Suppose Your Wealthy Aunt Minnie Has Asked You to Manage

question 334

Essay

Suppose your wealthy Aunt Minnie has asked you to manage her large stock portfolio. You would
like to buy and/or sell options on many of the stocks she owns. Describe the types of options you
would buy or sell, as well as your rationale, given the following circumstances:
A. Aunt Minnie owns 10,000 shares of IBM common stock. You believe it is going to fall in price, but
she won't let you sell it because her late husband told her never to let it go. How do you protect her
from the impending price decline?
B. Your analysis suggests that the common stock of Jet-Electro is poised to increase in value
sharply over the next year. Aunt Minnie doesn't want to buy any of the stock, but does want you to
use options to profit if the price rises. What do you do?
C. Although Aunt Minnie doesn't want you sell any of the stocks she owns, she would like you to
use options to generate a little extra income. How might you do this?

Examine strategies for managing and motivating staff in the face of technology-induced shirking.

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Definitions:

Variable Costing

An accounting method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in the cost of goods sold, with fixed overhead costs treated as period expenses.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold in a company, including both materials and labor costs.

Absorption Costing Income Statement

An income statement where all manufacturing costs, both variable and fixed, are treated as product costs, with non-manufacturing costs treated as period costs.

Variable and Fixed Costs

Variable costs change based on production levels, while fixed costs remain constant regardless of production volume.