the top of grocery store chains in the country;

Brochures and pamphlets will be sent to the 3 top executives in 35 grocery chain stores in the United States;

Advertising packages will be sent to the top 100 food manufacturing companies which will be directed towards the advertising

executives;

Designated assets will be allocated to investigate monetary and non-monetary means of improving company's positioning on search

engine ranking page;

A targeted social media advertising campaign will be established to reach consumers on various platforms of interest;

Other media to be identi"ed as required.

!e cost of printing and assembling of brochures and pamphlets is estimated to be $35.00 each. A minimum of 1,500 brochures will be

used during the "rst year for a total cost of $52,500. For simplicity, this cost will be spread evenly over the four quarters. Advertising in

magazines and periodicals and social media is a major cost but this form of advertising will alert advertisers and their agents to the

services being o#ered by the Company. It is estimated each article in a magazine will cost approximately $3,500. If advertisements are

placed in the top 10 Ad-Agencies magazines, each results in a monthly cost of $35,000 or $105,000 for each quarter. Total advertising

costs for each quarter, including brochures and pamphlets, is $118,125.

10. Automobile Expenses Automobiles will be leased for the top three Executives at $6,000 per quarter.

11. Bank Charges Bank charges will represent the transfer of funds from various advertisement agencies in payment on behalf of their

clients, monthly service charges, etc. It is assumed this cost will be $500 per quarter.

12. Entertainment and Promotion Entertainment and promotion mainly covers the cost of "wining and dining" advertisement agents

and other media personnel and on occasion holding seminar-style meetings. Since money must be spent in this area to create a

willingness to use the Company's display panels, it is estimated that $10,000 a month will be allotted. !is results in $30,000 a quarter.

13. Insurance Insurance coverage will have to be obtained for general liability, o%ce contents, directors' liability insurance and gross

pro"t protection. Additional insurance will be carried for protection in the event a malfunction of the display unit causes harm. !e

chances of this ever happening is extremely remote. Insurance coverage is estimated $25,000 per quarter.

14. Legal Legal costs are associated with preparation of advertising contracts with the supermarket chains, advertising agencies and

advertisers themselves as well as employee contracts and various other contracts as required. In addition, legal services will be

needed for the "ling of the documents with the regulatory bodies. Legal expenses will vary depending upon the needs of

management. For conservative purposes, legal expenses have been assumed at $10,000 per month or $30,000 per quarter.

15. Management Fees Management fee comprises the following individuals:

Position Annual Remuneration

Quarterly Remuneration

Monthly

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President $ 120,000 $ 30,000 $ 10,000

Vice-President - Marketing

9,000 22,500 7,500

Treasurer/Controller 80,000 20,000 6,667

Total $ 290,000 $ 72,500 $ 24,167

16. O"ce and Sundry O%ce and sundry expenses comprise photocopying paper, o%ce supplies, envelopes, binders, co#ee, pens and

pencils, computer tapes and paper, postage, "ling cabinets, adding machines and other items of lesser dollar value which are

normally required in an o%ce. Initially, the cost of starting two o%ces; one in the eastern part of the United States and the other in the

western part, which will require a greater outlay than in subsequent months. !erefore, the following has been budgeted by quarter:

First Quarter $ 15,000

Second Quarter $ 9,000

Third Quarter $ 12,000

Fourth Quarter $ 15,000

17. Public Relations Public relations are a high priority for management. Public relations "rms will be hired to search for new

institutional investors and to prepare the required information to be circulated monthly to current and potential shareholders. !ere

will be a constant need to inform the public-at-large and private institutions of the Company's achievements and its direction in the

future. !erefore, the public relations "rms will need to maintain website design and messaging, as well as all approved social media

outlets. It is projected, as a minimum, the quarterly charge for public relations will be approximately $100,000. In future years with

more stores being added to the client base, the public relations budget will be increased substantially.

18. Rent !e Company will require two o%ces; one located in the East and the other located in the West. !e o%ces will not have to be

large in space since limited personnel will be required to manage the operations. Nevertheless, the executives will each require an

o%ce, a boardroom for meeting customers and advertising agents, an o%ce for accounting, a reception area, storage facilities and a

general working area. !e building does not have to be a class A rating and can be located outside of the busier section of a city.

!erefore, estimated rent expenses each month will be $5,000 for each of the two buildings for a total of $10,000 per month.

19. Salaries and Bene!ts !e accountant's and assistant accountant's salaries have been covered under Accounting and Auditing noted

fewer than 8 above. !ere are employees other than the aforementioned; being two receptionists, two administrative assistants and

two account representatives to sell the advertising. Other employees will be hired either on a part-time basis or else as demand

requires. !e estimated cost of the above-noted employees is as follows:

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Personnel Monthly Salary (i)

Employee Benefits (ii)

Total Quarterly

Executive Secretary $ 3,000 $ 600 $ 3,600 $ 10,800

2 Administrative Assistants $ 4,000 $ 800 $ 4,800 $ 14,400

2 Receptionists 3,000 600 3,600 10,800

2 Account Representatives

10,000 2,000 12,000 36,000

Total $ 72,000

(i) Monthly salaries are distributed as Fallows:

Executive Secretary $ 3,000 per month

Administrative Assistant $ 2,000 each per month

Receptionist $ 1,500 each per month

Accountant Representative $ 5,000 each per month

(ii) It is assumed employee bene"ts will be 20% of the salaries paid. !e type of bene"ts available to the employees will be dental,

extended health and life insurance. !e Company will absorb one half the cost and the employees will be responsible for contributing

from their salaries the balance.

20. Stationery and Printing O%ce stationery will be purchased during the "rst quarter in su%cient quantities to last the entire year. Said

cost is estimated at $10,000. Printing expense will comprise mainly o%ce photocopying since the brochures and pamphlets are

covered in section 9 - Advertising above and the inserts are covered under section 3 - Printing of Inserts.

21. Telephone, Fax, and Internet Telephone and fax charges will be relatively constant over the year. Internet services for the o%ces will

be bundled with the telephone package for greater savings. For conservative purposes, these service charges for the two o%ces are

estimated at $3,500 per month or $10,500 per quarter.

22. Travel and Accommodation Travel cost for the executives and account representatives is relatively high due to the nature of the

business. Initially, the main travel will be based in the United States but eventually, consideration will have to be given to extending

travel to include the European countries where the Company has obtained patent protection for its display panel. It is anticipated this

will occur in the last quarter of the year. As the year progresses, traveling in the United States will increase. !erefore, it is anticipated

travel costs will be $10,000 a month for the "rst quarter, increasing by 100% for each of the second and third quarters. In the last

quarter, it is anticipated to travel locally in the United States will amount to $35,000 per month with the added cost each month of

trips to Europe. !e European trips are estimated to add an addition $10,000 per month to the travel costs. !erefore, travel costs by

quarter are calculated as follows:

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First Quarter $ 30,000

Second Quarter 60,000

Third Quarter 90,000

Fourth Quarter 135,000

ese attached schedules are an integral part of

this Projected Statement of Net Income

Supplemental Information

Brand Name versus Generic Stocks

Brand Name Stocks Generic Stocks

Less information risk More information risk

Higher quality of information Lower quality of information

Large sample of consensus estimates Small or no sample of consensus estimates

Monitoring service or fee No monitoring service or fee

Lower return Higher return

Higher price (premium) Lower price (discount)

Lower uncertainty Higher uncertainty

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More consistency Less consistency

Graphs

Supplemental information is provided in. !e "rst graph illustrates the price per share for PPMC common stock for the time period August 20,

2015, through September 27, 2016. !e latter date represents the speci"c event when PPMC "led their 10QSB. !e second graph compares the

PPMC price per share with comparable index measures, such as the Dow Jones Industrial Average, Standard and Poor’s 500, NASDAQ, and Russell

2000 indices, for the same period of time.

e price per share for PPMC common stock, August 20, 2015 through September 27, 2016, when PPMC "led their 10QSB

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Comparison of the PPMC price per share over comparable index measures, such as the Dow Jones Industrial Average, Standard and Poor’s 500, NASDAQ, and Russell

2000 indices, for the same time period

References

Arbel, A. 1985. Generic Stocks: An old product in a new package. e Journal of Portfolio Management 68: 4–13.

Arbel, A., Carvell, S., and Strebel, P. 1983. Gira#es, Institutions and Neglected Firms. Financial Analysts Journal 39: 57–63.

Arbel, A., and Strebel, P. 1982. !e Neglected and Small Firm E#ects. e Financial Review: 201–18.

Arbel, A., and Strebel, P. 1983. Pay attention to neglected "rms! e Journal of Portfolio Management 9: 37–42.

Business Wire. 2003. Purchase Point Media Corp.: Corporate Update (August 20).

Cataldo, A. Information Asymmetry: A Unifying Concept for Financial and Managerial Accounting eories (including illustrative case studies).

Studies in Managerial and Financial Accounting 13, 2003. Oxford, England: Elsevier Science (JAI). Series Editor: Marc Epstein.

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Project Requirements

!e project requires three steps to be presented.

Step 1 – Identify Form and Substance Errors.

Step 2 – Compute the Purchase Point Media (PPMC) break-even points in terms of carts and stores.

Step 3 – Determine the number of grocery stores for various food chains.

In one Word document, provide individual sections for each Step. !is Word document along with the Excel "le (described below for Step 2) will

be uploaded when you click on the Take Exam button on your Student Portal to submit your project (described under the “Submitting Your

Assignment” later in the instructions).

!is Senior Capstone project highlights your knowledge and the skills you have developed over the course of your education. !ere is nothing

“new” to be learned here.

!e knowledge and skills required for this project include English Composition, Financial Accounting, Managerial Accounting, Information

Literacy and the abilities to think critically, do research and to present your work in a professional manner.

If you are unsure or don’t understand something about the project, then go back to your previous subjects to review. For example, if you don’t

remember how to make a proper citation, then revisit your English Composition to see how to make a correct citation. Or, if you don’t remember

how to calculate a break-even point, go back to Managerial Accounting and review the subject matter pertaining to that concept.

Remember, there is nothing “new” here. Everything about this project you should already know how to do.

Substance Versus Form and Critical Thinking

Step 1 In the infamous Enron bankruptcy case, the form of the "nancial statements prepared by the Enron Corporation and WorldCom was very

professional; however, the substance was lacking, leading to audit and market failures and the eventual bankruptcy of both of these big-cap, or

large capitalization "rms. PPMC represents a reverse case, in which the form of the data contained in the PPMC news release and corporate

website was very poor.

To begin, read the PPMC report, focusing on problems with the form of the report. (“Form” means spelling, punctuation, and capitalization are

correct and that the text is grammatically correct. Also, form means that the format of the text as far as font, bold, underlining, indents, and so on

are correct.) Prepare a typed, clearly communicated summary of all errors or weaknesses you "nd in the form of this report. !is should be a

numbered list. !ere are well over 30 form errors in the document. (!e ways to go about doing this for this step is to think of yourself as an English

Composition instructor and a student has turned in a required paper that was written.) Although the PPMC report isn’t well-written, don’t attempt

to rewrite the report. Only present a numbered list of the errors found.

To report the numbered list of form errors for this step, each error should have three components:

1. !e location of the error.

2. What the error is.

3. How the text should have been written correctly.

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Here is an example of how you’ll present the form errors.

Summary of Errors in the Form of the PPMC Report 1. Location:

!e "rst page of Exhibit 1, the last sentence of the "rst paragraph states “You should independently investigate and fully understand

all risk before making investment decisions.”

Error:

!e word risk is singular. It should be plural.

Correction:

It should have been written, “You should independently investigate and fully understand all risks before making investment

decisions.”

Next, reread the PPMC report, focusing on problems with the substance of the report. (“Substance” means the "gures and data that are being

reported and making sure the math is correct.) Identify the obvious errors or problems "rst by focusing on the addition or math errors. Prepare a

typed, clearly communicated summary of all the errors you "nd in the substance of this report. !ese should be presented in a numbered list.

To report the numbered list of substance errors for this step, each error should have three components the same as the presentation of the form

errors:

1. !e location of the error.

2. What the error is.

3. How the text should have been written correctly.

!e heading for the substance errors should be “Summary of Errors in the Substance of the PPMC Report”.

Do not take this step lightly. !e data and "gures found in the report are used to calculate the break-even analysis for Step 2. As presented, the data

is incorrect and therefore, the break-even analysis would be incorrect. !erefore, it is important that you "nd “all” of the substance errors and

correct them as these corrected "gures will be what you use to make the break-even calculations for Step 2.

Step 2 !e PPMC Notes in the document appear to be organized by cost behavior. !is is similar to the approach you used in your Managerial

Accounting course. You should follow this approach or framework as you compute the PPMC breakeven point in terms of carts and stores. Begin

with revenues, follow with variable costs (VCs), develop the contribution margin (CM; in aggregate), followed by "xed costs (FCs), and, "nally,

compute PPMC’s net operating income (NOI) and break-even point in terms of both carts and stores.

At the beginning of the assignment, on the right-hand side under "Optional Study Materials" select the "PPMC Excel Spreadsheet" menu item to

download the required Excel spreadsheet.

Step 2 requires that you calculate the break-even points for both carts and stores. Download this "le and use it to calculate the break-even points.

Reference the Excel spreadsheet for Step 2 in the Word document and include the spreadsheet as a separate "le when submitting the project. !e

spreadsheet for the calculations is too large to include in a table in a Word document or be able to read if an Excel spreadsheet is inserted.

!erefore, there should be two "les submitted for the project – this Word document and the Excel spreadsheet with your work for Step 2.

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!e majority of the work has been done for you when using the spreadsheet. !e setup to be able to calculate the CM, NOI and the break-even

points are part of the spreadsheet. What you need to do to interpret the Notes from the PPMC document, input the data into the spreadsheet (be

sure to use your “corrected substance” "gures/data from Step 1), and do the calculations required to obtain the break-even point for the carts and

the break-even point for the stores. (Hint: Some cells in the spreadsheet have comments inserted. Pay attention to these comments. For example,

there is a comment in a cell that has the formula to be used to calculate the break-even point.)

Step 3 Step 3 requires three items:

1. !e ticker symbol for the store chain.

2. !e number of stores for the store chain.

3. A Works Cited page for the "gures found as the number of stores.

Table 1 should be reproduced as a table in your Word document for Step 3 and the ticker symbol and the number of stores inserted from your own

research.

To "nd the ticker symbol for each of the store chains, it is as easy as opening up Google Chrome as your web browser and typing in the store name

followed by “ticker symbol” into the search box. !e hits form the search should reveal the ticker symbol for that store. Alternatively, you could use

a "nancial website such as Yahoo Finance, E-trade, and so on to do your searching. All of the stores have a ticker symbol with the exception of one

which is a private company.

Using your own research skills and abilities, determine the number of grocery stores for each store chain. How you go about doing this is up to you

and your research skills.

Here is what you are looking for as far as the number of stores is concerned:

You are looking for the most “current” information. However, current doesn’t mean today.

For example, if store A (which has 10 stores) took over store B (which had 3 stores) in a merger, then B is no longer in business. !e

number of stores for A will be 13 as of today because it is still in business. !e number of stores for B will be 3 which is how many it

had before the merger. !at is the most current for B – not zero.

As another example, if a store declares bankruptcy, it all depends upon the bankruptcy status. If the store is in Chapter 11, which is

reorganization then the number of stores will be the current information. If the store is in Chapter 13, which is a closing of the

business, then the number of stores will be zero.

Be aware that the solution to the number of stores in the table is kept current, but that doesn't mean that data will all be “as of today.”

It is possible that the most current information might be 2017 or 2018. It all depends upon your research and what is available. Finding

the correct information is the purpose behind doing research.

One other thing to watch out for in doing your research is a “name change.” If a store changes its name, then list both the old name

and the new name and the current information available for the number of stores.

You should rarely use third-party sites such as Google Finance, InvestSnips, Investopedia, Wikipedia, newspaper articles, and so on as

these don’t have the most current and accurate information. You should use information from the business website, SEC "lings,

Annual Reports, and so on for the most applicable, relevant and current information.

Lastly, this step involves research. “Research” is not doing a quick search and picking a website or two and going with what is found.

Research is looking at quite a few sources and thinking critically about what is found as to relevancy, currency, and accuracy. For

example, one web page may say “about 500” stores, but, another page on the website will say “536 stores” exactly. Or one website

might have information from March 2016 and another might have information from December 2016. Which is more current and

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relevant? !e December 2016 website. Not only do you need to do research, but, you also must think critically about the information

you "nd.

Along with Table 1, a Works Cited page needs to be included for Step 3. !is is Standard English Composition. Work and/or "gures that are not

your own need to be cited as part of a paper.

If no citations are provided or the citations are not properly formatted, this becomes “Plagiarism” which is unacceptable at Penn Foster or in the

workplace.

!ere should be a correctly formatted citation for each "gure for the number of stores for the grocery store chain. !is is standard for

English Composition and should follow APA formatting. If you do not remember how to make a properly formatted APA citation, go to

the Purdue OWL (Online Writing Lab) website by doing the following:

do a search on the Internet for “Purdue OWL” and go to the homepage

in the menu on the left, click on “Research and Citation”

from the drop-down menu click on “APA Style”

then click on “APA Formatting and Style Guide”

"nally, select “Reference List: Electronic Resources

Alternatively, you can telephone and speak to an English Instructor.

!e web address provided for the citation should take the reader directly to the web page where the number of stores can be found.

!e reader should not have to search for your information. Do not provide a generic web address such as the homepage of a website

unless the actual number of stores is on that web page.

Table 1

Stock Ticker No. of Stores Firm Name

KR Kroger

ABS Albertson’s

Safeway

Ahold

SUPERVALU

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Winn-Dixie Stores

Publix Super Markets

Great Atlantic & Pacific

Smart & Final

Ingles Markets

Blue Square-Israel

Pathmark

Ruddick

Whole Foods Market

Weis Markets

Marsh Supermarkets

Nash Finch

Fresh Brands

Wild Oats Markets

Spartan Stores

Eagle Food Centers

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Gristede’s Foods

Village Super Market

Foodarama Supermarkets

Arden Group

Total

Writing Guidelines

Refer to the “Submitting Your Work” section at the end of this book for details on submission requirements for the PPMC Case assignment.

Grading Criteria

Your assignment will be evaluated according to the following criteria:

Content 80 percent

Written Communication 10 percent

Format 10 percent

Criteria Grade

Content 80 pts

Identifies Form and Substance errors as instructed (worth 30 points)

Completes Step 2 – Compute the PPMC break-even point in terms of carts and stores (worth 40 points)

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Completes Step 3 – Determine the number of grocery stores in the United States (worth 10 points)

Written Communication 10 pts

Answers each question in a complete paragraph that includes an introductory sentence, at least four sentences of explanation, and a concluding sentence

Uses correct grammar, spelling, punctuation, and sentence structure

Provides clear organization by using words like first, however, on the other hand, and so on, consequently, since, next, and when

Makes sure the paper contains no typographical errors

Properly formatted citations – (No Works Cited or incorrectly formatted citations will result in a final grade of 1 for the project due to Plagiarism.)

Format 10 pts The paper is double-spaced, typed in font size 12, and contains properly formatted Internet research sources. It includes the student’s

Name and address

Student number, Course title and number, and project number

Total Grade %

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