MGMT 497 – ITM CORPORATION TWO YEAR PLAN

IN THE MIDDLE INCORPORATED World 11 Team 1

Final Corporate Report Laura Angel Chial Jung Gisela Mino Carlos Nabor Hien Pham Marlene Sotelo

Dr. Kwong World 11 Team 1 Fall 2013

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MGMT 497 – ITM CORPORATION TWO YEAR PLAN

Table of Contents

SECTION 1 INTRODUCTION ................................................................................................................. 5 SECTION 2 CORPORATE CHARTER ...................................................................................................... 6 SECTION 3 INDUSTRY ANALYSIS AND OBJECTIVES .......................................................................... 8

3.1 Industry Analysis .......................................................................................................................... 8

3.2 Weighting Factors ....................................................................................................................... 14

3.3 Goals and Objectives ................................................................................................................... 17 SECTION 4 STRATEGIES ...................................................................................................................... 22

4.1 Vision Statement ......................................................................................................................... 22

4.2 Mission Statement ....................................................................................................................... 22

4.3 Broad Strategies .......................................................................................................................... 22 SECTION 5 SALES FORECAST ............................................................................................................. 37

5.1 Techniques and Assumptions .................................................................................................... 37

5.2 Company Sales Forecasts ........................................................................................................... 40

5.3 Industry Sales Forecasts ............................................................................................................. 42

5.4 Market Shares .............................................................................................................................. 43

5.5 Regression Analysis .................................................................................................................... 45 SECTION 6 PRODUCTION PLAN ......................................................................................................... 47

6.1 Production Scheduling ................................................................................................................ 47

6.2 Production and Inventory Management ................................................................................... 49

6.3 Production Supply and Distribution Plan .................................................................................. 51

6.4 Estimates of Unit Labor and Unit Material Costs of Production .............................................. 52

6.5 Total Production Costs ............................................................................................................... 53

6.6 Cost of Goods Produced .............................................................................................................. 55

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MGMT 497 – ITM CORPORATION TWO YEAR PLAN SECTION 7 FINANCIAL STATEMENTS ............................................................................................... 56

7.1 Pro forma Assumptions .............................................................................................................. 56

7.2 Accounts Receivable and Accounts Collected ........................................................................... 56

7.3 Plant and Equipment Depreciation ............................................................................................ 57

7.4 Capital Stock ................................................................................................................................ 58

7.5 Actual and Pro forma Financial Statements .............................................................................. 59

7.6 Pro forma analysis .................................................................................................................... 122 Appendix .............................................................................................................................................. 126

Appendix B: Operating Information 1 Report for Years 3 & 4 ....................................................... 131

Appendix C: Operating Information 2 Report for Years 3 & 4 ........................................................ 139

Appendix D: Sales Forecasts for Years 5 & 6 ................................................................................... 147

Appendix E: Decision Set Data for Years 5 to 6 ............................................................................... 155

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MGMT 497 – ITM CORPORATION TWO YEAR PLAN

4

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

SECTION 1

INTRODUCTION

In the Middle Corporation is a global company created by six students from the

California State University Los Angeles to provide quality products by integrating affordable technology with superior customer service. We are a global company with three sales offices in the Merica's and one sales office in our Sereno office. We also have our main production plant in Merica 1 and another production plant our overseas plant in Sereno. Our company goals are to increase and maintain the lead in market share, increase our return on equity every quarter, and to raise our stock price every year. With six different and diverse executive team members, In the Middle Corporation is in a prime situation to be the industry leaders.

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MGMT 497 – ITM CORPORATION TWO YEAR PLAN

SECTION 2

CORPORATE CHARTER

Chial Jung CEO VP Marke]ng Marlene Sotelo

VP Opera]ons Gisela Mino

VP Sales Hien Pham

VP Finance Laura Angel

Controller Carlos Nabor

• As the Chief Executive Officer of In the Middle Corporation, Chial Jung is responsible for the overall well-­‐ being of the organization from the financial condition of the company to the total management of the organization. Chial Jung has a back ground in human resource management. With his extensive background in this industry, Chial Jung has created many different relationships including customers, suppliers, and distributors to help the organization fulfill its goals and strategies.

Gisela Mino, Vice President of Operations Chial Jung, Chief Executive Officer

•

As the Vice President of Operations, Gisela Mino is responsible for the overall growth of In the Middle Corporation by providing support to everyday activities and creating action plans and goals for the company to strive for.

Hien Pham, Vice President of Sales

•

6

MGMT 497 – ITM CORPORATION TWO YEAR PLAN As the Vice President of Sales, Hien Pham is directly responsible for increasing revenue year to year by executing the plans we have in place for sales of our products. He has an extensive background when it comes to increasing revenue with different ideas in place for increasing sales quarter after quarter.

Laura Angel, Vice President of Finance

•

As the Vice President of Finance, Laura Angel is responsible for the financial overview of the organization. Laura Angel uses GAAP and other financial tools to construct and maintain a financial budget for this organization to adhere to. She has a background in Finance.

• Carlos Nabor, Controller

As the controller of ITM, Carlos Nabor takes care of all accounting related activities. He also involves in interpreting and utilizing accounting information to help ITM making timely and profitable decisions. Naturally, he has extensive knowledge and experience in financial accounting, cost accounting, and taxes.

Marlene Sotelo, Vice President of Marketing

•

As Vice President of Marketing, Marlene Sotelo is responsible for the overall image and brand recognition of our corporation through different forms of advertising and image presence. She is in charge for the direction and image of our company and how and where to advertise our company according to where the market share is.

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MGMT 497 – ITM CORPORATION TWO YEAR PLAN

SECTION 3

INDUSTRY ANALYSIS AND OBJECTIVES

3.1

Industry Analysis ITM Corporation will conduct an industry analysis to gauge where our corporation

stands in the current business environment for the last 2 years (years 3 and 4). By using Michael Porter’s Five Forces analysis to measure sales, net income, return on assets, return on equity, and stock price, we can identify the strength and weaknesses of our company compared against competitors and where we stand in the current economic climate. 3.1.1 Sales In order for our company to be successful, we need to have high revenues from the

sales of our products. ITM Corporation, company 1(C1) have been steadily increasing our sales by creating new models and budgeting our money for proper advertisements. From Y3Q1 to Y4Q4, we have increased our sales by more than 50% and have beaten every one of our competitors in total sales. We are well above the company average and want to maintain our lead in total sales. We want in increase by 20 percent over the next years by continuing to offer the newest available model with affordable prices. Table 3.1.1 Sales (Years 3 & 4) with Industry Comparisons(in $000s) C1 C2 C3 C4 C5 Industry Avg. Y3Q1 3247 3295 3180 3160 2765 3129 Y3Q2 4212 4376 3940 3858 2186 3714 Y3Q3 3797 3636 3571 3475 2437 3383 Y3Q4 5120 4852 4976 4310 3147 4481

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MGMT 497 – ITM CORPORATION TWO YEAR PLAN

Y4Q1 Y4Q2 Y4Q3 Y4Q4 Total Company Avg.

4551 5322 5205 6574 38028 4754

4198 5587 4857 5302 36103 4513

4419 4074 4122 3963 32245 4031

3768 3984 3744 5554 31853 3982

3154 2420 2575 3108 21792 2724

4018 4277 4101 4900

Sales Graph 3.1.1 Years 3 & 4 with Industry Comparisons 7000 6000 5000 4000 3000 2000 1000 0 Y3Q1 Y3Q2 Y3Q3 Y3Q4 Y4Q1 Y4Q2 Y4Q3 Y4Q4 C1 C2 C3 C4 C5 Industry Avg.

3.1.2 Net Income The net income is the total profit a company earns after expenses and taxes. Net income

determines if our company is making a profit or losing money. From looking at the figures and the graph below, our company is the highest in net income meaning that we are the most profitable company compared to our competitors. Our net income trends continued to increase every quarter with the exception of Y3Q3 because we had to open our plant to increase production and save money on production. For years 5 and 6, we want to remain the leader in

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MGMT 497 – ITM CORPORATION TWO YEAR PLAN

net income because this means that we are making money and not losing money from the sales of our products.

Table 3.1.2 Net Income (Years 3 & 4) with Industry Comparisons(in $000s) C1 C2 C3 C4 C5 Industry Avg. Y3Q1 183 193 271 244 -­‐141 150 Y3Q2 187 228 340 345 -­‐301 160 Y3Q3 120 185 107 -­‐107 -­‐296 2 Y3Q4 167 -­‐63 346 437 264 230 Y4Q1 254 548 66 24 -­‐140 150 Y4Q2 346 -­‐326 102 81 72 55 Y4Q3 300 575 55 104 266 260 Y4Q4 744 527 -­‐522 -­‐73 448 225 Total 2301 1867 765 1055 172 Company Avg. 288 233 96 132 22

Net Income Graph 3.1.2 Years 3 & 4 with Industry Comparisons 1000 800 600 400 200 0 -­‐200 -­‐400 -­‐600 Y3Q1 Y3Q2 Y3Q3 Y3Q4 Y4Q1 Y4Q2 Y4Q3 Y4Q4 C1 C2 C3 C4 C5 Industry Avg.

3.1.3 Return on Assets

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MGMT 497 – ITM CORPORATION TWO YEAR PLAN

Return on Assets tells us how well the management is doing using our assets to

generate a profit. The ratio is calculated by dividing net income by total assets. As you can see from the graph below, our company has been beating the industry average and never falling below a negative average in every quarter. We have worked on increasing our return on assets by investing in a new plant and new lines and we want to maintain our lead compared to our competitors over the next 2 years.

Table 3.1.3 Return on Assets (Years 3 & 4) with Industry Comparisons(in $000s) C1 C2 C3 C4 C5 Industry Avg. Y3Q1 1.19 1.11 1.75 1.58 -­‐0.96 0.94 Y3Q2 1.11 1.27 2.13 2.16 -­‐2.08 0.92 Y3Q3 0.73 1.03 0.67 -­‐0.67 -­‐2.07 -­‐0.06 Y3Q4 0.91 -­‐0.34 2.04 2.68 1.80 1.42 Y4Q1 1.50 2.91 0.37 0.14 -­‐0.97 0.79 Y4Q2 1.97 -­‐1.77 0.55 0.50 0.51 0.35 Y4Q3 1.61 3.05 0.31 0.63 1.83 1.49 Y4Q4 3.94 2.71 -­‐3.00 -­‐0.37 2.95 1.25 Return on Assets Graph 3.1.3 Years 3 & 4 with Industry Comparisons 5.00 4.00 3.00 2.00 1.00 0.00 -­‐1.00 -­‐2.00 -­‐3.00 -­‐4.00 Y3Q1 Y3Q2 Y3Q3 Y3Q4 Y4Q1 Y4Q2 Y4Q3 Y4Q4 C1 C2 C3 C4 C5 Industry Avg.

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MGMT 497 – ITM CORPORATION TWO YEAR PLAN

3.1.4 Return on Equity Return on equity tells us how a company well is using shareholder’s money to make a

profit. Our company has been relatively stable with our return on equity in the first 4 quarters beginning with Y3Q1 but we have been increasing our return on equity the last 4 quarters beginning in Y4Q1. We are well above the industry average and compared to our competitors, we are the highest in our return on equity. For years 5 and 6, we want to maintain our lead in ROE and we want to issue more dividends to our shareholders. Table 3.1.4 Return on Equity (Years 3 & 4) with Industry Comparisons (%)

Y3Q1 Y3Q2 Y3Q3 Y3Q4 Y4Q1 Y4Q2 Y4Q3 Y4Q4 C1 1.49 1.38 0.88 1.21 1.81 2.43 2.14 5.09 C2 1.57 1.82 1.45 -­‐0.50 4.16 -­‐2.55 4.32 3.86 C3 2.19 2.67 0.83 2.63 0.46 0.66 0.38 -­‐3.76 C4 1.98 2.72 -­‐0.85 3.35 0.18 0.62 0.79 -­‐0.56 C5 -­‐1.18 -­‐2.58 -­‐2.60 2.27 -­‐1.22 0.62 2.25 3.65 Industry Avg. 1.21 1.20 -­‐0.06 1.79 1.08 0.36 1.98 1.66

Return on Equity Graph 3.1.3 Years 3 & 4 with Industry Comparisons (%)

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MGMT 497 – ITM CORPORATION TWO YEAR PLAN

6.00 5.00 4.00 3.00 2.00 1.00 0.00 -­‐1.00 Y3Q1 Y3Q2 Y3Q3 Y3Q4 Y4Q1 Y4Q2 Y4Q3 Y4Q4 -­‐2.00 -­‐3.00 -­‐4.00 -­‐5.00 C1 C2 C3 C4 C5 Industry Avg.

Stock Price

The share price of a company’s stock generally tells how well the company is doing and

how well it is situated in the market compared to its competitors. The higher the price of a single company stock means that it is generating high profit and has a high return on equity for its shareholders to benefit from. With the exception of Y3Q1, our company has been below the industry average. We have worked hard to be at the industry average for Y4Q4 and want to continue growing the price of our stocks. We are determined to be the leaders in stock price by the end of year 6 by continuing to generate high profits so that we can issue more dividends to our shareholders. Table 3.1.5 Stock Price (Years 3 & 4) with Industry Comparisons ($) Y3Q1 Y3Q2 Y3Q3 Y3Q4

C1 0.78 0.66 0.83 0.92

C2 0.78 0.78 0.99 1.08

C3 0.78 0.79 1.00 1.13

C4 0.78 0.79 0.98 1.12

C5 0.76 0.73 0.88 1.00

Industry Avg. 0.77 0.75 0.94 1.05

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MGMT 497 – ITM CORPORATION TWO YEAR PLAN

Y4Q1 Y4Q2 Y4Q3 Y4Q4

0.86 0.93 1.11 1.17

1.03 1.05 1.25 1.29

0.95 0.91 1.02 0.98

1.02 1.08 1.24 1.23

0.90 0.95 1.11 1.16

0.95 0.98 1.14 1.17

Stock Price Graph 3.1.5 Years 3 & 4 with Industry Comparisons ($)

1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 Y3Q1 Y3Q2 Y3Q3 Y3Q4 Y4Q1 Y4Q2 Y4Q3 Y4Q4 C1 C2 C3 C4 C5 Industry Avg.

3.2 Weighting Factors

1 ROA (Return on Assets) 2 ROE (Return on Equity) 3 MS (Market Share) 4 SP (Stock Price) UPC (Unit Production 5 Cost) 6 TNI (Total Net Income)

Criteria

Preliminary

% 3 15% 4 20% 5 3 2 3 25% 15% 10% 15%

Final 3 4 5 3 2 3

% 15% 20% 25% 15% 10% 15% 14

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

In The Middle Corporation decided to focus on three main weighting factors, market

share, return on equity, and return on assets. We decided on these three weighting factors on the basis that if we can succeed on these three criteria’s, we can be a successful company with a winning model. Market share was our primary strength during the initial first 2 quarters with only company 2 ahead of us. We felt as though we can be the leaders in market share and maintain the top position with our philosophy of investing heavily in research and development so that we can introduce the latest and the greatest model available. The second criteria we focused on were return on equity. We feel as though we have used our money from our investors wisely and to make a profit back to our investors. We invested 1700 in Y3Q2 to the building of our new plant in Sereno so that we can lower production cost and increase our net income so that we are profitable enough to be able to pay dividends to our shareholders. The third major criteria we are focusing on are return on assets. Our ratio was above the industry average with the exception of Y3Q4 because of our new plant in Sereno increasing our assets. We are constantly increasing our training budget and increase our savings level to 3 with the new plant in Sereno. With the constant funding for our training and development, we hope that we can increase our savings level from 2 to 3. Company 2 and 5 does pose a threat to us, but we feel positive in increasing our return on assets ratio and maintain our lead from Y5Q1 to Y6Q4.

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MGMT 497 – ITM CORPORATION TWO YEAR PLAN

The other 3 remaining criteria’s, (Total Net Income, Unit Production Cost, and Stock Price), we will put some weight to as well because they are important categories for our company to succeed. Our company has been increasing total net income from Y4Q1 to leading the industry in Y4Q4. This means that we are increasing profits quarter after quarter and we count on being the industry leader in total net income for years 5 and 6 with our toughest competition coming from teams 2 and 5. Table 3.2 Unit Production Cost (Years 3 & 4) with Industry Comparisons ($) Y3Q1 Y3Q2 Y3Q3 Y3Q4 Y4Q1 Y4Q2 Y4Q3 Y4Q4 Graph for Unit Production Cost 3.2 Years 3 & 4 with Industry Comparisons ($) 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 Y3Q1 Y3Q2 Y3Q3 Y3Q4 Y4Q1 Y4Q2 Y4Q3 Y4Q4 C1 C2 C3 C4 C5 Industry Avg.

C1 4.80 5.50 5.15 6.10 5.83 5.69 5.80 5.57

C2 4.80 5.17 4.88 5.11 4.28 3.63 4.12 4.25

C3 4.80 5.02 4.75 5.24 5.65 5.49 5.72 5.82

C4 4.79 4.97 4.86 5.12 5.63 5.55 5.13 5.24

C5 5.67 5.00 4.80 4.26 4.63 4.72 4.37 4.36

Industry Avg. 4.97 5.13 4.89 5.17 5.20 5.02 5.03 5.05

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MGMT 497 – ITM CORPORATION TWO YEAR PLAN

Our unit production cost isn’t a priority for TMI Corporation but we do want to focus on it because the less we can sell our products for, the better it is for our net income (profits) for our company. With our new plant in Sereno, we will be able to increase our savings because we can produce our products cheaper and make more money. The last criteria we will put some emphasis on is stock price. With one of our main focus being ROI, we know that by increasing ROI, our stock prices are going to increase. We need to make sure that we need to constantly increase our net income in order for us to be able to pay dividends to our shareholders and increase out stock price from quarter to quarter. Our stock price has been steadily increasing from Y4Q1 to finally being at the industry average in Y4Q4. Eventually, we want to increase out stock price with our toughest competitor coming from companies 2 and 4 but we believe we can eventually become the leaders in stock price compared to our competitors because we don’t forecast any big expenses from years 5 to 6.

3.3

Goals and Objectives ITM Corporation constantly strives to have the latest and the greatest model. With that

being said, our company’s goals and objectives is to be the industry leader and maintain our lead for the upcoming years 5 and 6. Our goals and objectives are going to take consideration our recent performances according to our financial statements and the ever changing economic climate like the changing exchange rates in Sereno and the increasing inflation costs that we have to account for. As a bold and innovative company, our goals and objectives have a high success value and we believe that we are going to be the industry leader going forward well

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MGMT 497 – ITM CORPORATION TWO YEAR PLAN

past year 6. The table below will list our performance goals and objectives for the upcoming years of 5 & 6.

Goals and Objectives Criteria ROA (Return on Assets) ROE (Return on Equity) MS (Market Share) SP (Stock Price) UPC (Unit Production Cost) TNI (Total Net Income)

Year 5 Year 6 10% 11% 10% 11% 26% 27% $

1.42

$

1.73

$

8.49

$

7.94 $

2331 $

2143

3.3.1 Return on Assets In The Middle Corporation expects to be at 4% by the end of year 6. During years 3 and

4, we have steadily increased our return on assets, especially starting in Y4Q1, we have consistently beaten the industry average and we became the leader in ROA in Y4Q4. In The Middle Corporation expect a positive return on assets of 10% in year 5 due to our steadily improving revenues and savings level increases to 4. By year 6, we expect to be the leader in Return on Assets with a forecast of 11%, more than doubling our ROA in Y4Q4.

§ Ending Year 5, In The Middle Corporation expects ROA to be at 10%, an increase of 6.1% compared from Y4Q4. § Ending Year 6, In The Middle Corporation expects ROA to be at 11%, and increase of 7.1% compared from Y4Q4 and 1% from Y5.

3.3.2 Return on Equity

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MGMT 497 – ITM CORPORATION TWO YEAR PLAN

In The Middle Corporation has consistently beat the industry average when it comes to

Return on Equity with the exception of Y3Q4 and that is because we got a loan to construct 2 new lines in Sereno. Other than that, we have consistently beaten the industry average and became the leader in ROE by Y4Q4. We expect to increase ROE dramatically in years 5 & 6. § Ending Year 5, In The Middle Corporation expects ROE to be at 10%, and increase of 4.91 compared from Y4Q4. § Ending Year 6, In The Middle Corporation expects ROE to be at 11%, and increase of 5.91 compared from Y4Q4 and 1% from Year 5.

3.3.3 Market Share In The Middle Corporation has consistently been in the top 3 when it comes to market

share and becoming the leader in market share in Y4Q4. Our goal be the leader in innovation and always have the latest model out with affordable quality and features makes us a constant and consistent leader when it comes to market share. We believe that we can always be the leader in our industry for market share.

§ Ending Year 5, In The Middle Corporation expects our market share to grow by .05% to a total of 26% compared from Y4Q4. § Ending Year 6, In The Middle Corporation expects our market share to grow by 1% to 27% compared from Y4Q4.

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MGMT 497 – ITM CORPORATION TWO YEAR PLAN

3.3.4 Stock Price In The Middle Corporation hasn’t been near the industry average when it comes to stock

price. We have finally managed to be at the industry average of $1.17 a share in Y4Q4 and we expect our stock prices to increase with no major expenses forecasted for Years 5 and 6. We will continue to focus on ROE to increase our stock prices for the upcoming years 5 and 6. We want to increase our stock price by 5% every quarter starting in Y5Q1. § Ending Year 5, In The Middle Corporation expects our stock price to be at $1.42, an increase of $0.25 compared from Y4Q4. § Ending Year 6, In The Middle Corporation expects our stock price to be at $1.73, an increase of $0.56 compared from Y4Q4.

3.3.5 Unit Production Cost Unit production cost continues to be a challenge for In The Middle Corporation with

plants in Merica 1 and Sereno with the latter posing a challenge for us with the ever increasing cost of the exchange rate which we expect to more than double in Y6Q4 in Sereno. We have never been at the industry average for UPC but we are working on plans to make the UPC below the industry average. We expect our savings level to increase from 2 in Y4Q4 to 3 by year 6, which will decrease the UPC for In The Middle Corporation. § Ending Year 5, In The Middle Corporation expects our unit production cost to be at $8.49 in Merica 1, an increase of $2.92 compared from Y4Q4.

20

MGMT 497 – ITM CORPORATION TWO YEAR PLAN § Ending Year 5, In The Middle Corporation expects our unit production cost to be at stock price to be at $7.94, an increase of $2.37 compared from Y4Q4 but a decrease of $0.55 from year 5.

3.3.6 Total Net Income In The Middle Corporation has been a profitable company as you can see from our

income statement over the last 8 quarters starting in Y3Q1 to Y4Q4. We have always beaten the industry average with the exception of Y3Q4 because we had to open up 2 new lines in Sereno. But other than that hiccup, we have been constantly increasing our net income especially from Y3Q4 to Y4Q4. We plan to maintain our dominance in net income over other competitors and will invest heavily in advertisement and will constantly beat our competitors with newer models. § Ending Year 5, In The Middle Corporation expects our net income to be at $2,331, an increase of $1,587 compared from Y4Q4. § Ending Year 6, In The Middle Corporation expects our net income to be at $2,143, an increase of $1,399 compared from Y4Q4.

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MGMT 497 – ITM CORPORATION TWO YEAR PLAN

SECTION 4

STRATEGIES

4.1

Vision Statement To become the industry leader worldwide by continuously expanding our customer base

and brand recognition.

4.2

Mission Statement We strive to bring quality products to our consumers at competitive prices while

sustaining continuous innovation, and building long lasting relationships with our consumers and business partners. We will maintain an exciting and competitive work environment for all of our employees. In addition, we will adhere to the highest ethical conduct in all business situations.

4.3

Broad Strategies 4.3.1 Marketing Strategies General Inflation Adjustments In The Middle Inc. strategies and planning throughout the expenditures will be adjusted

for the inflation expected every quarter. Table 4.3.1a demonstrates the inflation multiplier for Merica and Sereno per quarter for the next two years.

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MGMT 497 – ITM CORPORATION TWO YEAR PLAN

Table 4.3.1a : General Inflation Adjustment for Costs (Multiplier = 1.000 in Year 3 Quarter 1)

Inflation Multiplier

Y5Q1 Y5Q2 Y5Q3 Y5Q4 Y6Q1 Y6Q2 Y6Q3 Y6Q4 Merica

1.157

1.194

1.215 1.237 1.259

1.281

1.303 1.324 Sereno 1.522 1.467 1.512 1.564 1.612 1.661 1.709 1.758

Sales Force In The Middle Inc. has 12 active sales people in Merica 1, 11 on Merica 2, 10 on Merica

3, and 14 on Sereno. Since one person resigned from Merica 3 I.T.M. Inc. will be hiring one new sales person on Merica 3 on Y5Q2 to maintain the desired number of sales people in each market area. I.T.M. Inc does not plan on having any more sale people resign, therefore there will be no new hiring’s after Y5Q2. Table 4. 3.1b: Sales Force Management

Active Sales People

Merica 1 Merica 2 Merica 3 Sereno Merica 1 Merica 2 Merica 3 Sereno Merica 1 Merica 2 Merica 3 Sereno Merica 1 Merica 2 Merica 3 Sereno Y5Q1 12

11

10

14 0

0

0

0

0

0

0

0

1

0

1

0

Y5Q2 12

11

11

14 0

0

0

0

0

0

0

0

0

0

0

0

Y5Q3 13

11

11

14 0

0

0

0

0

0

0

0

0

0

0

0

Y5Q4 13

11

11

14 0

0

0

0

0

0

0

0

0

0

0

0

Y6Q1 13

11

11

14 0

0

0

0

0

0

0

0

0

0

0

0

Y6Q2 13

11

11

14 0

0

0

0

0

0

0

0

0

0

0

0

Y6Q3 13

11

11

14 0

0

0

0

0

0

0

0

0

0

0

0

Y6Q4 13

11

11

14 0

0

0

0

0

0

0

0

0

0

0

0

Sales People in Training

Sales People Transferred

Sales people Resigned

23

MGMT 497 – ITM CORPORATION TWO YEAR PLAN Sales People Fired Merica 1 Merica 2 Merica 3 Sereno Merica 1 Merica 2 Merica 3 Sereno Merica 1 Merica 2 Merica 3 Sereno 0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

Expenses for Transferring Sales People (in $000s)

Severance Expenses

Salaries and Commission for Sales People Salary: In The Middle Inc. will be maintaining the quarterly salary base at 3000 in Merica 1, Merica 2, and Merica 3, and 8941 in Sereno. Commission: To keep the workers motivated I.T.M. Inc. will raise the commission rate by three percent every quarter. This quarterly increase in commission will keep sale people motivated, keep them competing to increase their quarterly sales, and will also keep sales people from resigning.

Table 4.3.1c: Salaries and Commission for sales people

Quarterly Base Salary Merica 1 Merica 2 Merica 3 Sereno Merica 1 Merica 2 Merica 3 Sereno Y5Q1 3000

3000 3000

8941 .22

.22

.22

.64 Y5Q2 3000

3000 3000

8941 .23

.23

.23

.66 Y5Q3 3000

3000 3000

8941 .24

.24

.24

.68 Y5Q4 3000

3000 3000

8941 .25

.25

.25

.70 Y6Q1 3000

3000 3000

8941 .25

.25

.25

.72 Y6Q2 3000

3000 3000

8941 .26

.26

.26

.74 Y6Q3 3000

3000 3000

8941 .26

.26

.26

.76 Y6Q4 3000

3000 3000

8941 .27

.27

.27

.79

Commission Rate (in units)

24

MGMT 497 – ITM CORPORATION TWO YEAR PLAN Salaries Expense

(in $000s) Merica 1 Merica 2 Merica 3 Sereno 37

35

32

138

41

38

40

36

34

32

159 139 23

49

37

221 52

49

45

196

42

40

32

158 47

44

35

178

43

41

34

165 59

55

46

224

Commission Merica 1 Expeneses

Merica 2 (in $000s) Merica 3 Sereno

22

23

32

37

25

26

81 239

24

25

26

67

54

61

51

37

40

299 243 277

26

27

56

76

39

53

255 345

Advertising In The Middle Inc. will maintain an increase in advertising every quarter to keep

high

sales. Every quarter there will be an increase of three percent in all market areas to ensure high sales. The increase will be of six percent on the quarters new models are introduced, which will be on the fourth quarter of every year to take advantage of the high seasonal sales.

Table 4.3.1d : Advertising Expenditure by Market Area

Y5Q1 Y5Q2 Y5Q3 64

53

53

170 Y5Q4 67

56

56

180 Y6Q1 69

58

58

185 Y6Q2 72

60

60

191 Y6Q3 74

61

61

197 Y6Q4 78

65

65

208

Advertising Merica 1 Expense

Merica 2 (in $000s) Merica 3 Sereno

60

62

50

52

50

52

160 165

General and Other Expenses

As the table below would suggest, general and other expenses will fluctuate in

accordance with the high and low selling seasons. Nevertheless, the trend suggests a year to year increase in general and other expenses.

25

MGMT 497 – ITM CORPORATION TWO YEAR PLAN Table 4.3.1e: General and Other Selling Expenses by Market Area

General Selling Merica 1 Expenses

Merica 2 (in $000s) Merica 3 Sereno Sales Office Merica 1 Y5Q1 Y5Q2 Y5Q3 Y5Q4 Y6Q1 Y6Q2 Y6Q3 Y6Q4

130

146

133

183

134

152

136

187

113

121

114

159

103 1202 1074 1489

147

165

152

170

115

124

1202 1366

154

207

158

212

121

165

1261 1709

3

3

3

3

3

3

3

3

3

3

19 3

3

19 3

3

19 3

3

19 3

3

19 3

3

19 3

3

19 3

3

19

Depretition

Merica 2 (in $000s) Merica 3 Sereno

Product Pricing Plan and Projected Sales In the Middle Inc. product pricing strategy has been to increase the price every time a

new model is introduced. I.T.M. Inc. has been increasing prices above the industry average due to the products higher quality level. The price increase is just on the introduction of a new model, the remaining quarters the price remained constant.

The price will be increased by three percent on the introduction of a new model. The

increase in price will take place at end of each year on quarter four. The price increase will be to cover the higher production price that comes when we introduce a new model. Based on the strategy I.T.M. Inc. never lowered the price and managed to maintain high sales and market share.

26

MGMT 497 – ITM CORPORATION TWO YEAR PLAN Table 4.3.1f : Product Pricing and Projected Unit Sales by Market Area

Product Prices

Merica 1 (in $) Merica 2 Merica 3 Sereno Sales to Customers

Merica 1

(in 000s Units) Merica 2 Merica 3 Sereno Y5Q1 Y5Q2 Y5Q3 Y5Q4 Y6Q1 Y6Q2 10.99

10.99

10.99

86 176

185

121

161 Y6Q3 10.99

10.99

10.99

86 163

171

118

148 Y6Q4 11.32

11.32

11.32

89 214

223

156

194

10.69

10.69

10.69

10.99

10.99

10.69

10.69

10.69

10.99

10.99

10.69

10.69

10.69

109.9

10.99

83 83 83 86 86 140

147

111

125 158

167

119

144 147

154

116

133 193

202

154

174 156

165

112

141

4.3.2 Operational Strategies

Research and Development

In The Middle Inc. goal to be an innovator will continue through the coming years. I.T.M.

Inc. will continue to be the first in the market with the newest model, therefore the amount invested in R&D will be increased from $75,000 to $100,000. I.T.M. Inc. will have a constant investment in R&D in the future years always being first in new model introduction. Table 4.3.2a : Planned R&D Spending Home Plant in Merica 1 Y5Q1 Y5Q2 100 Y5Q3 100 Y5Q4 100 Y6Q1 100 Y6Q2 100 Y6Q3 100 Y6Q4 100

R&D Expenses

75 (in $000s)

New Product Production

Based on our quarterly investment in R&D I.T.M. Inc. will have model 5 available by year

five quarter 4. I.T.M Inc. will continue to use model 4 for Y5Q1 through Y5Q3 and have the new

27

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

model ready for introduction by Y5Q4. Model 6 will be ready to introduce by Y6Q4. As with the current model, model 5, and model 6 will continue with the same quality and features level remaining at quality level 3 and feature level 2.

Table 4.3.2b : New Product Production Schedule

Y5Q1 Y5Q2 Y5Q3 Y5Q4 Y6Q1 Y6Q2 Y6Q3 Y6Q4

New Model Developed & 4 4 4 5 5 5 5 6 Produced Merica 1 Quality Level

3

3

3

3

3

3

3

3

Feature Level 2 2 2 2 2 2 2 2 Merica 2 Merica 3 Sereno Quality Level

3

3

3

3

3

3

3

3

Feature Level 2 2 2 2 2 2 2 2 Quality Level

3

3

3

3

3

3

3

3

Feature Level 2 2 2 2 2 2 2 2 Quality Level

3

3

3

3

3

3

3

3

Feature Level 2 2 2 2 2 2 2 2

Employee Training

In The Midde Inc. will continue using the same strategy keeping the ongoing training for

the existing employees constant at $72,00. This will be beneficial for I.T.M. Inc. as it will help keep increasing efficiency in production as well as increasing the cost savings level.

Table 4.3.2c : Planning Expenditures on Training New & Existing Employees

For New Salespeople Merica 1 Merica 2 Merica 3 Sereno Merica 1

Sereno

Merica 1 Y5Q1 0

0

0

0 Y5Q2 0

0

0

0 Y5Q3 0

0

0

0 Y5Q4 0

0

0

0 Y6Q1 0

0

0

0 0

0

72 Y6Q2 0

0

0

0 0

0

72 Y6Q3 0

0

0

0 Y6Q4 0

0

0

0

For New Production Workers Ongoing Training for Existing Employees

0

0 0 0

72 72

0

0

0 0

72

72

0

0

0 0

72

72

28

MGMT 497 – ITM CORPORATION TWO YEAR PLAN Total Training Merica 1 Expenses

Merica 2 (in $000s) Merica 3 Sereno Cost savings Level Expected 72

0

0

0 2 72

0

0

0 3 72

0

0

0 3 72

0

0

0 2 72

0

0

0 2 72

0

0

0 3 72

0

0

0 3 72

0

0

0 2

Sales Office and Plants

In The Middle Inc. has the home plant in Merica 1 and a plant in Sereno. I.T.M. Inc. has

a sales office area in each of the four market areas. Those sales offices are projected to remain open for the coming years. Since I.T.M. Inc. has a plant in Merica 1, their home area, and a plant in Sereno it has no future plants of expanding or closing any sales offices or plants whithin the next few years. Due to having the home plant in Merica 1 and a plant in Sereno it expects to pay higher executive compensations in Merica 1 and Sereno. Table 4.3.2d : Executive and Administrative Personnel Cost for Operating Plant & Sales Offices

Number of Plants Merica 1 Merica 2 Merica 3 Sereno Merica 1 Merica 2 Merica 3 Sereno Merica 1 Merica 2 Merica 3 Sereno Y5Q1 Y5Q2 Y5Q3 Y5Q4 Y6Q1 Y6Q2 Y6Q3 Y6Q4

1

1

1

1

1

1

1

1

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

1 1 1 1 1 1 1 1 1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1 1 1 1 1 1 1 1 84

31

26

654 94

35

28

753 84

31

26

672 117

43

36

932 94

35

26

753 106

39

28

855 98

133

36

49

28

38

790 1070

Number of sale Offices

Executive Conpensation

(in $000s)

29

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

Production Line Operation

In The Middle Inc. have six active lines in Merica 1, four active lines and two idled lines

in Sereno in Y5Q1. As of Y5Q2 I.T.M. Inc. plans on having all six lines in Merica 1 and all six lines in Sereno active to meet the scheduled production. Each of the lines will be running at 40 hours in the upcoming years with the exception of Y6Q4 where the home area plant will most likely be running the six lines with a few hours of overtime which will be used to meet the demand of the higher seasonal sales in that quarter. I.T.M. Inc. has no active second shift lines and does not plan on adding, idling, deactivating, or activating any lines in the upcoming years. Since there will be no future plans to expand, I.T.M. Inc. does not expect any equipment expenses.

Table 4.3.2e: Production Line Operations and Related Expenses

Y5Q1 Y5Q2 Y5Q3 Y5Q4 6

6

40

40 Y6Q1 Y6Q2 6

6

40

40 Y6Q3 Y6Q4 6

6

40

40

Active 1st Merica 1

6 6

6

Shift Lines

Sereno

4

6

6

Hours Per Line Merica 1

40

40

40

Sereno 40 40 40

6

6

40

40

6

6

40

40

Active 2nd Merica 1

0

0

0

0

0

0

0

0

Shift Lines

Sereno

0

0

0

0

0

0

0

0

Hours Per Line Merica 1

0

0

0

0

0

0

0

0

Sereno 0 0 0 0 0 0 0 0 New 1st Shift Line

New 2nd Shift Line Merica 1

0

0

0

0

0

0

0

0

Sereno

0

0

0

0

0

0

0

0

Merica 1

0

0

0

0

0

0

0

0

Sereno 0 0 0 0 0 0 0 0

Line

Deactivation

Merica 1

0

0

0

0

0

0

0

0

(1st & 2nd Sereno 0 0 0 0 0 0 0 0 Shift) Line Merica 1

0

0

0

0

0

0

0

0

Reactivation

Sereno 0 0 0 0 0 0 0 0 (1st & 2nd Shift)

30

MGMT 497 – ITM CORPORATION TWO YEAR PLAN Lines Idle on Merica 1

0

0

0

0

0

0

0

0

Standby

Sereno 2 0 0 0 0 0 0 0 (1st & 2nd Shift)

Units of Merica 1

312

312

312

312

312

312

312

374

Production

Sereno 208 312 312 312 312 312 312 312 (in 000s) Equipment Expense

(in $000s) Temporary Idle Cost

(in $000s) Line Deactivation Costs (in $000s) Line Reactivation Costs (in $000s) Production Expenses (in $000s) Merica 1

0

0

0

0

0

0

0

0

Sereno 0 0 0 0 0 0 0 0 Merica 1

0

0

0

0

0

0

0

0

Sereno 950 0 0 0 0 0 0 0 Merica 1

0

0

0

0

0

0

0

0

Sereno 0 0 0 0 0 0 0 0

Merica 1

0

0

0

0

0

0

0

0

Sereno 0 0 0 0 0 0 0 0

Merica 1

1922

Sereno 8014

2169

9234

1835

9030

2649

2113

2351

11786 9612 11069

2206

10097

2971

13729

Inventory Control and Storage

In The Middle Inc. will continue to monitor production to make sure they always have

an appropriate number of inventory to avoid a stock-­‐out. This will guarantee that our sales will be met every quarter in each of the four market areas. The amount of inventory kept in each market area every quarter is outlined in Table 4.3.2f.

31

MGMT 497 – ITM CORPORATION TWO YEAR PLAN Table 4.3.2f : Inventory Control & Storage Costs

Beginning Inventory

(in 000s units) Y5Q1 Y5Q2 Y5Q3 Y5Q4 Y6Q1 Y6Q2 Y6Q3 Y6Q4

Merica 1

45

38

60

142

52

89

54

87

Merica 2

43

43

48

45

30

48

54

50

Merica 3

39

47

50

49

51

50

42 47

Sereno 43 39 45 41 54 44 50 46 Storage 3

4

3

5

Merica 1

3

3

3

4

Expense

Merica 2

8

9

10

12

10

12

11

14

(in $000s) 6

6

8

9

7

8

7

10

Merica 3

28 32 31 41 34 39 35 48 Sereno

Product Shipping Plan

In The Middle In. plans on having both the home plant and Sereno plant ship to the

other two market areas. This will possibly have both plants, in our home area Merica 1, and Sereno producing at its full capacity. Table 4.3.2g shows the amount of units that Merica 1 home plant and Sereno plant will be shipping to each market area.

The units shipped to customers are outlined in Table 4.3.2h along with the cost

associated with product units shipped to customers. The total transportation is shown in Table 4.3.2i. Table 4.3.2g : Product Units Shipped to Sales Office

Y5Q1 Y5Q2 Y5Q3 Y5Q4 Y6Q1 Y6Q2 Y6Q3 Y6Q4

From Home Merica 1

133

180

229

103

193

141

196

185

Plant

Merica 2

60

10

0

62

2

46

0

30

(in 000s Merica 3

119

122

83

146

117

125

116

97

units) Sereno 0

0 0 0 0 0 0 0 From Merica 1

0

0

0

0

0

0

0

0

Overseas Merica 2

87

162

151

125

181

145

167

104

Plant

Merica 3

0

0

32

0

0

0

1

0

(in 000s Sereno 121

150

129

187

131

167

144

208

units)

32

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

Shipping Merica 1

0

Expenses

Merica 2

133

(in $000s) Merica 3

83

Sereno 0

0

181

87

0

0

0

165

185

96

108

0 0

0

207

88

0

0

231

96

0

0

196

92

0

0

148

77

0

Table 4.3.2h : Product Units Shipped to Customers

Sales to Customers

(in 000s units)

Y5Q1 Y5Q2 Merica 1

140

158

Merica 2

147

167

Merica 3

111

119

Sereno 125 144

Shipping Merica 1

16

19

Expenses

Merica 2

17

20

(in $000s) Merica 3

13

14

Sereno 18 21

Y5Q3 147

154

116

133 18

19

14

19

Y5Q4 193

202

154

174 24

25

19

15

Y6Q1 156

165

112

141 21

21

14

12

Y6Q2 176

185

121

161 23

24

16

13

Y6Q3 163

171

118

148 21

22

15

11

Y6Q4 214

184

147

194 28

24

19

13

Table 4. 3.2i: Total Transportation Cost

Total Shipping Costs

(in $000s) Merica 1

Merica 2

Merica 3

Sereno Y5Q1 16

172

107

104 Y5Q2 18

195

114

120 Y5Q3 17

180

108

111 Y5Q4 23

243

150

151 Y6Q1 18

198

109

122 Y6Q2 21

222

117

139 Y6Q3 19

205

115

128 Y6Q4 26

276

156

174

4.3.3 Finance Strategies

Bank Loans and Estimated Interest Expenses

In The Middle Inc. does not plan on having any loans on the upcoming years. Loans were

used in year three and four to finance the construction of a new plan in Sereno and its expansion but since I.T.M. Inc. does not expect any major expenses there are no planned loans for the upcoming years. This is depicted in Table 4.3.3a.

33

MGMT 497 – ITM CORPORATION TWO YEAR PLAN Table 4.3.3a: Bank Loans Needed (in $000s)

Bank Loan Outstanding (Quarter-­‐Start) 6New Bank Loan in the Current Quarter Loan Interest Expense Bank Loan Repaid Y5Q1 0 0 0 0 Y5Q2 0 7.60 0 0 0 Y5Q3 0 7.60 0 0 0 Y5Q4 0 7.60 0 0 0 Y6Q1 0 7.60 0 0 0 Y6Q2 0 7.60 0 0 0 Y6Q3 0 7.60 0 0 0 Y6Q4 0 7.60 0 0 0

Current-­‐Quarter Loan Rate (Annual %)

7.60

Investment in Certificates of Deposits and Estimated Interest Expenses Plan

In The Middle Inc. has no plans to invest in CDs. I.T.M. Inc. will continue with its plan to

use the money at hand to buy back bonds and stock.

Table 4.3.3b: Investment in Certificate of Deposits (in $000s)

CD Matured CD Purchase CD Rate (Annual %) CD Interest Income Y5Q1 0 0 5.03 0 Y5Q2 0 0 5.03 0 Y5Q3 0 0 5.03 0 Y5Q4 0 0 5.03 0 Y6Q1 0 0 5.03 0 Y6Q2 0 0 5.03 0 Y6Q3 0 0 5.03 0 Y6Q4 0 0 5.03 0

Bond Sales and Repurchases and Estimated Total Receipts or Expenses Plan

In The Middle Inc. plan for redeeming bonds will be to redeem a certain amount of

bonds Y5Q2, Y6Q2, and Y6Q4. I. T. M. Inc. will be able to redeem the bonds using cash on hand. The amount to be redeemed every quarter is illustrated in Table 4.3.3c below.

Table 4.3.3c: Sales or Redemption of Bonds (in $000s)

Bonds Outstanding at Quarter-­‐Start Bonds Sold (+) or Repurchased (-­‐) Rate on Bonds Issued or Redeemed (%)

Y5Q1 1500 0 0

Y5Q2 Y5Q3 Y5Q4 Y6Q1 1500 -­‐500 33% 1000 0 0 1000 0 0 1000 0 0

Y6Q2

1000

-­‐200 25%

Y6Q3 Y6Q4 800 0 0 800 -­‐200 33%

34

MGMT 497 – ITM CORPORATION TWO YEAR PLAN Bonds Outstanding at Quarter-­‐End Expenditure on Bond Repayment Call Premium on Bond Repayment 1500 0 0 1000 0 0 1000 0 0 1000 0 0 1000 0 0 800 0 0 800 0 0 600 0 0

Receipt from Bond Sale Bond Interest Payment

0 38

0 25

0 25

0 20

0 20

0 15

0 15

0 10

Stock Sales or Buybacks and Estimated Total Receipts or Expenses Plan

In The Middle Inc. issued stock in year 3 and 4 to finance the construction of the plant in

Sereno. I.T.M. Inc plans to repurchase the stock it issued to finance the construction of the Sereno plant and maintain only the amount of stock it started with in Y3Q1. The amount of stock repurchased per quarter is depicted in Table 4.3.3d. Since stock will be repurchased the price per share is expected to increase every quarter. The repurchase of the stock will also have an expected increase in ROI.

Table 4.3.3d: Sales or Redemption of Stock (in $000s)

Stock Outstanding at Quarter-­‐Start Shares Issued (+) or Repurchased (-­‐) $ Price per Share Issued or Bought Shares Outstanding at Quarter-­‐End Receipt from Stock Sale Expenditure on Stock Buyback ($000s) Y5Q1 7100 0 0 7100 0 0 Y5Q2 7100 1.29 -­‐400 1.42 6700 0 567.6 Y5Q3 6700 1.35 0 0 6700 0 0 Y5Q4 6700 1.42 0 0 6700 0 0 Y6Q1 6700 1.49 -­‐200 1.64 6500 0 327.8 Y6Q2 6500 1.57 0 0 6500 0 0 Y6Q3 6500 1.65 -­‐200 1.82 6300 0 363 Y6Q4 6300 1.73 0 0 6300 0 0

$ Market Price per Share at Quarter-­‐Start

1.23

Dividend Plan for Shareholders

In The Middle Inc. did not pay any dividends in year 3 and 4. It plans on remaining

constant not paying any dividends in the upcoming years.

35

MGMT 497 – ITM CORPORATION TWO YEAR PLAN Table 4.3.3e: Cash Dividends to Shareholders

Dividend per Share ($) Dividend Paid to Shareholders

(in $000s)

Y5Q1 0 0

Y5Q2 Y5Q3 Y5Q4 Y6Q1 Y6Q2 Y6Q3 Y6Q4 0 0 0 0 0 0 0 0 0 0 0 0 0 0

36

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

SECTION 5

SALES FORECAST

ITM forecasts its sales as well as industry sales every quarter using various regression models, taking into consideration historical data, real GDP, and average price. Although this is done every quarter and adjustments are made as needed, the two year plan will present the next eight quarters. The sales forecast is primarily used for accurate and efficient production. However, it is also very useful in helping with forecasting future revenue and expenses. It is understood that the two year forecasting number is relative and that changes will be made in each quarter to reflect the latest information available. It is nevertheless presents a big picture for the two years to come.

5.1

Techniques and Assumptions

In attempting to forecast future sales with limited information, there are certain

assumptions that we make. They are as followed: One assumption that we make is the sharp increase in exchange rate between Merica

and Sereno. We have seen a steady climb since end of year of 3 up to this point, and it is reasonable to assume that this trend will continue. We forecast a steady increase in exchange rates through the four quarters of year 5, having 6.46, 6.50, 6.79, and 11.83 sequentially. Using the linear trend line with the simple linear data set of quarters and exchange rates, we attempt to predict the subsequent four quarters (year 6), which gives us 12.00, 13.50, 15.10, and 16.90 sequentially.

37

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

Table 5.1a: Exchange Rates Forecast

Exchange Rates 18 16 14 12 10 8 6 4 2 0 0 1 2 3 4 5 6 7 8 9 Exchange Rate Linear (Exchange Rate) 6.46 6.5 6.79 11.83

Y5Q1 6.46 Y5Q2 6.50 Y5Q3 6.79 Y5Q4 11.83

Another assumption that we make is the consistent increase in GDP in both Merica and Sereno. According to our reports, the next four quarter (year 5) will likely see an increase in GDP to 104.98, 105.12, 108.57, and 110.65 in Merica. Sereno will have a GDP of 132.77 by the end of year 5. The increasing trend indicates potential for growth in sales during the next four quarter and it is likely that this trend will carry over to year 6 as well. We use another linear trend line to demonstrate this.

38

Y6Q1 12.00

Y6Q2 13.50

Y6Q3 15.10

Y6Q4 16.90

MGMT 497 – ITM CORPORATION TWO YEAR PLAN Table 5.1b: MERICA GDP FORECAST

GDP Merica 118 116 114 112 110 108 106 104 102 100 98 0 2 4 6 GDP 8 Linear (GDP) 10 12 14

Y5Q1 Y5Q2 Y5Q3 Y5Q4 104.98 105.12 108.57 110.65

Table 5.1c: SERENO GDP FORECAST

Y6Q1 111

Y6Q2 112.8

Y6Q3 113.1

Y6Q4 115.8

GDP Sereno 160 140 120 100 80 60 40 20 0 0 2 4 6 GDP 8 Linear (GDP) 10 12 14

Y5Q1 126.3

39

Y5Q2 Y5Q3 Y5Q4 132.38 130.57 132.77

Y6Q1 135

Y6Q2 138

Y6Q3 140

Y6Q4 142

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

One last assumption is that we make is the upward moving trend of CPI in both Merica

and Sereno. Merica will likely see a modest increase from 115.7 at the end of year 4 to 134.6 by the end of year 6. Sereno will likely see a larger gap, with projected CPI of 180.6 by the end of year 6, up from 152.2 at the end of year 4. We will need to take into account and keep up with increasing rate of inflation in estimating our expenses, particularly the production cost.

5.2

Company Sales Forecasts An upward moving trend in GPD as forecasted above suggests a related increase in sales

during the next 2 years. Not all quarter will see sales increase, however, as seasonal factor is one that we should look at. Quarter 2 and 4 of each year will see higher sales figures than quarter 1 and 3, with a sharp increase in quarter 4 likely due to year-­‐end holiday season. Therefore, production will run the highest for quarter 2 and 4 and might slow down in quarter 1 and 3 of each year. Nevertheless, the sales in unit in each quarter is expected to increase compared to the same quarter last year. Sereno will have a larger year to year increase in unit sales, in consistent with the larger increase in GDP mentioned above. Market area M3 will see lower sales figured compared to M1 and M2. This is likely due to the fact that we had stocked out at M3 twice in the past year, incidentally the only market area that we ever stocked out on. The sales forecast in thousands of unit is below.

40

MGMT 497 – ITM CORPORATION TWO YEAR PLAN Table 5.2a: COMPANY SALES FORECASTS IN UNITS (000s)

Forecasted Quarter Y5 Q1 Y5 Q2 Y5 Q3 Y5 Q4 Subtotal Y6 Q1 Y6 Q2 Y6 Q3 Y6 Q4 Subtotal

M1 140 158 147 193 638 156 176 163 214 709

M2 147 167 154 202 670 165 185 171 223 744

M3 111 119 116 154 500 112 121 118 156 507

M4 125 144 133 174 576 141 161 148 194 644

Total 523 588 550 723 2384 574 643 600 787 2604

Looking at the forecasted revenue for the next 2 years in table 5.2b below, we see a

consolidated amount of $25,827,720 for year 5 and $25,636,790 for year 6. There is a slight drop in revenue, partly due the sudden drop in revenue in Sereno in year 6 quarter 3. We cannot figure it out at the moment. However, as we move closer to that point in time, more updated data will give us a better picture. The highest sales revenue comes from, perhaps a little surprisingly, market area M2 and not our home area M1. Market area M2 will accounts for nearly 28% of revenue in year 5 and more than 32% in year 6. Market area M3 will see the lowest revenue, accounts for about 21% of revenue in year 5 and a slightly better 22% in year 6. The two stock outs have contributed negatively to sales in market area M3. Table 5.2b: COMPANY SALES FORECASTS IN REVENUE (000s)

Forecasted Quarter Y5 Q1 Y5 Q2 Y5 Q3 Y5 Q4 Subtotal

M1 1496.60 1689.02 1571.43 2121.07 6878.12

M2 1571.43 1785.23 1646.26 2219.98 7222.90

M3 1186.59 1272.11 1240.04 1692.46 5391.20

M4 1606.04 1838.77 1625.77 1264.92 6335.50

Total 5860.66 6585.13 6083.50 7298.43 25827.72

Exchange Rate 6.46 6.5 6.79 11.83

41

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

Y6 Q1 Y6 Q2 Y6 Q3 Y6 Q4 Subtotal 5.3

1714.44 1934.24 1791.37 2422.48 7862.53

1813.35 2033.15 1879.29 2524.36 8250.15

1230.88 1010.50 5769.17 1329.79 1025.63 6322.81 1296.82 842.91 5810.39 1765.92 1021.66 7734.42 5623.41 3900.70 25636.79

12 13.5 15.1 16.9

Industry Sales Forecasts The industry sales forecast in unit is listed below. The numbers seem to change in

consistent with the changes in GDP for Merica and Sereno. The seasonal factor is also very relevant for the whole industry, with stronger sales in quarter 2 and 4 and slower in quarter 1 and 3. Market area M1 and M2 have higher sales units and are quite close in total. Industry sales is weakest in Sereno, which is incidentally where we have the strongest market share in. Market share will be discussed further in the next section. Table 5.3a: INDUSTRY SALES FORECASTS IN UNITS (000s)

Forecasted Quarter Y5 Q1 Y5 Q2 Y5 Q3 Y5 Q4 Subtotal Y6 Q1 Y6 Q2 Y6 Q3 Y6 Q4 Subtotal

M1 557 629 586 770 2542 624 702 652 854 2832

M2 550 622 576 754 2502 614 691 638 833 2776

M3 476 514 501 663 2154 481 519 507 672 2179

M4 376 432 398 523 1729 424 485 445 584 1938

Total 1959 2197 2061 2710 8927 2143 2397 2242 2943 9725

Same quarter sales revenue for the industry will increase from year 5 to year 6 in market areas M1, M3, and M3. However, there is a significant decrease in revenue in

42

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

Sereno in year 6 compared to year 5, down to $11,434,760 from $18,436,680 in year 5. This is due to an increasingly unfavorable exchange rate, which is expected to make a sharp climb starting in quarter 4 of year 5. This will pose a problem because we have a plant in Sereno and it is where most of our net income came from in the last 3 quarters.

Table 5.3b: INDUSTRY SALES FORECASTS IN REVENUE (000s)

Forecasted Quarter Y5 Q1 Y5 Q2 Y5 Q3 Y5 Q4 Subtotal Y6 Q1 Y6 Q2 Y6 Q3 Y6 Q4 Subtotal

M1 5753.19 6545.60 6143.86 8133.54 26576.19 6640.77 7526.90 7043.23 9294.52 30505.41

M2 5680.89 6472.75 6039.02 7964.53 26157.19 6534.35 7408.96 6891.99 9065.96 29901.26

M3

M4

Total

4935.73 4658.82 21028.64 5369.74 5372.95 23761.03 5273.18 4786.04 22242.10 7030.62 3645.87 26774.56 22609.27 18463.68 93806.33 5138.90 2943.00 21257.02 5586.47 3022.29 23544.61 5498.23 2503.99 21937.43 7342.26 2965.49 28668.23 23565.86 11434.76 95407.29

Exchange Rate 6.46 6.5 6.79 11.83

12 13.5 15.1 16.9

5.4

Market Shares Leading through innovation, ITM aims to be the market leader of the industry. Already

the leader in market share by a narrow margin in the end of year 4, we will strive to stay on top while maintaining our profit. Through innovation and quality, we want to prove that price is not the only thing that gets the consumers to buy a company’s products. Our market share in revenue and volume are quite close to each other, as the tables below suggest. We predict that our market share in Sereno will be the most significant with over 33% throughout year 5 and 6.

43

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

M3 is where our market share will be at the weakest with just a little over 23%. Should our market share drop below the forecasted level in any quarter, we will make the necessary changes to bring it back to the desired level.

Table 5.4a: MARKET SHARES AS % OF INDUSTRY BY VOLUMN

Forecasted Quarter Y5 Q1 Y5 Q2 Y5 Q3 Y5 Q4 Annual Average Y6 Q1 Y6 Q2 Y6 Q3 Y6 Q4 Annual Average

M1 25.13% 25.12% 25.09% 25.06% 25.10% 25.00% 25.07% 25.00% 25.06% 25.04%

M2 26.73% 26.85% 26.74% 26.79% 26.78% 26.87% 26.77% 26.80% 26.77% 26.80%

M3 23.32% 23.15% 23.15% 23.23% 23.21% 23.28% 23.31% 23.27% 23.21% 23.27%

M4 33.24% 33.33% 33.42% 33.27% 33.31% 33.25% 33.20% 33.26% 33.22% 33.23%

Quarter Average 26.70% 26.76% 26.69% 26.68% 26.71% 26.78% 26.83% 26.76% 26.74% 26.78%

Table 5.4b: MARKET SHARE AS % OF INDUSTRY BY REVENUE

Forecasted Quarter Y5 Q1 Y5 Q2 Y5 Q3 Y5 Q4 Annual Average Y6 Q1 Y6 Q2 Y6 Q3 Y6 Q4 Annual Average

M1 26.01% 25.80% 25.58% 26.08% 25.88% 25.82% 25.70% 25.43% 26.06% 25.77%

M2 27.66% 27.58% 27.26% 27.87% 27.61% 27.75% 27.44% 27.27% 27.84% 27.59%

M3 24.04% 23.69% 23.52% 24.07% 23.85% 23.95% 23.80% 23.59% 24.05% 23.86%

M4 34.47% 34.22% 33.97% 34.69% 34.31% 34.34% 33.94% 33.66% 34.45% 34.11%

Quarter Average 27.87% 27.71% 27.35% 27.26% 27.53% 27.14% 26.85% 26.49% 26.98% 26.87%

44

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

5.5

Regression Analysis When forecasting sales in various market areas, we use various different regression

models. There are three variables to take into consideration, though not necessary all at the same time, which are time, real GDP, and average price. The four models are as followed: Model #1: SA Sales = β0 + β1 × Real GDP + β2 × Avg. Price Model #2: SA Sales = β0 + β1 × Time Model #3: SA Sales = β0 + β1 × Time + β2 × Real GDP Model #4: SA Sales = β0 + β1 × Time + β2 × Real GDP + β3 × Avg. Price During year 3, we tried to use different models for each market area each quarter. However, eventually it appears that there is one model that is the best suited for a particular market area’s set of data. Beginning year 4 quarter 2, we have used a consistent model for each market area. It just so happened that we take advantage of all four models, each used for a different market area. In M1, we used mode #3 (time and real GDP) to run our regression analysis. This model

gave us the highest R square out of the four. In M2, we used model #2 (time only) because the other three would give one or more inaccurate coefficients. For market area M3, model #1 (real GDP and average price) was used. Although model #2 would usually give us a slightly higher R square, we preferred to use two variables instead of one. Model #4 (time, real GDP, and average price) worked best for Sereno, with the highest R square and accurate coefficients. The models that we have chosen for each market area have given us consistent results

with a good level of accuracy. Thus, we are confident in our regression analyses and will be using them for the foreseeable future.

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MGMT 497 – ITM CORPORATION TWO YEAR PLAN

Table 5.5: REGRESSION RESULTS BY MARKET AREAS

Market Area M1

Market Area M2

Market Area M3

Sereno

R-­‐ Square 0.928

0.849

0.777

0.929

Adjusted

Variables R-­‐Square Used 0.917

0.838

0.742

0.911

Time Real GDP Avg. Price Time Real GDP Avg. Price Time Real GDP Avg. Price Time Real GDP Avg. Price

Coefficient Estimates 17.256 1.097 N/A 17.162 N/A N/A N/A 15.263 -­‐135.103 15.630 1.142 -­‐4.956

Standard Errors 2.459 3.531 N/A 1.936 N/A N/A N/A 3.516 39.524 5.291 2.532 1.602

46

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

SECTION 6

PRODUCTION PLAN

This section includes TMI’s production plan for the upcoming 8 quarters. The following tables represent the company’s forecasted production schedule, inventory management, product supply, and distribution to different market areas. A production analysis is also provided to estimate unit production costs, as well as a consolidated production costs by market area for every forecasted quarter. The estimates are generated from TMI’s financial results and operational decisions from years 3 and 4. Expectations about changes in operational costs are also taken into account. For example, TMI’s desired product model number and quality, and necessary production scheduling to meet forecasted demand. Lastly, economical factors such as gross domestic product (GDP), consumer price index (CPI), and Sereno’s exchange rate also influenced the results in the forecast.

6.1

Production Scheduling TMI Corporation has a manufacturing plant in Merica 1 (home plant) and another plant

Sereno. During year 3 and year 4, TMI expanded its operations by opening a plant in Sereno and subsequently adding new production lines to meet demand. At the moment, each plant has 6 active lines prepared to yield 312,000 units per quarter. At maximum capacity and efficiency, TMI expects to have total production output of 624,000 units for every quarter for the next two years. Both plants will carry out 1st shift time at 40 hours per week. Production can increase by scheduling overtime or adding new lines to the home plant (8 line capacity). Alternatively, production can decrease by idling lines in both plants.

47

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

To determine production supply, TMI has obtained sales forecasts for the industry and for individual market areas in the next 8 quarters. With the results obtained from the sales forecasts, TMI has carefully assigned inventory-­‐to-­‐sales ratios to every individual market area. The company aims to produce sufficient stock to meet its obligations while maintaining safety stock. TMI has experienced a few stock outs in the past and is determined to avoid them in the following quarters. As a result, TMI plans to schedule output that will equal or slightly exceed total sales orders in some quarters. The remaining unsold inventory in one quarter will be used for the following quarter. TMI decided to idle two lines for Year 5 Quarter 1, to produce the necessary demand for that quarter. For Year 6 Quarter 4, the company plans to schedule overtime in the home plant to account for the high seasonal level of demand experienced in fall. TMI is confident that this production schedule worksheet will ensure adequate output. Nonetheless, TMI will continue updating its forecasts and devising the production schedule for any discrepancies.

Table 6.1: Production Schedule Worksheet

Home Plant M4 Plant

Active Layoff Active Layoff Consolidated Y5 Q1 1st-­‐Shift Lines 6 0 4 2 12

1st-­‐Shift Hours 40 0 40 0 33.3 Total Sales 2nd-­‐Shift Lines 0 0 0 0 0 Orders = 520 2nd-­‐Shift Hours 0 0 0 0 0

Total Output Scheduled 312 0 208 0 520 Y5 Q2 1st-­‐Shift Lines 6 0 6 0 12

1st-­‐Shift Hours 40 0 40 0 40 Total Sales 2nd-­‐Shift Lines 0 0 0 0 0 Orders = 607 2nd-­‐Shift Hours 0 0 0 0 0

Total Output Scheduled 312 0 312 0 624 Y5 Q3 1st-­‐Shift Lines 6 0 6 0 12

48

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

Total Sales Orders = 522

Y5 Q4

Total Sales Orders = 676

Y6 Q1

Total Sales Orders = 577

Y6 Q2

Total Sales Orders = 618

Y6 Q3

Total Sales Orders = 581

Y6 Q4

Total Sales Orders = 803

1st-­‐Shift Hours 2nd-­‐Shift Lines 2nd-­‐Shift Hours Total Output Scheduled 1st-­‐Shift Lines 1st-­‐Shift Hours 2nd-­‐Shift Lines 2nd-­‐Shift Hours Total Output Scheduled 1st-­‐Shift Lines 1st-­‐Shift Hours 2nd-­‐Shift Lines 2nd-­‐Shift Hours Total Output Scheduled 1st-­‐Shift Lines 1st-­‐Shift Hours 2nd-­‐Shift Lines 2nd-­‐Shift Hours Total Output Scheduled 1st-­‐Shift Lines 1st-­‐Shift Hours 2nd-­‐Shift Lines 2nd-­‐Shift Hours Total Output Scheduled 1st-­‐Shift Lines 1st-­‐Shift Hours 2nd-­‐Shift Lines 2nd-­‐Shift Hours Total Output Scheduled

40 0 0 312 6 40 0 0 312 6 40 0 0 312 6 40 0 0 312 6 40 0 0 312 6 48 0 0 374

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

40 0 0 312 6 40 0 0 312 6 40 0 0 312 6 40 0 0 312 6 40 0 0 312 6 40 0 0 312

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

40 0 0 624 12 40 0 0 624 12 40 0 0 624 12 40 0 0 624 12 40 0 0 624 12 44 0 0 686

6.2

Production and Inventory Management Table 6.2 below shows ITM’s forecasted production and inventory management for the

next two years. Only the beginning inventory in year 5 quarter 1 is true data, while the rest is forecasted. The ending inventory for certain quarters, and thus beginning inventory for the subsequent one, might seem to be too high. However, they are intentionally high to take into

49

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

account the fact that the actual output is often less than expected production and also losses due to misplacement, damage, and theft.

There had been times during the last two year, and possibly in the next two years, when running production at full capacity will give us a higher than desired inventory. However, because we have to idle two lines at a time if we want to reduce production, we run the risk of under producing. Furthermore, it costs about $52,000 to idle a line. Therefore, when facing with the issue of producing too much or too little, we usually choose to produce more. According to our forecast, from this point until year 6 quarter 3, we will not need to use

any 2nd-­‐shift line or overtime to meet production need. This will likely help to improve our year to year production cost because we had used either 2nd-­‐shift line or overtime almost every other quarter in year 3 and 4. We will certainly update our forecast every quarter to have the most recent and accurate forecast possible.

Table 6.2: Production and Inventory Management (000s units)

Y5 Q1 Total Unsold Old Units: 0 Liquidate Old Items: No Y5 Q2 Total Unsold Old Units: 0 Liquidate Old Items: No Y5 Q3 Total Unsold Old Units: 0 Liquidate Old Items: No Y5 Q4 Total Unsold Old Units:

Beginning Inventory Planned Production Sales Office Purchases Sales to Customers Ending Inventory Beginning Inventory Planned Production Sales Office Purchases Sales to Customers Ending Inventory Beginning Inventory Planned Production Sales Office Purchases Sales to Customers Ending Inventory Beginning Inventory Planned Production M1 45 312 133 140 38 38 312 180 158 60 60 312 229 147 142 142 312 M2 43 0 147 147 43 43 0 172 167 48 48 0 151 154 45 45 0 M3 39 0 119 111 47 47 0 122 119 50 50 0 115 116 49 49 0 M4 43 208 121 125 39 39 312 150 144 45 45 312 129 133 41 41 312 Total 170 520 520 523 167 167 624 624 588 203 203 624 624 550 277 277 624 50

MGMT 497 – ITM CORPORATION TWO YEAR PLAN 0 Liquidate Old Items: No Y6 Q1 Total Unsold Old Units: 0 Liquidate Old Items: No Y6 Q2 Total Unsold Old Units: 0 Liquidate Old Items: No Y6 Q3 Total Unsold Old Units: 0 Liquidate Old Items: No Y6 Q4 Total Unsold Old Units: 0 Liquidate Old Items: No Sales Office Purchases Sales to Customers Ending Inventory Beginning Inventory Planned Production Sales Office Purchases Sales to Customers Ending Inventory Beginning Inventory Planned Production Sales Office Purchases Sales to Customers Ending Inventory Beginning Inventory Planned Production Sales Office Purchases Sales to Customers Ending Inventory Beginning Inventory Planned Production Sales Office Purchases Sales to Customers Ending Inventory 103 193 52 52 312 193 156 89 89 312 141 176 54 54 312 196 163 87 87 312 185 214 58 187 202 30 30 0 183 165 48 48 0 191 185 54 54 0 167 171 50 50 0 134 184 0 147 154 42 42 0 117 112 47 47 0 125 121 51 51 0 117 118 50 50 0 97 147 0 187 174 54 54 312 131 141 44 44 312 167 161 50 50 312 144 148 46 46 312 208 194 60 624 723 178 178 624 624 574 228 228 624 624 643 209 209 624 624 600 233 233 624 624 739 118

6.3

Production Supply and Distribution Plan The projected amount of manufactured units in Merica 1 and Sereno are to be

distributed to different market areas. Due to quarterly demand fluctuations, the number of units supplied to each market area will vary per quarter. TMI’s local sales office area in Merica 1 has priority over Merica 2 and 3 when receiving sales orders. However, because TMI has more than one plant, Sereno will ship orders before Merica 1 can fulfill orders. The table shows that Sereno will fill its sales orders first and then distribute units to Merica 2. Merica 1 will then fill its sales orders and then supply the remaining units to Merica 2 and Merica 3. To ensure

51

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

favorable transportation cost savings and effective distribution, TMI plans to carefully monitor distribution from both plants. One way that TMI proposes to do this is by adjusting the inventory-­‐to-­‐sales ratio; in order to properly allocate product shipments to every market area. The production supply and distribution plan is provided below. Product Supply and Distribution to Different Market Areas From the Home Plant in Merica 1 M1 M2 M3 M4 Total
Y5 Q1 Y5 Q2 Y5 Q3 Y5 Q4 Y6 Q1 Y6 Q2 Y6 Q3 Y6 Q4 133 180 229 103 193 141 196 185 60 10 0 62 2 46 0 30 119 122 83 147 117 125 116 97 0 0 0 0 0 0 0 0 312 312 312 312 312 312 312 312

From the Second Plant Sereno
Y5 Q1 Y5 Q2 Y5 Q3 Y5 Q4 Y6 Q1 Y6 Q2 Y6 Q3 Y6 Q4

M1
0 0 0 0 0 0 0 0

M2
87 162 151 125 181 145 167 104

M3
0 0 32 0 0 0 1 0

M4
121 150 129 187 131 167 144 208

Total
208 312 312 312 312 312 312 312

6.4

Estimates of Unit Labor and Unit Material Costs of Production Near the end of Year 4, TMI introduced its newest product, model 4, with deluxe quality

and standard features. As already mentioned in the production objectives section, TMI plans to introduce new models every fourth quarter of the next two years. In other words, TMI expects to sell model 5 on year 5 quarter 4, and sell model 6 on year 6 quarter 4. Production unit costs

52

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

are predicted to be higher than standard unit costs due to TMI’s efforts of providing its product at the highest quality available in the industry. However, TMI believes it can reduce some of this cost by providing training and thus acquiring greater saving levels. Ongoing training of production and operations employees can provide TMI with lower production costs by enhancing the skills of its employees and by improving manufacturing processes. The following tables display the estimated labor and material unit costs for Merica 1 and Sereno.

Table 6.4a: Unit Labor Cost of Production Product Model Number: Production Cost Saving Level: Home Plant Standard Unit cost ($) Sereno Standard Unit Cost (Ps) Adjust for any Overtime and 2nd-­‐Shift: Home Plant Adjusted Unit Cost ($) Sereno Adjusted Unit Cost (Pc) Adjust for Quality & Features: Home Plant Adjusted Unit Cost ($) Sereno Adjusted Unit Cost (Ps) Y5 Q1 4 2 3.69 18.11 Y5 Q2 4 2 3.93 14.15 Y5 Q3 4 2 3.4 13.8 Y5 Q4 5 2 5.11 18.5 Y6 Q1 5 3 3.92 14.8 Y6 Q2 5 3 4.44 17.28 Y6 Q3 5 3 4.19 15.86 Y6 Q4 6 3 4.78 22.15

0 0 4.06 19.92

0 0 4.32 15.57

0 0 3.74 15.18

0 0 5.61 20.35

0 0 4.31 16.28

0 0 4.88 19.01

0 0 4.61 17.45

5.18 0

5.26 24.37

Table 6.4b: Unit Material Cost of Production Product Model Number: Home Plant Sereno Home Plant Sereno Standard Unit cost ($) Standard Unit Cost (Ps)

Y5 Q1 4 1.75 8.95 1.93 9.85

Y5 Q2 4 1.98 10.50 2.18 11.55

Y5 Q3 4 1.66 10.24 1.83 11.26

Y5 Q4 5 2.46 13.72 2.71 15.09

Y6 Q1 5 1.93 10.98 2.12 12.08

Y6 Q2 5 2.16 12.82 2.38 14.10

Y6 Q3 5 2.06 11.46 2.27 12.61

Y6 Q4 6 2.16 16.00

Adjust for Quality & Features: Adjusted Unit Cost ($) Adjusted Unit Cost (Ps)

2.38 17.60

6.5

Total Production Costs The tables provided below display projected costs associated with total production costs

in Merica 1 and Sereno. TMI is expecting its labor costs and material costs to be the highest

53

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

production costs incurred in years 5 and 6. Maintenance, equipment depreciation, and plant depreciation expenses also augment total production costs. Unit production cost for Merica and Sereno was acquired by dividing total production cost ($ or Ps) by each market area’s planned unit output. Lastly, the table provides the consolidated production costs in dollars for both plants. Sereno’s costs were translated to dollars by using TMI’s projected exchange rates.
Table
6.5: Production Costs Home Plant: Merica 1

Planned Output

Total labor cost

Total material cost

Total maintenance cost

Temporary layoff cost

Line deactivation cost

Equipment depreciation

Plant depreciation

Total cash expenses ($000)

Total production cost ($000)

Unit production cost ($ per unit)

Oversea Plant: Sereno

Planned Output

Total labor cost

Total material cost

Total maintenance cost

Temporary layoff cost

Line deactivation cost

Equipment depreciation

Plant depreciation

Total cash expenses (Ps 000s)

Total production cost

(Ps 000s)

Unit production cost

(Ps per unit)

Consolidated: Both Plants

Planned Output

Total labor cost

Total material cost

Total maintenance cost

Temporary layoff cost

Y5 Q1 312 1152 547 90 0 0 107 26 1789 1922 6.16

Y5 Q1 208 3767 2794 522 0 0 798 134 7082 8014 38.53

Y5 Q1 520 1735 980 171 147

Y5 Q2 312 1226 617 104 0 0 107 26 2036 2169 6.95

Y5 Q2 312 4415 3275 612 0 0 798 134 8302 9234 29.6

Y5 Q2 624 1905 1121 198 0

Y5 Q3 312 1061 518 86 0 0 107 26 1702 1835 5.88

Y5 Q3 312 4307 3195 597 0 0 798 134 8098 9030 28.94

Y5 Q3 624 1695 989 174 0

Y5 Q4 312 1594 768 126 0 0 107 26 2516 2649 8.49

Y5 Q4 312 5773 4282 799 0 0 798 134 10854 11786 37.78

Y5 Q4 624 2082 1130 194 0

Y6 Q1 312 1224 602 100 0 0 107 26 1980 2113 6.77

Y6 Q1 312 4616 3424 639 0 0 798 134 8680 9612 30.81

Y6 Q1 624 1609 887 153 0

Y6 Q2 312 1385 675 112 0 0 107 26 2218 2351 7.54

Y6 Q2 312 5391 3999 747 0 0 798 134 10137 11069 35.48

Y6 Q2 624 1784 971 167 0

Y6 Q3 312 1306 643 104 0 0 107 26 2073 2206 7.07

Y6 Q3 312 4949 3574 596 0 0 798 134 9165 10097 32.36

Y6 Q3 624 1634 880 143 0

Y6 Q4 374 1788 771 128 0 0 107 26 2838 2971 7.94

Y6 Q4 312 6910 4991 832 0 0 798 134 12797 13729 44

Y6 Q4 686 2197 1066 177 0

54

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

Line deactivation cost

Equipment depreciation

Plant depreciation

Total cash expenses ($000)

Total production cost ($000)

Unit production cost

($ per unit) Foreign Exchange rate 0 231 47 3032 3310 6.36 6.46 0 230 47 3224 3501 5.61 6.50 0 225 46 2858 3128 5.01 6.79 0 174 37 3405 3617 5.80 11.83 0 174 37 2649 2860 4.58 12.00 0 166 36 2923 3125 5.01 13.50 0 160 35 2657 2852 4.57 15.10 0 154 34 3440 3629 5.29 16.90

6.6

Cost of Goods Produced All market areas will be selling TMI’s consumer durable product at the same quality level

and feature level. Therefore, the product quality level will not vary in individual markets. The cost of goods produced was obtained by multiplying the amount of planned distribution to each market area with unit production cost for that quarter. The following table depicts the costs of goods produced for individual market areas. Table 6.6: Cost of Goods Sold

Manufactured in Merican Plant Unit production cost ( $ per unit) Cost of product for Merica 1 ($000) Cost of product for Merica 2 ($000) Cost of product for Merica 3 ($000) Cost of product for Sereno ($000) Total cost of products produced ($000) Manufactured at Sereno Plant Unit production cost (Lc per unit) Cost of product for Merica 1 ($000) Cost of product for Merica 2 ($000) Cost of product for Merica 3 ($000) Cost of product for Sereno ($000) Total cost of products produced ($000) Y5 Q1 6.16 819 370 733 0 1922 Y5 Q1 6.67 0 580 0 807 1388 Y5 Q2 6.95 1251 70 848 0 2168 Y5 Q2 4.55 0 738 0 683 1421 Y5 Q3 5.88 1347 0 488 0 1835 Y5 Q3 4.26 0 644 136 550 1330 Y5 Q4 8.49 874 526 1248 0 2649 Y5 Q4 3.19 0 399 0 597 996 Y6 Q1 6.77 1307 13.5 792 0 2112 Y6 Q1 2.57 0 465 0 336 801 Y6 Q2 7.54 1063 347 943 0 2352 Y6 Q2 2.63 0 381 0 439 820 Y6 Q3 7.07 1386 0 820 0 2206 Y6 Q3 2.13 0 356 2.13 307 666 Y6 Q4 7.94 1470 238 771 0 2478 Y6 Q4 2.59 0 270 0 539 809

55

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

SECTION 7

FINANCIAL STATEMENTS

7.1

Pro forma Assumptions In deriving the following pro forma financial statements we used historical data and

trends in addition to our expected goals and objectives listed in the above section 4 titled Strategies. Using these factors we constructed our pro forma statements that reflect our future desired goals and objectives. These future forecasts are show in the following sections.

7.2

Accounts Receivable and Accounts Collected

Accounts Receivables and Accounts Collected in $000s

Accounts Receivable M1 M2 M3 Sereno Collect from Last-­‐Quarter Sales M1 M2 M3 Sereno Collect from Current-­‐Quarter Sales M1 M2 M3 Sereno Total Accounts Collected M1 M2 M3 Sereno

Y5 Q1 622 718 652 5762 Y5 Q1 866 807 716 6723 Y5 Q1 875 853 535 4613 Y5 Q1 2363 2378 1710 17098

Y5 Q2 694 760 684 6242 Y5 Q2 622 718 652 5762 Y5 Q2 995 1026 588 5711 Y5 Q2 2311 2504 1924 17715

Y5 Q3 568 739 668 6002 Y5 Q3 694 760 864 6242 Y5 Q3 1003 908 572 5037 Y5 Q3 2265 2407 2104 17281

Y5 Q4 676 749 676 6222 Y5 Q4 658 739 668 6002 Y5 Q4 1451 1471 1016 8742 Y5 Q4 2785 2959 2360 20966

Y6 Q1 667 744 672 6112 Y6 Q1 676 749 676 6622 Y6 Q1 1047 1069 658 6014 Y6 Q1 2390 2562 2006 18748

Y6 Q2 671 747 674 6215 Y6 Q2 667 744 672 6112 Y6 Q2 1263 1287 557 7631 Y6 Q2 2601 2778 1903 19958

Y6 Q3 669 745 673 6163 Y6 Q3 671 747 674 6215 Y6 Q3 1122 1134 624 6565 Y6 Q3 2462 2626 1971 18943

Y6 Q4 670 750 674 6189 Y6 Q4 699 745 673 6163 Y6 Q4 1752 1774 1092 11077 Y6 Q4 3121 3269 2439 23429

56

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

7.3

Plant and Equipment Depreciation Plant for ITM was depreciated at a quarterly rate of 1/126 or 0.7937% from the original

book value of plant located in Merica 1 and Sereno. The straight-­‐line method for 30.5 years was applied. For the next two years, plant depreciation charges will remain constant; with Merica 1 incurring $26,000 and Sereno incurring Ps 134,000. Table 7.3a: Plant Depreciation Analysis (in $ or Ps 000s) Home Plant in Merica 2 Y5 Q1 Y5 Q2 Y5 Q3 Y5 Q4 Y6 Q1 Net Plant Value at Quarter Start 2884 2858 2832 2806 2780 New Plant Investment 0 0 0 0 0 Plant Depreciation Charges 26 26 26 26 26 Net Plant Value at Quarter End 2858 2832 2806 2780 2754 Second Plant in Sereno Y5 Q1 Y5 Q2 Y5 Q3 Y5 Q4 Y6 Q1 Net Plant Value at Quarter Start 16090 15956 15822 15688 15554 New Plant Investment 0 0 0 0 0 Plant Depreciation Charges 134 134 134 134 134 Net Plant Value at Quarter End 15956 15822 15688 15554 15420

Y6 Q2 Y6 Q3 Y6 Q4 2754 2728 2702 0 0 0 26 26 26 2728 2702 2676 Y6 Q2 Y6 Q3 Y6 Q4 15420 15286 15152 0 0 0 134 134 134 15286 15152 15018

Equipment is also depreciated on a straight-­‐line basis over 7 years using a quarterly rate of 1/28 or 3.5714% of the original book value of all equipment placed in Merica 1 and Sereno. Therefore, TMI will have equipment depreciation charges of $107,000 in Merica 1 and Ps 798,000 in Sereno for year 5 and 6. Table 7.3b: Equipment Depreciation Analysis (in $ or Ps 000s) Home Plant in Merica 2 Y5 Q1 Y5 Q2 Y5 Q3 Y5 Q4 Y6 Q1 Net Equipment Value at Quarter Start 1288 1181 1074 967 860 New Equipment Investment 0 0 0 0 0 Plant Equipment Charges 107 107 107 107 107 Net Equipment Value at Quarter End 1181 1074 967 860 753 Second Plant in Sereno Y5 Q1 Y5 Q2 Y5 Q3 Y5 Q4 Y6 Q1 Net Equipment Value at Quarter Start 19990 19192 18394 17596 16798 New Equipment Investment 0 0 0 0 0 Equipment Depreciation Charges 798 798 798 798 798 Net Equipment Value at Quarter End 19192 18394 17596 16798 15420

Y6 Q2 753 0 107 646 Y6 Q2 15420 0 798 15202

Y6 Q3 Y6 Q4 646 539 0 0 107 107 539 432 Y6 Q3 Y6 Q4 15202 14404 0 0 798 798 14404 13606

57

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

7.4

Capital Stock An increasing capital stock account tends to be a sign of economic health, since the

company can use the additional proceeds to invest in projects or machinery that will increase corporate profits and/or efficiency. ITM Inc. has increased its capital stock account but keeping in mind not to increase it to unhealthy high levels. Firms that continually issue secondary issues of capital stock may be doing so to raise funds, due to poor company performance.

Capital Stock Estimation (in $000s) Parent Company in Merica 1 Capital Stock at Quarter-­‐Start Outstanding Shares at Quarter-­‐Start Market Price of Stock at Quarter-­‐Start ($) Average Book Value Per Share ($) Shares Issued (+) or Repurchased (-­‐) Price per Share Issued or Bought ($) Outstanding Shares at Quarter-­‐End Capital Stock at Quarter-­‐End Deduction from Accumulated Earnings Y5 Q1 9716 7100 1.23 2.08 0 0 7100 9816 -­‐172 Y5 Q2 9816 7100 1.29 2.21 -­‐400 1.42 6700 9866 186 Y5 Q3 9866 6700 1.35 2.25 0 0 6700 9891 7 Y5 Q4 9891 6700 1.42 2.25 0 0 6700 9851 47 Y6 Q1 9851 6700 1.49 2.28 -­‐200 1.64 6500 9771 -­‐124 Y6 Q2 9771 6500 1.57 2.32 0 0 6500 9911 112 Y6 Q3 9911 6500 1.65 2.37 -­‐200 1.82 6300 9841 -­‐56 Y6 Q4 9841 6300 1.73 2.40 0 0 6300 9906 56

58

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

7.5

Actual and Pro forma Financial Statements

World 11 Company 1 Year 3 Quarter 1 CONSOLIDATED INCOME STATEMENT 10-10-2013 A BUSINESS POLICY GAME, 6TH EDITION 15:18:26 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ____________________________________________________________________________ ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno M$000s M$000s M$000s M$000s Ps000s Net Sales: to Customers 3247 880 811 890 3996 to Affiliates (cost + 20%) 0 1233 0 0 0 to Liquidators (at cost) 0 0 0 0 0 Less Cost of Goods sold 1463 1449 470 516 1564 Less Value Added Tax 67 0 0 0 400 Gross Profit 1717 664 341 374 2032 Selling Expense: Advertising Expense Sales Salaries Sales Commissions General Selling Expense Transportation Expense Sales Office Depreciation Total Selling Expense Admin and General Expense: Research and Development Total Training Expense Storage Expense Executive Compensation Other Expense Total Adm & Gen Expense Total Operating Expense Operating Profit (Loss) Other Income: CD Interest Capital Gain (Loss) Other Expense: Loan Interest Bond Interest Net Profit (Loss) Before Tax Less Income Tax Net Profit (Loss) After Tax Foreign Currency Adjustment Comprehensive Income(Loss) Notes: Translation Exchange Rate 148 126 57 409 165 12 918 200 106 30 150 0 486 1404 314 36 0 0 50 300 117 183 0 183 40 1.00 26 1.00 43 1.00 447 6.00 50 39 18 107 9 3 226 200 80 4 75 0 359 585 79 36 0 0 50 65 25 40 40 33 16 98 68 3 258 0 10 6 25 0 41 299 42 0 0 0 0 42 16 26 40 33 18 100 68 3 262 0 10 6 25 0 41 303 71 0 0 0 0 71 28 43 110 125 32 626 119 19 1031 0 36 83 150 0 269 1300 732 0 0 0 0 732 285 447

____________________________________________________________________________

59

MGMT 497 – ITM CORPORATION TWO YEAR PLAN World 11 Company 1 Year 3 Quarter 2 CONSOLIDATED INCOME STATEMENT 10-14-2013 A BUSINESS POLICY GAME, 6TH EDITION 14:17:10 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ____________________________________________________________________________ ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno M$000s M$000s M$000s M$000s Ps000s Net Sales: to Customers 4212 1138 959 1098 6080 to Affiliates (cost + 20%) 0 1847 0 0 0 to Liquidators (at cost) 0 0 0 0 0 Less Cost of Goods sold 2104 2129 603 698 3116 Less Value Added Tax 102 0 0 0 608 Gross Profit 2006 856 356 400 2356 Selling Expense: Advertising Expense Sales Salaries Sales Commissions General Selling Expense Transportation Expense Sales Office Depreciation Total Selling Expense Admin and General Expense: Research and Development Total Training Expense Storage Expense Executive Compensation Other Expense Total Adm & Gen Expense Total Operating Expense Operating Profit (Loss) Other Income: CD Interest Capital Gain (Loss) Other Expense: Loan Interest Bond Interest Net Profit (Loss) Before Tax Less Income Tax Net Profit (Loss) After Tax Foreign Currency Adjustment Comprehensive Income(Loss)
_Translation Exchange Rate

161 130 75 449 241 12 1069

52 42 24 120 12 3 253

44 33 20 104 64 3 268

43 33 23 107 78 3 287

130 134 50 706 522 19 1561

200 175 27 208 0 610 1679 327

200 175 5 78 0 458 711 145

0 0 11 26 0 37 305 51

0 0 8 26 0 34 321 79

0 0 15 467 0 482 2043 313

30 0

30 0

0 0

0 0

0 0

0 50 307 120 187 -7 194
1.00 1.00

0 50 125 49 76

0 0 51 20 31

0 0 79 31 48

0 0 313 122 191

76
1.00

31
5.98

48

191

_________________________________________________________________ Notes: Translation Exchange Rate 1.00 1.00 1.00

5.98

60

MGMT 497 – ITM CORPORATION TWO YEAR PLAN World 11 Company 1 Year 3 Quarter 3 CONSOLIDATED INCOME STATEMENT 10-18-2013 A BUSINESS POLICY GAME, 6TH EDITION 15:43:12 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ____________________________________________________________________________ ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno M$000s M$000s M$000s M$000s Ps000s Net Sales: to Customers 3797 987 959 937 5472 to Affiliates (cost + 20%) 0 1637 0 0 0 to Liquidators (at cost) 0 0 0 0 0 Less Cost of Goods sold 1880 1872 601 582 2768 Less Value Added Tax 91 0 0 0 547 Gross Profit 1826 752 358 355 2157 Selling Expense: Advertising Expense Sales Salaries Sales Commissions General Selling Expense Transportation Expense Sales Office Depreciation Total Selling Expense Admin and General Expense: Research and Development Total Training Expense Storage Expense Executive Compensation Other Expense Total Adm & Gen Expense Total Operating Expense Operating Profit (Loss) Other Income: CD Interest Capital Gain (Loss) Other Expense: Loan Interest Bond Interest Net Profit (Loss) Before Tax Less Income Tax Net Profit (Loss) After Tax Foreign Currency Adjustment

161 127 69 448 235 12 1052

52 39 21 115 10 3 240

44 33 20 106 62 3 268

43 33 20 106 70 3 275

130 134 45 723 559 19 1610

200 101 23 212 25 561 1612 213

200 72 2 79 25 378 618 134

0 11 9 26 0 46 314 44

0 11 8 26 0 45 320 35

0 39 25 485 0 549 2159 -2

22 0

22 0

0 0

0 0

0 0

0 38 197 77 120 5

0 38 118 46 72

0 0 44 17 27

0 0 35 14 21

0 0 -2 0 -2

Comprehensive Income(Loss) 115 72 27 21 -2 ____________________________________________________________________________ Tax Loss Carry-Forward 0 0 0 -2 Notes: Translation Exchange Rate 1.00 1.00 1.00 5.99

61

MGMT 497 – ITM CORPORATION TWO YEAR PLAN World 11 Company 1 Year 3 Quarter 4 CONSOLIDATED INCOME STATEMENT 10-21-2013 A BUSINESS POLICY GAME, 6TH EDITION 14:24:56 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ____________________________________________________________________________ ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno M$000s M$000s M$000s M$000s Ps000s Net Sales: to Customers 5120 1214 1204 1214 8927 to Affiliates (cost + 20%) 0 2282 0 0 0 to Liquidators (at cost) 0 0 0 0 0 Less Cost of Goods sold 2772 2584 836 826 4845 Less Value Added Tax 149 0 0 0 893 Gross Profit 2199 912 368 388 3189 Selling Expense: Advertising Expense Sales Salaries Sales Commissions General Selling Expense Transportation Expense Sales Office Depreciation Total Selling Expense Admin and General Expense: Research and Development Total Training Expense Storage Expense Executive Compensation Other Expense Total Adm & Gen Expense Total Operating Expense Operating Profit (Loss) Other Income: CD Interest Capital Gain (Loss) Other Expense: Loan Interest Bond Interest Net Profit (Loss) Before Tax Less Income Tax Net Profit (Loss) After Tax Foreign Currency Adjustment

161 129 87 487 283 12 1158

52 36 25 117 13 3 246

44 33 25 113 90 3 308

43 36 25 117 80 3 304

130 143 70 838 598 19 1798

150 308 27 219 0 705 1863 337

150 83 4 81 0 318 564 348

0 0 4 27 0 31 339 29

0 0 9 27 0 36 340 48

0 1351 63 507 0 1921 3719 -530

0 0

0 0

0 0

0 0

0 0

26 38 273 106 167 9

26 38 284 76 208

0 0 29 11 18

0 0 48 19 29

0 0 -530 0 -530

Comprehensive Income(Loss) 158 208 18 29 -530 ____________________________________________________________________________ Tax Loss Carry-Forward 0 0 0 -532 Notes: Translation Exchange Rate 1.00 1.00 1.00 6.00

62

MGMT 497 – ITM CORPORATION TWO YEAR PLAN World 11 Company 1 Year 4 Quarter 1 CONSOLIDATED INCOME STATEMENT 10-24-2013 A BUSINESS POLICY GAME, 6TH EDITION 14:24:39 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ____________________________________________________________________________ ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno M$000s M$000s M$000s M$000s Ps000s Net Sales: to Customers 4551 1185 1154 1028 7128 to Affiliates (cost + 20%) 0 1462 0 0 0 to Liquidators (at cost) 0 0 0 0 0 Less Cost of Goods sold 2466 1917 821 732 2757 Less Value Added Tax 118 0 0 0 713 Gross Profit 1967 730 333 296 3658 Selling Expense: Advertising Expense Sales Salaries Sales Commissions General Selling Expense Transportation Expense Sales Office Depreciation Total Selling Expense Admin and General Expense: Research and Development Total Training Expense Storage Expense Executive Compensation Other Expense Total Adm & Gen Expense Total Operating Expense Operating Profit (Loss) Other Income: CD Interest Capital Gain (Loss) Other Expense: Loan Interest Bond Interest Net Profit (Loss) Before Tax Less Income Tax Net Profit (Loss) After Tax Foreign Currency Adjustment

165 129 80 487 178 12 1052

53 36 25 118 12 3 247

45 33 24 113 74 3 292

44 36 22 115 66 3 286

140 143 56 850 157 19 1365

150 72 14 225 0 461 1513 454

150 72 4 82 0 308 555 175

0 0 5 27 0 32 324 9

0 0 4 27 0 31 317 -21

0 0 6 536 0 542 1907 1751

0 0

0 0

0 0

0 0

0 0

0 38 416 162 254 18

0 38 137 79 58

0 0 9 4 5

0 0 -21 0 -21

0 0 1751 475 1276

Comprehensive Income(Loss) 236 58 5 -21 1276 ____________________________________________________________________________ Tax Loss Carry-Forward 0 0 -21 0 Notes: Translation Exchange Rate 1.00 1.00 1.00 6.02

63

MGMT 497 – ITM CORPORATION TWO YEAR PLAN World 11 Company 1 Year 4 Quarter 2 CONSOLIDATED INCOME STATEMENT 10-28-2013 A BUSINESS POLICY GAME, 6TH EDITION 14:37:56 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ____________________________________________________________________________ ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno M$000s M$000s M$000s M$000s Ps000s Net Sales: to Customers 5322 1364 1311 1217 8667 to Affiliates (cost + 20%) 0 1709 0 0 323 to Liquidators (at cost) 0 0 0 0 0 Less Cost of Goods sold 2707 2197 876 823 3473 Less Value Added Tax 143 0 0 0 867 Gross Profit 2472 876 435 394 4650 Selling Expense: Advertising Expense Sales Salaries Sales Commissions General Selling Expense Transportation Expense Sales Office Depreciation Total Selling Expense Admin and General Expense: Research and Development Total Training Expense Storage Expense Executive Compensation Other Expense Total Adm & Gen Expense Total Operating Expense Operating Profit (Loss) Other Income: CD Interest Capital Gain (Loss) Other Expense: Loan Interest Bond Interest Net Profit (Loss) Before Tax Less Income Tax Net Profit (Loss) After Tax Foreign Currency Adjustment

186 123 93 508 223 12 1146

60 33 29 120 14 3 259

50 30 27 114 106 3 330

50 36 26 121 90 3 326

160 143 68 927 81 19 1398

150 332 6 233 0 722 1867 605

150 83 2 84 0 319 578 298

0 0 0 28 0 28 358 77

0 0 0 28 0 28 354 40

0 1508 26 566 0 2100 3498 1152

0 0

0 0

0 0

0 0

0 0

0 38 567 221 346 42

0 38 260 110 150

0 0 77 30 47

0 0 40 7 33

0 0 1152 449 703

Comprehensive Income(Loss) 304 150 47 33 703 ____________________________________________________________________________ Notes: Translation Exchange Rate 1.00 1.00 1.00 6.06

64

MGMT 497 – ITM CORPORATION TWO YEAR PLAN World 11 Company 1 Year 4 Quarter 3 CONSOLIDATED INCOME STATEMENT 10-31-2013 A BUSINESS POLICY GAME, 6TH EDITION 17:25:14 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ____________________________________________________________________________ ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno M$000s M$000s M$000s M$000s Ps000s Net Sales: to Customers 5205 1353 1259 1175 8667 to Affiliates (cost + 20%) 0 1717 0 0 2550 to Liquidators (at cost) 0 0 0 0 0 Less Cost of Goods sold 2618 2211 824 815 5512 Less Value Added Tax 142 0 0 0 867 Gross Profit 2445 859 435 360 4838 Selling Expense: Advertising Expense Sales Salaries Sales Commissions General Selling Expense Transportation Expense Sales Office Depreciation Total Selling Expense Admin and General Expense: Research and Development Total Training Expense Storage Expense Executive Compensation Other Expense Total Adm & Gen Expense Total Operating Expense Operating Profit (Loss) Other Income: CD Interest Capital Gain (Loss) Other Expense: Loan Interest Bond Interest Net Profit (Loss) Before Tax Less Income Tax Net Profit (Loss) After Tax Foreign Currency Adjustment

186 124 90 519 282 12 1214

60 36 28 126 15 3 268

50 30 26 115 137 3 361

50 36 25 122 116 3 352

160 134 68 956 86 19 1423

75 357 9 240 0 681 1895 551

75 83 3 85 0 246 514 345

0 11 3 28 0 42 403 32

0 0 0 28 0 28 380 -20

0 1608 20 603 0 2231 3654 1184

0 0

0 0

0 0

0 0

0 0

22 38 491 191 300 62

22 38 285 103 182

0 0 32 12 20

0 0 -20 0 -20

0 0 1184 462 722

Comprehensive Income(Loss) 238 182 20 -20 722 ____________________________________________________________________________ Tax Loss Carry-Forward 0 0 -20 0 Notes: Translation Exchange Rate 1.00 1.00 1.00 6.11 World 11 Company 1 Year 4 Quarter 4 CONSOLIDATED INCOME STATEMENT 11-04-2013

65

MGMT 497 – ITM CORPORATION TWO YEAR PLAN A BUSINESS POLICY GAME, 6TH EDITION 14:48:14 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ____________________________________________________________________________ ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno M$000s M$000s M$000s M$000s Ps000s Net Sales: to Customers 6574 1732 1614 1432 11205 to Affiliates (cost + 20%) 0 747 0 0 7078 to Liquidators (at cost) 0 0 0 0 0 Less Cost of Goods sold 3272 1619 945 957 10185 Less Value Added Tax 180 0 0 0 1121 Gross Profit 3122 860 669 475 6977 Selling Expense: Advertising Expense Sales Salaries Sales Commissions General Selling Expense Transportation Expense Sales Office Depreciation Total Selling Expense Admin and General Expense: Research and Development Total Training Expense Storage Expense Executive Compensation Other Expense Total Adm & Gen Expense Total Operating Expense Operating Profit (Loss) Other Income: CD Interest Capital Gain (Loss) Other Expense: Loan Interest Bond Interest Net Profit (Loss) Before Tax Less Income Tax Net Profit (Loss) After Tax Foreign Currency Adjustment

186 125 112 552 329 12 1316

60 39 36 139 18 3 295

50 33 33 127 177 3 423

50 33 29 123 116 3 354

160 125 86 1018 114 19 1522

75 72 36 242 114 539 1855 1267

75 72 3 85 114 349 644 216

0 0 13 28 0 41 464 205

0 0 14 28 0 42 396 79

0 0 35 633 0 668 2190 4787

0 0

0 0

0 0

0 0

0 0

9 38 1220 476 744 166

9 38 169 74 95

0 0 205 80 125

0 0 79 23 56

0 0 4787 1867 2920

Comprehensive Income(Loss) 578 95 125 56 2920 ____________________________________________________________________________ Notes: Translation Exchange Rate 1.00 1.00 1.00 6.24

66

MGMT 497 – ITM CORPORATION TWO YEAR PLAN In The Middle Inc. Consolidated Quarterly Income Statement As Year 5 Quarter 1 World 11 Company 1

Consolidated

Merica 1

Merica 2

Merica 3

Y5 Q1 M$000s M$000s M$000s M$000s exchange rate

Net Sales:

to Customers 5861 1497 1571 1187 to Affiliates (cost + 20%) 0 1272 0 0 to Liquidators (at cost) 0 0 0 0 Less Cost of Goods Sold 2929 1922 974 808 Less Value Added Tax 161 0 0 0 Gross Profit 2771 847 597 379

Selling Expense:

Advertising Expense 185 60 50 50 Sales Salaries 125 37 35 32 Sales Commissions 91 22 32 25 General Selling Expense 537 130 134 113 Transportation Expense 311 16 172 107 Sales Office Depreciation 12 3 3 3 Total Selling Expense 1261 268 426 328

Admin and General Expense:

Research and Development 100 100 0 0 Total Training Expense 228 72 7 0 Storage Expense 21 3 8 6 Executive Compensation 242 84 31 26 Other Expense 49 49 0 0 Total Admin & Gen 640 308 46 32 Expense Total Operating Expense 1901 575 472 360 Operating Profit (Loss) 869 271 125 19

Other Income:

CD Interest 0 0 0 0 Capital Gain (Loss) 0 0 0 0

Other Expense:

Loan Interest 0 0 0 0 Bond Interest 38 38 0 0

Net Profit (Loss) Before Tax 831 233 125 19 Less Income Tax 322 89 46 10 Net Profit (Loss) After Tax 510 144 79 9

Foreign Currency Adjustment 208 0 0 0

Comprehensive Income 302 144 79 9 (Loss)

Sereno

Ps000s

10375 4803 0 8014 1038 6126

160 138 81 1043 104 20 1546

0 962 28 654 0 1645 3191 2935

0 0

0 0

2935 1141 1794

0

1794

67

MGMT 497 – ITM CORPORATION TWO YEAR PLAN In The Middle Inc. Consolidated Quarterly Income Statement As Year 5 Quarter 2 World 11 Company 1

Consolidated

Merica 1

Merica 2

Merica 3

Y5 Q2 M$000s M$000s M$000s M$000s exchange rate 1 1 1 Net Sales:

to Customers 6585 1689 1785 1272 to Affiliates (cost + 20%) 0 1436 0 0 to Liquidators (at cost) 0 0 0 0 Less Cost of Goods Sold 3276 2169 1107 866 Less Value Added Tax 184 0 0 0 Gross Profit 3126 955 678 406

Selling Expense:

Advertising Expense 191 62 52 52 Sales Salaries 140 41 40 34 Sales Commissions 123 23 37 26 General Selling Expense 604 146 152 121 Transportation Expense 346 18 195 114 Sales Office Depreciation 14 3 4 3 Total Selling Expense 1417 294 479 351

Admin and General Expense:

Research and Development 100 100 0 0 Total Training Expense 250 72 8 0 Storage Expense 24 3 9 6 Executive Compensation 273 94 35 28 Other Expense 56 56 0 0 Total Admin & Gen Expense 703 325 52 34 Total Operating Expense 2120 620 531 384 Operating Profit (Loss) 1005 336 147 22

Other Income:

CD Interest 0 0 0 0 Capital Gain (Loss) 0 0 0 0

Other Expense:

Loan Interest 0 0 0 0 Bond Interest 25 25 0 0

Net Profit (Loss) Before Tax 980 311 147 22 Less Income Tax 366 100 53 10 Net Profit (Loss) After Tax 615 211 94 11

Foreign Currency Adjustment 44 0 0 0

Comprehensive Income (Loss) 571 211 94 11

Sereno

Ps000s 6.5

11954 5534 0 9234 1196 7058

165 159 239 1202 120 23 1909

0 1109 32 753 0 1895 3804 3254

0 0

0 0

3254 1314 1940

0

1940

68

MGMT 497 – ITM CORPORATION TWO YEAR PLAN In The Middle Inc. Consolidated Quarterly Income Statement As Year 5 Quarter 3 World 11 Company 1

Consolidated

Merica 1

Merica 2

Merica 3

Y5 Q3 M$000s M$000s M$000s M$000s exchange rate 1 1 1 Net Sales:

to Customers 6084 1571 1646 1240 to Affiliates (cost + 20%) 0 1117 0 0 to Liquidators (at cost) 0 0 0 0 Less Cost of Goods Sold 3045 1835 1002 839 Less Value Added Tax 163 0 0 0 Gross Profit 2875 853 645 401

Selling Expense:

Advertising Expense 195 64 53 53 Sales Salaries 125 38 36 32 Sales Commissions 142 23 49 37 General Selling Expense 542 133 136 114 Transportation Expense 321 17 180 108 Sales Office Depreciation 12 3 3 3 Total Selling Expense 1337 277 458 346

Admin and General Expense:

Research and Development 100 100 0 0 Total Training Expense 177 72 5 0 Storage Expense 26 3 10 8 Executive Compensation 241 84 31 26 Other Expense 69 69 0 0 Total Admin & Gen Expense 613 328 46 34 Total Operating Expense 1950 605 504 380 Operating Profit (Loss) 926 248 141 20

Other Income:

CD Interest 0 0 0 0 Capital Gain (Loss) 0 0 0 0

Other Expense:

Loan Interest 0 0 0 0 Bond Interest 25 25 0 0

Net Profit (Loss) Before Tax 901 223 141 20 Less Income Tax 367 85 60 13 Net Profit (Loss) After Tax 533 138 81 7

Foreign Currency Adjustment 311 0 0 0

Comprehensive Income (Loss) 222 138 81 7

Sereno

Ps000s 6.79

11039 5731 0 9030 1104 6636

175 139 221 1074 111 21 1741

0 683 31 672 0 1386 3127 3509

0 0

0 0

3509 1422 2087

0

2087

69

MGMT 497 – ITM CORPORATION TWO YEAR PLAN In The Middle Inc. Consolidated Quarterly Income Statement As Year 5 Quarter 4 World 11 Company 1

Consolidated

Merica 1

Merica 2

Merica 3

Y5 Q4 M$000s M$000s M$000s M$000s exchange rate 1 1 1 Net Sales:

to Customers 7304 2127 2220 1692 to Affiliates (cost + 20%) 0 1709 0 0 to Liquidators (at cost) 0 0 0 0 Less Cost of Goods Sold 3845 2649 1368 1150 Less Value Added Tax 127 0 0 0 Gross Profit 3333 1187 852 542

Selling Expense:

Advertising Expense 190 64 56 56 Sales Salaries 162 52 49 45 Sales Commissions 167 24 67 51 General Selling Expense 655 183 187 159 Transportation Expense 429 23 243 150 Sales Office Depreciation 15 4 5 4 Total Selling Expense 1617 349 606 465

Admin and General Expense:

Research and Development 100 100 0 0 Total Training Expense 185 72 9 0 Storage Expense 29 4 12 9 Executive Compensation 276 117 43 36 Other Expense 78 78 0 0 Total Admin & Gen Expense 668 371 64 46 Total Operating Expense 2285 720 670 510 Operating Profit (Loss) 1048 466 182 32

Other Income:

CD Interest 0 0 0 0 Capital Gain (Loss) 0 0 0 0

Other Expense:

Loan Interest 0 0 0 0 Bond Interest 20 20 0 0 Net Profit (Loss) Before Tax Less Income Tax Net Profit (Loss) After Tax Foreign Currency Adjustment Comprehensive Income (Loss)

Sereno

Ps000s 11.83 14964 7208 0 11786 1497 8889

175 196 299 1489 151 29 2338

0 1234 41 932 0 2208 4546 4343

0 0

0 0

1028 355 673 2947 -­‐2274

446 122 324 0 324

182 71 112 0 112

32 15 17 0 17

4343 1740 2604 0

2604

70

MGMT 497 – ITM CORPORATION TWO YEAR PLAN In The Middle Inc. Consolidated Quarterly Income Statement As Year 6 Quarter 1 World 11 Company 1

Consolidated

Merica 1

Merica 2

Merica 3

Y6Q1 M$000s M$000s M$000s M$000s exchange rate 1 1 1 Net Sales:

to Customers 5769 1714 1813 1231 to Affiliates (cost + 20%) 0 1351 0 0 to Liquidators (at cost) 0 0 0 0 Less Cost of Goods Sold 3021 2113 1115 836 Less Value Added Tax 101 0 0 0 Gross Profit 2647 952 698 395

Selling Expense:

Advertising Expense 201 70 58 58 Sales Salaries 127 42 40 32 Sales Commissions 137 25 54 37 General Selling Expense 515 147 152 115 Transportation Expense 336 18 198 109 Sales Office Depreciation 12 3 4 3 Total Selling Expense 1326 305 507 354

Admin and General Expense:

Research and Development 100 100 0 0 Total Training Expense 159 72 7 0 Storage Expense 23 3 10 7 Executive Compensation 218 94 35 26 Other Expense 65 65 0 0 Total Admin & Gen Expense 565 334 52 33 Total Operating Expense 1891 639 559 387 Operating Profit (Loss) 756 313 140 8

Other Income:

CD Interest 0 0 0 0 Capital Gain (Loss) 0 0 0 0

Other Expense:

Loan Interest 0 0 0 0 Bond Interest 20 20 0 0

Net Profit (Loss) Before Tax 736 293 140 8 Less Income Tax 288 98 59 11 Net Profit (Loss) After Tax 448 196 81 -­‐4

Foreign Currency Adjustment 57 0 0 0

Comprehensive Income (Loss) 391 196 81 -­‐4

Sereno

Ps000s 12 12126 5917 0 9612 1213 7218

180 158 243 1202 122 23 1927

0 958 34 753 0 1744 3672 3546

0 0

0 0 3546 1435 2111 0 2111

71

MGMT 497 – ITM CORPORATION TWO YEAR PLAN In The Middle Inc. Consolidated Quarterly Income Statement As Year 6 Quarter 2 World 11 Company 1

Consolidated

Merica 1

Merica 2

Merica 3

Y6Q2 M$000s M$000s M$000s M$000s exchange rate 1 1 1 Net Sales:

to Customers 6323 1934 2033 1330 to Affiliates (cost + 20%) 0 1484 0 0 to Liquidators (at cost) 0 0 0 0 Less Cost of Goods Sold 3326 2351 1247 902 Less Value Added Tax 103 0 0 0 Gross Profit 2894 1068 786 428

Selling Expense:

Advertising Expense 205 72 60 60 Sales Salaries 139 47 44 35 Sales Commissions 147 26 61 40 General Selling Expense 561 165 170 124 Transportation Expense 370 21 222 117 Sales Office Depreciation 13 4 4 3 Total Selling Expense 1435 334 562 379

Admin and General Expense:

Research and Development 100 100 0 0 Total Training Expense 155 72 7 0 Storage Expense 26 4 12 8 Executive Compensation 236 106 39 28 Other Expense 76 76 0 0 Total Admin & Gen Expense 594 358 58 36 Total Operating Expense 2030 691 620 415 Operating Profit (Loss) 864 376 166 13

Other Income:

CD Interest 0 0 0 0 Capital Gain (Loss) 0 0 0 0

Other Expense:

Loan Interest 0 0 0 0 Bond Interest 15 15 0 0

Net Profit (Loss) Before Tax 849 361 166 13 Less Income Tax 314 109 68 13 Net Profit (Loss) After Tax 535 253 98 0

Foreign Currency Adjustment 436 0 0 0

Comprehensive Income (Loss) 99 253 98 0

Sereno

Ps000s 13.5 13846 6872 0 11069 1385 8263

185 178 277 1366 139 26 2172

0 1031 39 855 0 1924 4096 4167

0 0

0 0 4167 1678 2490 0 2490

72

MGMT 497 – ITM CORPORATION TWO YEAR PLAN In The Middle Inc. Consolidated Quarterly Income Statement As Year 6 Quarter 3 World 11 Company 1

Consolidated

Merica 1

Merica 2

Merica 3

Y6Q3 M$000s M$000s M$000s M$000s exchange rate 1 1 1 Net Sales:

to Customers 5810 1791 1879 1297 to Affiliates (cost + 20%) 0 1409 0 0 to Liquidators (at cost) 0 0 0 0 Less Cost of Goods Sold 3089 2206 1155 881 Less Value Added Tax 84 0 0 0 Gross Profit 2637 995 724 416

Selling Expense:

Advertising Expense 208 74 61 61 Sales Salaries 130 43 41 34 Sales Commissions 138 26 56 39 General Selling Expense 516 154 158 121 Transportation Expense 348 19 205 115 Sales Office Depreciation 12 3 4 3 Total Selling Expense 1352 319 526 373

Admin and General Expense:

Research and Development 100 100 0 0 Total Training Expense 145 72 7 0 Storage Expense 24 3 11 7 Executive Compensation 215 98 36 28 Other Expense 68 68 0 0 Total Admin & Gen 552 342 54 35 Expense Total Operating Expense 1904 661 580 408 Operating Profit (Loss) 733 333 144 8

Other Income:

CD Interest 0 0 0 0 Capital Gain (Loss) 0 0 0 0

Other Expense:

Loan Interest 0 0 0 0 Bond Interest 15 15 0 0

Net Profit (Loss) Before Tax 718 318 144 8 Less Income Tax 275 102 61 12 Net Profit (Loss) After Tax 443 217 83 -­‐4

Foreign Currency Adjustment 372 0 0 0

Comprehensive Income 71 217 83 -­‐4 (Loss)

Sereno

Ps000s 15.1 12728 6219 0 10097 1273 7578

191 165 255 1261 128 24 2024

0 1001 35 790 0 1826 3850 3727

0 0

0 0 3870 1509 2360 0 2360

73

MGMT 497 – ITM CORPORATION TWO YEAR PLAN In The Middle Inc. Consolidated Quarterly Income Statement As Year 6 Quarter 4
World
11 Company 1

Y6Q4 exchange rate Net Sales: to Customers to Affiliates (cost + 20%) to Liquidators (at cost) Less Cost of Goods Sold Less Value Added Tax Gross Profit Selling Expense: Advertising Expense Sales Salaries Sales Commissions General Selling Expense Transportation Expense Sales Office Depreciation Total Selling Expense Admin and General Expense: Research and Development Total Training Expense Storage Expense Executive Compensation Other Expense Total Admin & Gen Expense Total Operating Expense Operating Profit (Loss) Other Income: CD Interest Capital Gain (Loss) Other Expense: Loan Interest Bond Interest Net Profit (Loss) Before Tax Less Income Tax Net Profit (Loss) After Tax Foreign Currency Adjustment Comprehensive Income (Loss) 383 333 391

7734 0 0 4140 102 3492

220 173 176 685 468 16 1739 100 160 32 283 93 668 2407 1085

0 0

0 10 1075 359 716 0 129 528 137 391 0 14

0 10 212 83 129 0 3223

0 0

0 0 30 17 14 0

100 72 5 133 93 402 804 538

0 0

0 0 5284 2061 3223

78 59 27 207 26 5 402

0 9 14 49 0 73 762 212

0 0

0 0 Consolidated

M$000s 2422 1891 0 2971 0 1343

65 55 76 212 276 5 689

0 0 10 38 0 48 537 30

0 0 Merica 1

M$000s 1 2524 0 0 1551 0 974

65 46 53 165 156 4 489

0 1336 48 1070 0 2453 5140 5147 Merica 2

M$000s 1 1766 0 0 1199 0 567

202 224 345 1709 174 33 2686 Merica 3

M$000s 1 17266 8477 0 13729 1727 10287 Sereno

Ps000s 16.9

74

MGMT 497 – ITM CORPORATION TWO YEAR PLAN In The Middle Inc. Consolidated Annual Income Statement For the Ending of Year 5 World 11 Company 1

Consolidated

Quarter 1

Quarter 2

YR5 M$000s M$000s M$000s Net Sales:

to Customers 25834 5861 6585 to Affiliates (cost + 20%) 0 0 0 to Liquidators (at cost) 0 0 0 Less Cost of Goods Sold 13096 2929 3276 Less Value Added Tax 634 161 184 Gross Profit 12104 2771 3126

Selling Expense: Advertising Expense 762 185 191 Sales Salaries 551 125 140 Sales Commissions 523 91 123 General Selling Expense 2338 537 604 Transportation Expense 1406 311 346 Sales Office Depreciation 53 12 14 Total Selling Expense 5633 1261 1417

Admin and General Expense: Research and 400 100 100 Development Total Training Expense 841 228 250 Storage Expense 100 21 24 Executive Compensation 1032 242 273 Other Expense 252 49 56 Total Admin & Gen 2624 640 703 Expense Total Operating Expense 8256 1901 2120 Operating Profit (Loss) 3848 869 1005

Other Income: CD Interest 0 0 0 Capital Gain (Loss) 0 0 0

Other Expense: Loan Interest 0 0 0 Bond Interest 108 38 25

Net Profit (Loss) Before Tax 3740 831 980 Less Income Tax 1409 322 366 Net Profit (Loss) After Tax 2331 510 615

Foreign Currency 3510 208 44 Adjustment Comprehensive Income -1179 302 571 (Loss)

Quarter 3

M$000s 6084 0 0 3045 163 2875

195 125 142 542 321 12 1337

100 177 26 241 69 613 1950 926

0 0

0 25 901 367 533 311 222

Quarter 4

M$000s 7304 0 0 3845 127 3333

190 162 167 655 429 15 1617

100 185 29 276 78 668

2285 1048

0 0

0 20

1028 355 673

2947

-­‐2274

75

MGMT 497 – ITM CORPORATION TWO YEAR PLAN In The Middle Inc. Consolidated Annual Income Statement For the Ending of Year 6 Consolidated

Quarter 1

Quarter 2

M$000s M$000s M$000s

25637 5769 6323 0 0 0 0 0 0 13577 3021 3326 390 101 103 11670 2647 2894

834 201 205 569 127 139 598 137 147 2277 515 561 1522 336 370 53 12 13 5853 1326 1435

400 100 100 620 159 155 105 23 26 952 218 236 302 65 76 2379 565 594 8232 1891 2030 3438 756 864

0 0 0 0 0 0

0 0 0 60 20 15

3378 736 849 1235 288 314 2143 448 535

1198 57 436

945 391 99

World 11 Compay 1

YR6 Net Sales: to Customers to Affiliates (cost + 20%) to Liquidators (at cost) Less Cost of Goods Sold Less Value Added Tax Gross Profit Selling Expense: Advertising Expense Sales Salaries Sales Commissions General Selling Expense Transportation Expense Sales Office Depreciation Total Selling Expense Admin and General Expense: Research and Development Total Training Expense Storage Expense Executive Compensation Other Expense Total Admin & Gen Expense Total Operating Expense Operating Profit (Loss) Other Income: CD Interest Capital Gain (Loss) Other Expense: Loan Interest Bond Interest Net Profit (Loss) Before Tax Less Income Tax Net Profit (Loss) After Tax Foreign Currency Adjustment Comprehensive Income (Loss)

Quarter 3

M$000s 5810 0 0 3089 84 2637

208 130 138 516 348 12 1352

100 145 24 215 68 552 1904 733

0 0

0 15 718 275 443 372 71

Quarter 4

M$000s 7734 0 0 4140 102 3492

220 173 176 685 468 16 1739

100 160 32 283 93 668 2407 1085

0 0

0 10 1075 359 716 333 383

76

MGMT 497 – ITM CORPORATION TWO YEAR PLAN World 11 Company 1 Year 3 Quarter 1 CONSOLIDATED CASH FLOW ANALYSIS 10-10-2013 B BUSINESS POLICY GAME, 6TH EDITION 15:18:26 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno M$000s M$000s M$000s M$000s Ps000s Operating Receipts: Accounts Collected CD Interest Net Sales to Affiliates Sales to Liquidators Subsidiary Dividends Rec'd Operating Expenditures: Interest Paid Production Cost Purchases from Affiliates Operating Expense Taxes Paid Net Operating Cash Flow Investment Receipts: CDs Matured Fixed Assets Sold Investment Expenditures CDs Purchased New Equipment Sales Office Investment Plant Investment Subsidiary Stock Purchased Other Investments Net Investment Cash Flow Financing Receipts: Loans from Bank Stock Sold to Parent Bond Sale Stock Sale Financing Expenditures: Dividends Paid Dividends to Parent Bank Loans Repaid Bonds Repurchased Stock Repurchased Net Financing Cash Flow

3380 36 0 0 0 50 1323 0 1334 299 410

905 36 1233 0 61 50 1323 0 534 86 242

871 0 0 0 0 0 0 576 290 51 -46

910 0 0 0 0 0 0 565 293 51 1

4163 0 0 0 0 0 0 555 1302 668 1638

1000 0 1500 0 0 0 0 0 -500

1000 0 1500 0 0 0 0 0 -500

0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 1 0 0 0 -1

0 0 0 0 0 358 0 0 0 -358

Beginning Cash Balance 3066 2729 100 100 823 Net Cash Flow for Quarter -90 -258 -46 0 1280 Cash Balance End of Quarter 2976 2471 54 100 2103 ---------------------------------------------------------------------------Notes: Translation Exchange Rate 1.00 1.00 1.00 6.00

77

MGMT 497 – ITM CORPORATION TWO YEAR PLAN World 11 Company 1 Year 3 Quarter 2 CONSOLIDATED CASH FLOW ANALYSIS 10-14-2013 B BUSINESS POLICY GAME, 6TH EDITION 14:17:10 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno M$000s M$000s M$000s M$000s Ps000s Operating Receipts: Accounts Collected CD Interest Net Sales to Affiliates Sales to Liquidators Subsidiary Dividends Rec'd Operating Expenditures: Interest Paid Production Cost Purchases from Affiliates Operating Expense Taxes Paid Net Operating Cash Flow Investment Receipts: CDs Matured Fixed Assets Sold Investment Expenditures CDs Purchased New Equipment Sales Office Investment Plant Investment Subsidiary Stock Purchased Other Investments Net Investment Cash Flow Financing Receipts: Loans from Bank Stock Sold to Parent Bond Sale Stock Sale Financing Expenditures: Dividends Paid Dividends to Parent Bank Loans Repaid Bonds Repurchased Stock Repurchased Net Financing Cash Flow

3696 30 0 0 0 50 1698 0 1575 184 219

1009 30 1847 0 0 50 1698 0 666 25 447

885 0 0 0 0 0 0 574 300 16 -5

994 0 0 0 0 0 0 713 312 28 -59

4830 0 0 0 0 0 0 3350 1779 685 -984

1500 0 1200 0 0 902 0 0 -602

1500 0 1200 0 0 0 715 0 -415

0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0

0 0 0 0 0 5392 0 0 -5392

0 0 0 1037 0 0 0 0 0 1037

0 0 0 1037 0 0 0 0 0 1037

0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0

0 4273 0 0 0 0 0 0 0 4273

Beginning Cash Balance 2977 2471 54 100 2103 Net Cash Flow for Quarter 654 1069 -5 -59 -2103 Cash Balance End of Quarter 3630 3540 49 41 0 ---------------------------------------------------------------------------Notes: Translation Exchange Rate 1.00 1.00 1.00 5.98

78

MGMT 497 – ITM CORPORATION TWO YEAR PLAN World 11 Company 1 Year 3 Quarter 3 CONSOLIDATED CASH FLOW ANALYSIS 10-18-2013 B BUSINESS POLICY GAME, 6TH EDITION 15:43:12 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno M$000s M$000s M$000s M$000s Ps000s Operating Receipts: Accounts Collected CD Interest Net Sales to Affiliates Sales to Liquidators Subsidiary Dividends Rec'd Operating Expenditures: Interest Paid Production Cost Purchases from Affiliates Operating Expense Taxes Paid Net Operating Cash Flow Investment Receipts: CDs Matured Fixed Assets Sold Investment Expenditures CDs Purchased New Equipment Sales Office Investment Plant Investment Subsidiary Stock Purchased Other Investments Net Investment Cash Flow Financing Receipts: Loans from Bank Stock Sold to Parent Bond Sale Stock Sale Financing Expenditures: Dividends Paid Dividends to Parent Bank Loans Repaid Bonds Repurchased Stock Repurchased Net Financing Cash Flow

4013 22 0 0 0 38 1834 0 1622 222 319

1063 22 1637 0 105 38 1834 0 646 49 260

959 0 0 0 0 0 0 503 308 20 128

1017 0 0 0 0 0 0 582 317 31 87

5837 0 0 0 0 0 0 3308 2102 730 -303

1200 0 1000 0 0 935 0 0 -735

1200 0 1000 0 0 0 985 0 -785

0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0

0 0 0 0 0 5600 0 0 -5600

0 0 0 0 0 0 0 500 0 -500

0 0 0 0 0 0 0 500 0 -500

0 0 0 0 0 77 0 0 0 -77

0 0 0 0 0 28 0 0 0 -28

0 5903 0 0 0 0 0 0 0 5903

Beginning Cash Balance 3630 3540 49 41 0 Net Cash Flow for Quarter -916 -1025 51 59 0 Cash Balance End of Quarter 2715 2515 100 100 0 ---------------------------------------------------------------------------Notes: Translation Exchange Rate 1.00 1.00 1.00 5.99

79

MGMT 497 – ITM CORPORATION TWO YEAR PLAN World 11 Company 1 Year 3 Quarter 4 CONSOLIDATED CASH FLOW ANALYSIS 10-21-2013 B BUSINESS POLICY GAME, 6TH EDITION 14:24:56 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno M$000s M$000s M$000s M$000s Ps000s Operating Receipts: Accounts Collected CD Interest Net Sales to Affiliates Sales to Liquidators Subsidiary Dividends Rec'd Operating Expenditures: Interest Paid Production Cost Purchases from Affiliates Operating Expense Taxes Paid Net Operating Cash Flow Investment Receipts: CDs Matured Fixed Assets Sold Investment Expenditures CDs Purchased New Equipment Sales Office Investment Plant Investment Subsidiary Stock Purchased Other Investments Net Investment Cash Flow Financing Receipts: Loans from Bank Stock Sold to Parent Bond Sale Stock Sale Financing Expenditures: Dividends Paid Dividends to Parent Bank Loans Repaid Bonds Repurchased Stock Repurchased Net Financing Cash Flow

4399 0 0 0 0 64 2276 0 1769 168 122

1100 0 2282 0 0 64 2276 0 579 46 417

1081 0 0 0 0 0 0 872 328 17 -136

1076 0 0 0 0 0 0 756 331 14 -25

6854 0 0 0 0 0 0 3921 3185 547 -799

1000 0 0 1126 0 976 0 0 -1102

1000 0 0 0 0 0 2271 0 -1271

0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0

0 0 0 6756 0 5855 0 0 -12611

1296 0 0 0 0 0 0 0 0 1296

1296 0 0 0 0 0 0 0 0 1296

0 36 0 0 0 0 0 0 0 36

0 0 0 0 0 0 0 0 0 0

0 13410 0 0 0 0 0 0 0 13410

Beginning Cash Balance 2715 2515 100 100 0 Net Cash Flow for Quarter 316 442 -100 -25 0 Cash Balance End of Quarter 3032 2957 0 75 0 ---------------------------------------------------------------------------Notes: Translation Exchange Rate 1.00 1.00 1.00 6.00

80

MGMT 497 – ITM CORPORATION TWO YEAR PLAN In The Middle Inc. Consolidated Cash Flow Analysis For the Ending Year 3
World
11 Company 1 Consolidated

Quarter 1

Quarter 2

Quarter 3

Quarter 4

M$000s M$000s M$000s M$000s M$000s

15488 88 0 0 0 0 202 7131 0 6300 873 1070 0 0 4700 0 0 3700 1126 0 2813 0 0 -­‐2939 0 0 1296 0 0 1037 0 0 0 0 500 0 1833 0 12388 -­‐36 12353 3380 36 0 0 0 50 1323 0 1334 299 410

1000 0 1500 0 0 0 0 0 -­‐500

0 0 0 0 0 0 0 0 0 0 3066 -­‐90 2976 3696 30 0 0 0 50 1698 0 1575 184 219

1500 0 1200 0 0 902 0 0 -­‐602

0 0 0 1037 0 0 0 0 0 1037 2977 654 3630 3630 -­‐916 2715 0 0 0 500 0 -­‐500 2715 316 3032

0 0 0 0 0 0 0 0 0 1296 1000 0 0 935 0 0 -­‐735

1296 0 0 0

1200 0 0 1126 0 976 0 0 -­‐1102 38 1834 0 1622 222 319

1000 0 4013 22 0 0 0 64 2276 0 1769 168 122 4399 0 0 0 0

Operating Receipts: Accounts Collected CD Interest Net Sales to Affiliates Sales to Liquidators Subsidiary Dividends Rec'd Operating Expenditures: Interest Paid Production Cost Purchases from Affiliates Operating Expense Taxes Paid Net Operating Cash Flow Investment Receipts: CDs Matured Fixed Assets Sold Investment Expenditures CDs Purchased New Equipment Sales Office Investment Plant Investment Subsidiary Stock Purchased Other Investments Net Investment Cash Flow Financing Receipts: Loans from Bank Stock Sold to Parent Bond Sale Stock Sale Financing Expenditures: Dividends Paid Dividends to Parent Bank Loans Repaid Bonds Repurchased Stock Repurchased Net Financing Cash Flow Beginning Cash Balance Net Cash Flow for Quarter Cash Balance End of Quarter

81

MGMT 497 – ITM CORPORATION TWO YEAR PLAN World 11 Company 1 Year 4 Quarter 1 CONSOLIDATED CASH FLOW ANALYSIS 10-24-2013 B BUSINESS POLICY GAME, 6TH EDITION 14:24:39 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno M$000s M$000s M$000s M$000s Ps000s Operating Receipts: Accounts Collected CD Interest Net Sales to Affiliates Sales to Liquidators Subsidiary Dividends Rec'd Operating Expenditures: Interest Paid Production Cost Purchases from Affiliates Operating Expense Taxes Paid Net Operating Cash Flow Investment Receipts: CDs Matured Fixed Assets Sold Investment Expenditures CDs Purchased New Equipment Sales Office Investment Plant Investment Subsidiary Stock Purchased Other Investments Net Investment Cash Flow Financing Receipts: Loans from Bank Stock Sold to Parent Bond Sale Stock Sale Financing Expenditures: Dividends Paid Dividends to Parent Bank Loans Repaid Bonds Repurchased Stock Repurchased Net Financing Cash Flow

4862 0 0 0 0 38 2191 0 1615 254 764

1199 0 1462 0 207 38 1931 0 555 76 268

1179 0 0 0 0 0 0 705 326 11 137

1121 0 0 0 0 0 0 637 321 19 144

8207 0 0 0 0 0 1564 723 2486 893 2541

0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 1296 0 0 -1296

0 0 0 0 0 0 1296 0 0 -1296

0 0 0 0 0 37 0 0 0 -37

0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 1021 0 0 0 -1021

Beginning Cash Balance 3032 2957 0 75 0 Net Cash Flow for Quarter -532 -1028 100 144 1520 Cash Balance End of Quarter 2500 1929 100 219 1520 ---------------------------------------------------------------------------Notes: Translation Exchange Rate 1.00 1.00 1.00 6.02 Minor differences in totals & translation may be due to rounding errors. Purchases from Affiliates consolidated with Sales to Affiliates. Dividends to Parent consolidated with Dividends from Subsidiaries. Stock sold to Parent consolidated with Stock Purchased in Subsidiaries.

82

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

World 11 Company 1 Year 4 Quarter 2 CONSOLIDATED CASH FLOW ANALYSIS 10-28-2013 B BUSINESS POLICY GAME, 6TH EDITION 14:37:56 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno M$000s M$000s M$000s M$000s Ps000s Operating Receipts: Accounts Collected CD Interest Net Sales to Affiliates Sales to Liquidators Subsidiary Dividends Rec'd Operating Expenditures: Interest Paid Production Cost Purchases from Affiliates Operating Expense Taxes Paid Net Operating Cash Flow Investment Receipts: CDs Matured Fixed Assets Sold Investment Expenditures CDs Purchased New Equipment Sales Office Investment Plant Investment Subsidiary Stock Purchased Other Investments Net Investment Cash Flow Financing Receipts: Loans from Bank Stock Sold to Parent Bond Sale Stock Sale Financing Expenditures: Dividends Paid Dividends to Parent Bank Loans Repaid Bonds Repurchased Stock Repurchased Net Financing Cash Flow

4908 0 0 0 0 38 2368 0 1737 279 486

1275 0 1709 0 79 38 1959 0 567 79 420

1233 0 0 0 0 0 0 939 344 4 -54

1122 0 0 0 0 0 0 823 339 0 -40

7744 0 323 0 0 0 2479 0 2954 1188 1446

0 0 0 1245 0 0 0 0 -1245

0 0 0 0 0 0 755 0 -755

0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0

0 0 0 7542 0 0 0 0 -7542

0 0 0 0 0 0 0 0 94 -94

0 0 0 0 0 0 0 0 94 -94

0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 79 0 0 0 -79

0 4576 0 0 0 0 0 0 0 4576

Beginning Cash Balance 2499 1929 100 219 1520 Net Cash Flow for Quarter -853 -429 -54 -119 -1520 Cash Balance End of Quarter 1646 1500 46 100 0 ---------------------------------------------------------------------------Notes: Translation Exchange Rate 1.00 1.00 1.00 6.06

83

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

World 11 Company 1 Year 4 Quarter 3 CONSOLIDATED CASH FLOW ANALYSIS 10-31-2013 B BUSINESS POLICY GAME, 6TH EDITION 17:25:14 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno M$000s M$000s M$000s M$000s Ps000s Operating Receipts: Accounts Collected CD Interest Net Sales to Affiliates Sales to Liquidators Subsidiary Dividends Rec'd Operating Expenditures: Interest Paid Production Cost Purchases from Affiliates Operating Expense Taxes Paid Net Operating Cash Flow Investment Receipts: CDs Matured Fixed Assets Sold Investment Expenditures CDs Purchased New Equipment Sales Office Investment Plant Investment Subsidiary Stock Purchased Other Investments Net Investment Cash Flow Financing Receipts: Loans from Bank Stock Sold to Parent Bond Sale Stock Sale Financing Expenditures: Dividends Paid Dividends to Parent Bank Loans Repaid Bonds Repurchased Stock Repurchased Net Financing Cash Flow

5258 0 0 0 0 60 2811 0 1872 362 153

1358 0 1717 0 0 60 2108 0 532 110 265

1285 0 0 0 0 0 0 1021 385 30 -151

1197 0 0 0 0 0 0 1113 369 7 -292

8667 0 2550 0 0 0 4296 0 3583 1316 2022

0 0 0 1316 0 0 0 0 -1316

0 0 0 0 0 0 1282 0 -1282

0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0

0 0 0 8040 0 0 0 0 -8040

1200 0 0 0 0 0 0 0 510 690

1200 0 0 0 0 0 0 0 510 690

0 105 0 0 0 0 0 0 0 105

0 192 0 0 0 0 0 0 0 192

0 6018 0 0 0 0 0 0 0 6018

Beginning Cash Balance 1646 1500 46 100 0 Net Cash Flow for Quarter -473 -327 -46 -100 0 Cash Balance End of Quarter 1173 1173 0 0 0 ---------------------------------------------------------------------------Notes: Translation Exchange Rate 1.00 1.00 1.00 6.11

84

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

World 11 Company 1 Year 4 Quarter 4 CONSOLIDATED CASH FLOW ANALYSIS 11-04-2013 B BUSINESS POLICY GAME, 6TH EDITION 14:48:14 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno M$000s M$000s M$000s M$000s Ps000s Operating Receipts: Accounts Collected CD Interest Net Sales to Affiliates Sales to Liquidators Subsidiary Dividends Rec'd Operating Expenditures: Interest Paid Production Cost Purchases from Affiliates Operating Expense Taxes Paid Net Operating Cash Flow Investment Receipts: CDs Matured Fixed Assets Sold Investment Expenditures CDs Purchased New Equipment Sales Office Investment Plant Investment Subsidiary Stock Purchased Other Investments Net Investment Cash Flow Financing Receipts: Loans from Bank Stock Sold to Parent Bond Sale Stock Sale Financing Expenditures: Dividends Paid Dividends to Parent Bank Loans Repaid Bonds Repurchased Stock Repurchased Net Financing Cash Flow

5834 0 0 0 0 47 3036 0 1851 328 572

1543 0 747 0 374 47 1766 0 598 103 150

1436 0 0 0 0 0 0 946 441 12 37

1303 0 0 0 0 0 0 935 387 0 -19

9682 0 7078 0 0 0 7924 0 2655 1329 4852

0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 19 0 -19

0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0

500 0 0 0 0 0 1200 0 0 -700

500 0 0 0 0 0 1200 0 0 -700

0 0 0 0 0 0 0 0 0 0

0 19 0 0 0 0 0 0 0 19

0 0 0 0 0 2336 0 0 0 -2336

Beginning Cash Balance 1173 1173 0 0 0 Net Cash Flow for Quarter -128 -569 37 0 2516 Cash Balance End of Quarter 1044 604 37 0 2516 ---------------------------------------------------------------------------Notes: Translation Exchange Rate 1.00 1.00 1.00 6.24

85

MGMT 497 – ITM CORPORATION TWO YEAR PLAN In The Middle Inc. Consolidated Cash Flow Analysis For the Ending Year 4
World
11 Company 1 Consolidated

Quarter 1

Quarter 2

Quarter 3

Quarter 4

M$000s M$000s M$000s M$000s M$000s

20862 0 0 0 0 0 183 10406 0 7075 1223 1975 0 0 0 0 0 0 2561 0 0 0 0 -­‐2561 0 0 1700 0 0 0 0 0 0 2496 0 604 -­‐1400 0 8350 -­‐1986 6363 4862 0 0 0 0 38 2191 0 1615 254 764

0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 1296 0 0 -­‐1296 3032 -­‐532 2500 2499 -­‐853 1646 0 0 0 0 94 -­‐94 1646 -­‐473 1173

0 0 0 0 0 0 0 0 510 690 1173 -­‐128 1044 0 1245 0 0 0 0 -­‐1245

1200 0 0 0 0 0 1200 0 0 -­‐700

0 0 0 1316 0 0 0 0 -­‐1316

500 0 0 0 38 2368 0 1737 279 486

0 0 0 0 0 0 0 0 0 4908 0 0 0 0 60 2811 0 1872 362 153

0 0 5258 0 0 0 0 47 3036 0 1851 328 572 5834 0 0 0 0

Operating Receipts: Accounts Collected CD Interest Net Sales to Affiliates Sales to Liquidators Subsidiary Dividends Rec'd Operating Expenditures: Interest Paid Production Cost Purchases from Affiliates Operating Expense Taxes Paid Net Operating Cash Flow Investment Receipts: CDs Matured Fixed Assets Sold Investment Expenditures CDs Purchased New Equipment Sales Office Investment Plant Investment Subsidiary Stock Purchased Other Investments Net Investment Cash Flow Financing Receipts: Loans from Bank Stock Sold to Parent Bond Sale Stock Sale Financing Expenditures: Dividends Paid Dividends to Parent Bank Loans Repaid Bonds Repurchased Stock Repurchased Net Financing Cash Flow Beginning Cash Balance Net Cash Flow for Quarter Cash Balance End of Quarter

86

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

In The Middle Inc.

Consolidated Cash Flow Analysis

year 5 Quarter 1

Consolidated M$000s 3430 0 2015 0 96 0 0 3163 2016 1901 466 505 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 500 0 0 -­‐500 0 1030 -­‐91 939 Rate Merica 1 M$000s 866 0 1272 0 96 0 1922 0 575 74 731

0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 500 0 0 -­‐500 604 135 739 1 Merica 2 M$000s 807 0 0 0 0 0 0 1105 472 80 -­‐18

0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 37 -­‐18 19 1

World 11 company 1

Operating Receipts: Accounts Collected CD Interest Net Sales to Affiliates Sales to Liquidators Subsidiary Dividends Rec'd Operating Expenditures: Interest Paid Production Cost Purchases from Affiliates Operating Expense Taxes Paid Net Operating Cash Flow Investment Receipts: CDs Matured Fixed Assets Sold Investment Expenditures CDs Purchased New Equipment Sales Office Investment Plant Investment Subsidiary Stock Purchased Other Investments Net Investment Cash Flow Financing Receipts: Loans from Bank Stock Sold to Parent Bond Sale Stock Sale Financing Expenditures: Dividends Paid Dividends to Parent Bank Loans Repaid Bonds Repurchased Stock Repurchased Net Financing Cash Flow Beginning Cash Balance Net Cash Flow for Quarter Cash Balance End of Quarter Notes: Translation Exchange

Merica 3 M$000s 716 0 0 0 0 0 0 911 360 23 2

0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0 0 2 2 1

Sereno Ps000s 6723 0 4803 0

0 8014 3191 1867 -­‐1358 0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0 2516 -­‐1358 1158 6.46

87

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

In The Middle Inc.

Consolidated Cash Flow Analysis

year 5 Quarter 2

Consolidated M$000s 2878 0 2287 0 0 0 0 3590 2288 2120 320 1041 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 500 568 -­‐1068 0 938 -­‐27 912 Rate 622 1436 0 0 0 2169 0 620 89 926

0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 500 568 -­‐1068 739 -­‐142 597 1 19 9 28 1 0 0 0 0 0 0

0 0 0 0

0 0 0 0 0 0 0 0 0 0 0 0 1116 531 46 9 Merica 1 M$000s 718 0 0 0 0 Merica 2 M$000s

World 11 Company 1

Operating Receipts: Accounts Collected CD Interest Net Sales to Affiliates Sales to Liquidators Subsidiary Dividends Rec'd Operating Expenditures: Interest Paid Production Cost Purchases from Affiliates Operating Expense Taxes Paid Net Operating Cash Flow Investment Receipts: CDs Matured Fixed Assets Sold Investment Expenditures CDs Purchased New Equipment Sales Office Investment Plant Investment Subsidiary Stock Purchased Other Investments Net Investment Cash Flow Financing Receipts: Loans from Bank Stock Sold to Parent Bond Sale Stock Sale Financing Expenditures: Dividends Paid Dividends to Parent Bank Loans Repaid Bonds Repurchased Stock Repurchased Net Financing Cash Flow Beginning Cash Balance Net Cash Flow for Quarter Cash Balance End of Quarter

Merica 3 M$000s

Sereno Ps000s 5762 0 5534 0

652 0 0 0 0

0 0 1172 384 10 2 0 0 0 0 0 0 0 0 0 0

0 9234 3804 1141 679 0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0 2 2 4 1

0 0 0 0 0 0 0 0 0 0 0 1158 679 1837 6.5

88

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

In The Middle Inc.

Consolidated Cash Flow Analysis

year 5 Quarter 3 Consolidated M$000s 3033 0 1939 0 0 0 0 3131 1961 1938 352 -­‐15 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 694 1117 0 0 0 1835 0 605 100 21

0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0

0 0 0 0

0 0 0 0 0 0 0 0 0 0 0 0 995 504 53 -­‐1 Merica 1 M$000s 760 0 0 0 0 Merica 2 M$000s

World 11 Company 1

Operating Receipts: Accounts Collected CD Interest Net Sales to Affiliates Sales to Liquidators Subsidiary Dividends Rec'd Operating Expenditures: Interest Paid Production Cost Purchases from Affiliates Operating Expense Taxes Paid Net Operating Cash Flow Investment Receipts: CDs Matured Fixed Assets Sold Investment Expenditures CDs Purchased New Equipment Sales Office Investment Plant Investment Subsidiary Stock Purchased Other Investments Net Investment Cash Flow Financing Receipts: Loans from Bank Stock Sold to Parent Bond Sale Stock Sale Financing Expenditures: Dividends Paid Dividends to Parent Bank Loans Repaid Bonds Repurchased Stock Repurchased Net Financing Cash Flow

Merica 3 M$000s

684 0 0 0 0

0 0 966 380 10 -­‐1 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0

Sereno Ps000s 6242 0 5731 0

0 9030 3127 1314 -­‐239 0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0

89

MGMT 497 – ITM CORPORATION TWO YEAR PLAN Beginning Cash Balance Net Cash Flow for Quarter Cash Balance End of Quarter Notes: Translation Exchange 895 -­‐15 879 Rate 597 21 618 1 28 -­‐1 27 1 6 -­‐1 5 1 1837 -­‐239 1598 6.97

90

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

In The Middle Inc.

Consolidated Cash Flow Analysis year 5 Quarter 4 World 11 Company 1

Operating Receipts: Accounts Collected CD Interest Net Sales to Affiliates Sales to Liquidators Subsidiary Dividends Rec'd Operating Expenditures: Interest Paid Production Cost Purchases from Affiliates Operating Expense Taxes Paid Net Operating Cash Flow Investment Receipts: CDs Matured Fixed Assets Sold Investment Expenditures CDs Purchased New Equipment Sales Office Investment Plant Investment Subsidiary Stock Purchased Other Investments Net Investment Cash Flow Financing Receipts: Loans from Bank Stock Sold to Parent Bond Sale Stock Sale Financing Expenditures: Dividends Paid Dividends to Parent Bank Loans Repaid Bonds Repurchased Stock Repurchased Net Financing Cash Flow Beginning Cash Balance Net Cash Flow for Quarter Cash Balance End of Quarter Notes: Translation Exchange Rate

Consolidated M$000s 2572 0 2318 0 0 0 0 3645 2318 2284 278 45

0

Merica 1 M$000s 658 1709 0 0 0 2649 0 720 85 19

0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 618 19 637 1

Merica 2 M$000s 739 0 0 0 0 0 0 991 670 60 7

0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 27 7 34 1

Merica 3 M$000s 668 0 0 0 0

0 0 1327 510 13 5 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0 4 5 9 1

Sereno Ps000s 6002 0 7208 0

0 11786 4546 1422 170 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1598 170 1768 11.83

0 0 0 0 0 0 0 0 0 0

0 0 0

0 0 0 0 0 0 0 0 0 0 784 45 829

91

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

In The Middle Inc.

Consolidated Cash Flow

year 6 Quarter 1

Consolidated M$000s 2620 0 1844 0 0 0 0 2914 1844 1891 353 -­‐50 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 328 -­‐328 676 1351 0 0 0 2113 0 639 122 -­‐39

0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 328 -­‐328 0 0 0 0 0 0

0 0 0 0

0 0 0 0 0 0 0 0 0 0 0 0 694 559 71 -­‐6 Merica 1 M$000s 749 0 0 0 0 Merica 2 M$000s

World 11 Company 1

Operating Receipts: Accounts Collected CD Interest Net Sales to Affiliates Sales to Liquidators Subsidiary Dividends Rec'd Operating Expenditures: Interest Paid Production Cost Purchases from Affiliates Operating Expense Taxes Paid Net Operating Cash Flow Investment Receipts: CDs Matured Fixed Assets Sold Investment Expenditures CDs Purchased New Equipment Sales Office Investment Plant Investment Subsidiary Stock Purchased Other Investments Net Investment Cash Flow Financing Receipts: Loans from Bank Stock Sold to Parent Bond Sale Stock Sale Financing Expenditures: Dividends Paid Dividends to Parent Bank Loans Repaid Bonds Repurchased Stock Repurchased Net Financing Cash Flow

Merica 3 M$000s

Sereno Ps000s 6222 0 5917 0

676 0 0 0 0

0 0 1150 387 15 2 0 0 0 0 0 0 0 0 0 0

0 9612 3672 1740 -­‐85 0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0

92

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

Beginning Cash Balance Net Cash Flow for Quarter Cash Balance End of Quarter Notes: Translation Exchange 0 823 -­‐378 445 Rate 637 -­‐367 270 1 34 -­‐6 28 1 5 2 7 1 1768 -­‐85 1683 12

93

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

In The Middle Inc.

Consolidated Cash Flow

year 6 Quarter 2

Consolidated M$000s 2536 0 1993 0 0 0 0 3171 1994 2029 274 397 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 200 0 -­‐200 0 667 1484 0 0 0 2351 0 691 98 384

0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 200 0 -­‐200

0 0 0 0 0 0

0 0 0 0

0 0 0 0 0 0 0 0 0 0 0 0 869 620 59 3 Merica 1 M$000s 744 0 0 0 0 Merica 2 M$000s

World 11 Company 1

Operating Receipts: Accounts Collected CD Interest Net Sales to Affiliates Sales to Liquidators Subsidiary Dividends Rec'd Operating Expenditures: Interest Paid Production Cost Purchases from Affiliates Operating Expense Taxes Paid Net Operating Cash Flow Investment Receipts: CDs Matured Fixed Assets Sold Investment Expenditures CDs Purchased New Equipment Sales Office Investment Plant Investment Subsidiary Stock Purchased Other Investments Net Investment Cash Flow Financing Receipts: Loans from Bank Stock Sold to Parent Bond Sale Stock Sale Financing Expenditures: Dividends Paid Dividends to Parent Bank Loans Repaid Bonds Repurchased Stock Repurchased Net Financing Cash Flow

Merica 3 M$000s

Sereno Ps000s 6112 0 6872 0

672 0 0 0 0

0 0 1125 415 11 4 0 0 0 0 0 0 0 0 0 0

0 11069 4096 1435 82 0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0

94

MGMT 497 – ITM CORPORATION TWO YEAR PLAN Beginning Cash Balance Net Cash Flow for Quarter Cash Balance End of Quarter 432 197 629 Rate 270 184 454 1 28 3 31 1 9 4 13 1 1683 82 1765 13.5

95

MGMT 497 – ITM CORPORATION TWO YEAR PLAN In The Middle Inc. Consolidated Cash Flow

year 6 Quarter 3

World 11 Company 1

Operating Receipts: Accounts Collected CD Interest Net Sales to Affiliates Sales to Liquidators Subsidiary Dividends Rec'd Operating Expenditures: Interest Paid Production Cost Purchases from Affiliates Operating Expense Taxes Paid Net Operating Cash Flow Investment Receipts: CDs Matured Fixed Assets Sold Investment Expenditures CDs Purchased New Equipment Sales Office Investment Plant Investment Subsidiary Stock Purchased Other Investments Net Investment Cash Flow Financing Receipts: Loans from Bank Stock Sold to Parent Bond Sale Stock Sale Financing Expenditures: Dividends Paid Dividends to Parent Bank Loans Repaid Bonds Repurchased Stock Repurchased Net Financing Cash Flow Beginning Cash Balance Net Cash Flow for Quarter Cash Balance End of Quarter Notes: Translation Exchange

Consolidated M$000s 2503 0 1821 0 0 0 0 2875 1820 1904 301 174 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 363 -­‐363 0 609 -­‐189 420 Rate

Merica 1 M$000s 671 1409 0 0 0 2206 0 661 109 171

0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 363 -­‐363 454 -­‐192 262 1

Merica 2 M$000s 747 0 0 0 0 0 0 552 580 68 3

0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 31 3 34 1

Merica 3 M$000s

Sereno Ps000s 6215 0 6219 0

674 0 0 0 0

0 0 1268 408 13 3 0 0 0 0 0 0 0 0 0 0

0 10097 3850 1678 -­‐41 0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0 7 3 10 1

0 0 0 0 0 0 0 0 0 0 0 1765 -­‐41 1724 15.1

96

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

World 11 Company 1

Operating Receipts: Accounts Collected CD Interest Net Sales to Affiliates Sales to Liquidators Subsidiary Dividends Rec'd Operating Expenditures: Interest Paid Production Cost Purchases from Affiliates Operating Expense Taxes Paid Net Operating Cash Flow Investment Receipts: CDs Matured Fixed Assets Sold Investment Expenditures CDs Purchased New Equipment Sales Office Investment Plant Investment Subsidiary Stock Purchased Other Investments Net Investment Cash Flow Financing Receipts: Loans from Bank Stock Sold to Parent Bond Sale Stock Sale Financing Expenditures: Dividends Paid Dividends to Parent Bank Loans Repaid Bonds Repurchased Stock Repurchased Net Financing Cash Flow Beginning Cash Balance Net Cash Flow for Quarter Cash Balance End of Quarter Notes: Translation Exchange

In The Middle Inc.

Consolidated Cash Flow

Year 6 Quarter 4

Merica 2 M$000s Merica 3 M$000s 745 0 0 0 0

Sereno Ps000s 6163 0 8477 0

Consolidated M$000s 2482 0 2393 0 0 0 0 3783 2393 2227 264 305 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 200 0 -­‐200 0 411 105 516 Rate

Merica 1 M$000s 699 1891 0 0 0 2971 0 804 102 296

0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 200 0 -­‐200 262 96 358 1

0 0 952 762 61 6

0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 34 6 40 1

673 0 0 0 0

0 0 1441 357 12 -­‐8 0 0 0 0 0 0 0 0 0 0

0 13729 5140 1509 185 0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0 13 -­‐8 5 1

0 0 0 0 0 0 0 0 0 0 0 1724 185 1909 16.9

97

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

In The Middle Inc. Consolidated Cash Flow Analysis For the Ending Year 5
World
11 Company 1

Y5 Operating Receipts: Accounts Collected CD Interest Net Sales to Affiliates Sales to Liquidators Subsidiary Dividends Rec'd Operating Expenditures: Interest Paid Production Cost Purchases from Affiliates Operating Expense Taxes Paid Net Operating Cash Flow

Investment Receipts: CDs Matured Fixed Assets Sold Investment Expenditures CDs Purchased New Equipment Sales Office Investment Plant Investment Subsidiary Stock Purchased Other Investments Net Investment Cash Flow

Financing Receipts: Loans from Bank Stock Sold to Parent Bond Sale Stock Sale Financing Expenditures: Dividends Paid Dividends to Parent Bank Loans Repaid Bonds Repurchased Stock Repurchased 11913 0 8559 0 96 0 0 13529 8583 8243 1416 1576 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 500 500 568 Consolidated

M$000s 3430 0 2015 0 96 0 0 3163 2016 1901 466 505 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 500 0 0 Quarter 1

M$000s 2878 0 2287 0 0 0 0 3590 2288 2120 320 1041 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 500 568 Quarter 2

M$000s 3033 0 1939 0 0 0 0 3131 1961 1938 352 -­‐15 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Quarter 3

M$000s 2572 0 2318 0 0 0 0 3645 2318 2284 278 45 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Quarter 4

M$000s

98

MGMT 497 – ITM CORPORATION TWO YEAR PLAN Net Financing Cash Flow

Beginning Cash Balance Net Cash Flow for Quarter Cash Balance End of Quarter -­‐1568 0 3647 -­‐88 3559 -­‐500 0 1030 -­‐91 939 -­‐1068 0 938 -­‐27 912 0 0 895 -­‐15 879 0 0 784 45 829

99

MGMT 497 – ITM CORPORATION TWO YEAR PLAN In The Middle Inc. Consolidated Cash Flow Analysis For the Ending Year 6 Consolidated

Quarter 1

Quarter 2

M$000s M$000s M$000s

10141 0 8051 0 0 0 0 12743 8051 8051 1192 826 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 400 691 -­‐1091 0 2620 0 1844 0 0 0 0 2914 1844 1891 353 -­‐50 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 328 -­‐328 0 2536 0 1993 0 0 0 0 3171 1994 2029 274 397 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 200 0 -­‐200 0 2503 0 1821 0 0 0 0 2875 1820 1904 301 174 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 363 -­‐363 0

World 11 Company 1

Y6 Operating Receipts: Accounts Collected CD Interest Net Sales to Affiliates Sales to Liquidators Subsidiary Dividends Rec'd Operating Expenditures: Interest Paid Production Cost Purchases from Affiliates Operating Expense Taxes Paid Net Operating Cash Flow

Investment Receipts: CDs Matured Fixed Assets Sold Investment Expenditures CDs Purchased New Equipment Sales Office Investment Plant Investment Subsidiary Stock Purchased Other Investments Net Investment Cash Flow

Financing Receipts: Loans from Bank Stock Sold to Parent Bond Sale Stock Sale Financing Expenditures: Dividends Paid Dividends to Parent Bank Loans Repaid Bonds Repurchased Stock Repurchased Net Financing Cash Flow

Quarter 3

M$000s

Quarter 4

M$000s 2482 0 2393 0 0 0 0 3783 2393 2227 264 305 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 200 0 -­‐200 0

100

MGMT 497 – ITM CORPORATION TWO YEAR PLAN Beginning Cash Balance Net Cash Flow for Quarter Cash Balance End of Quarter 2275 -­‐265 2010 823 -­‐378 445 432 197 629 609 -­‐189 420 411 105 516

101

MGMT 497 – ITM CORPORATION TWO YEAR PLAN World 11 Company 1 Year 3 Quarter 1 CONSOLIDATED BALANCE SHEET 10-10-2013 C BUSINESS POLICY GAME, 6TH EDITION 15:18:26 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno M$000s M$000s M$000s M$000s Ps000s ----- ASSETS ----Cash Balance Time Certificates of Deposit Accounts Receivable Inventory Total Current Assets Net Sales Office Net Manufacturing Plant Net Manufacturing Equipment Equity in Subsidiaries Other Investments Total Fixed Assets Total Assets 2976 1500 1690 614 6780 1489 3066 2037 0 2000 8592 15372 2471 1500 440 211 4622 373 3066 2037 2853 2000 10329 14951 54 0 405 207 666 373 0 0 0 0 373 1039 100 0 445 150 695 373 0 0 0 0 373 1068 2103 0 2398 278 4779 2221 0 0 0 0 2221 7000

----- LIABILITIES ----Accounts Payable Bank Loans Taxes Payable Total Current Liabilities Bonds Outstanding Total Liabilities Capital Stock Accumulated Earnings Accum. Foreign Cur. Adjust. Total Equity Total Liabilities & Equity 895 0 183 1078 2000 3078 9500 2798 -4 12294 15372 628 0 25 653 2000 2653 9500 2798 0 12298 14951 98 0 16 114 0 114 539 386 0 925 1039 99 0 28 127 0 127 539 402 0 941 1068 423 0 685 1108 0 1108 4573 1320 0 5893 7001

---------------------------------------------------------------------------Notes: Translation Exchange Rate 1.00 1.00 1.00 6.00

102

MGMT 497 – ITM CORPORATION TWO YEAR PLAN World 11 Company 1 Year 3 Quarter 2 CONSOLIDATED BALANCE SHEET 10-14-2013 C BUSINESS POLICY GAME, 6TH EDITION 14:17:10 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno M$000s M$000s M$000s M$000s Ps000s ----- ASSETS ----Cash Balance Time Certificates of Deposit Accounts Receivable Inventory Total Current Assets Net Sales Office Net Manufacturing Plant Net Manufacturing Equipment Equity in Subsidiaries Other Investments Total Fixed Assets Total Assets 3630 1200 2207 528 7565 1478 3942 1930 0 2000 9350 16915 3540 1200 569 99 5408 370 3040 1930 3679 2000 11019 16427 49 0 479 178 706 370 0 0 0 0 370 1076 41 0 549 165 755 370 0 0 0 0 370 1125 0 0 3648 512 4160 2202 5392 0 0 0 7594 11754

----- LIABILITIES ----Accounts Payable Bank Loans Taxes Payable Total Current Liabilities Bonds Outstanding Total Liabilities Capital Stock Accumulated Earnings Accum. Foreign Cur. Adjust. Total Equity Total Liabilities & Equity 1173 0 222 1395 2000 3395 10537 2985 -2 13520 16915 856 0 49 905 2000 2905 10537 2985 0 13522 16427 100 0 20 120 0 120 539 417 0 956 1076 105 0 31 136 0 136 539 450 0 989 1125 668 0 730 1398 0 1398 8846 1511 0 10357 11755

---------------------------------------------------------------------------Notes: Translation Exchange Rate 1.00 1.00 1.00 5.98

103

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

World 11 Company 1 Year 3 Quarter 3 CONSOLIDATED BALANCE SHEET 10-18-2013 C BUSINESS POLICY GAME, 6TH EDITION 15:43:12 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno M$000s M$000s M$000s M$000s Ps000s ----- ASSETS ----Cash Balance Time Certificates of Deposit Accounts Receivable Inventory Total Current Assets Net Sales Office Net Manufacturing Plant Net Manufacturing Equipment Equity in Subsidiaries Other Investments Total Fixed Assets Total Assets 2715 1000 1989 604 6308 1465 4835 1823 0 2000 10123 16431 2515 1000 493 169 4177 367 3014 1823 4607 2000 11811 15988 100 0 479 80 659 367 0 0 0 0 367 1026 100 0 469 165 734 367 0 0 0 0 367 1101 0 0 3283 1139 4422 2183 10905 0 0 0 13088 17510

----- LIABILITIES ----Accounts Payable Bank Loans Taxes Payable Total Current Liabilities Bonds Outstanding Total Liabilities Capital Stock Accumulated Earnings Accum. Foreign Cur. Adjust. Total Equity Total Liabilities & Equity 1126 0 168 1294 1500 2794 10537 3105 -5 13637 16431 800 0 46 846 1500 2346 10537 3105 0 13642 15988 103 0 17 120 0 120 539 367 0 906 1026 105 0 14 119 0 119 539 443 0 982 1101 706 0 547 1253 0 1253 14749 1509 0 16258 17511

---------------------------------------------------------------------------Notes: Translation Exchange Rate 1.00 1.00 1.00 5.99

104

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

World 11 Company 1 Year 3 Quarter 4 CONSOLIDATED BALANCE SHEET 10-21-2013 C BUSINESS POLICY GAME, 6TH EDITION 14:24:56 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno M$000s M$000s M$000s M$000s Ps000s ----- ASSETS ----Cash Balance Time Certificates of Deposit Accounts Receivable Inventory Total Current Assets Net Sales Office Net Manufacturing Plant Net Manufacturing Equipment Equity in Subsidiaries Other Investments Total Fixed Assets Total Assets 3032 0 2709 493 6234 1453 5759 2842 0 2000 12054 18288 2957 0 607 224 3788 364 2988 1716 6837 2000 13905 17693 0 0 602 116 718 364 0 0 0 0 364 1082 75 0 607 95 777 364 0 0 0 0 364 1141 0 0 5356 349 5705 2164 16626 6756 0 0 25546 31251

----- LIABILITIES ----Accounts Payable Bank Loans Taxes Payable Total Current Liabilities Bonds Outstanding Total Liabilities Capital Stock Accumulated Earnings Accum. Foreign Cur. Adjust. Total Equity Total Liabilities & Equity 1438 1296 255 2989 1500 4489 10537 3272 -10 13799 18288 1012 1296 76 2384 1500 3884 10537 3272 0 13809 17693 111 0 11 122 0 122 575 385 0 960 1082 111 0 19 130 0 130 539 472 0 1011 1141 1221 0 893 2114 0 2114 28159 979 0 29138 31252

---------------------------------------------------------------------------Notes: Translation Exchange Rate 1.00 1.00 1.00 6.00

105

MGMT 497 – ITM CORPORATION TWO YEAR PLAN In The Middle Inc. Consolidated Annual Balance Sheet For the Ending Year 3

World 11 Company 1

Cash Balance Time Certificates of Deposit Accounts Receivable Inventory Total Current Assets Net Sales Office Net Manufacturing Plant Net Manufacturing Equipment Equity in Subsidiaries Other Investments Total Fixed Assets Total Assets

Accounts Payable Bank Loans Taxes Payable Total Current Liabilities Bonds Outstanding Total Liabilities Capital Stock Accumulated Earnings Accum. Foreign Cur. Adjust.

Consolidated

Quarter Quarter 2

Quarter 3

Quarter

M$000s 1

M$000s M$000s 4

M$000s M$000s -­‐-­‐-­‐-­‐-­‐ ASSETS -­‐-­‐-­‐-­‐-­‐ 12353 2976 3630 2715 3032 3700 1500 1200 1000 0 8595 1690 2207 1989 2709 2239 614 528 604 493

26887 6780 7565 6308 6234

5885 1489 1478 1465 1453 17602 3066 3942 4835 5759 8632 2037 1930 1823 2842 0 8000 40119 67006

4632 1296 828 6756 7000 13756 41111 12160 -­‐21

15372 0 2000 8592 16915 0 2000 9350 16431

1126 0 168 1294 1500 2794 10537 3105 -­‐5 0 2000 10123

-­‐-­‐-­‐-­‐-­‐ LIABILITIES -­‐-­‐-­‐-­‐-­‐

895 1173 0 0 183 222

1078 1395

2000 2000

3078 3395

9500 10537 2798 2985 -­‐4 -­‐2

0 2000 12054

18288

1438 1296 255

2989

1500

4489

10537 3272 -­‐10

106

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

Total Equity Total Liabilities & Equity

53250 67006

12294 15372

13520 16915

13637 16431

13799

18288

World 11 Company 1 Year 4 Quarter 1 CONSOLIDATED BALANCE SHEET 10-24-2013 C BUSINESS POLICY GAME, 6TH EDITION 14:24:39 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno M$000s M$000s M$000s M$000s Ps000s ----- ASSETS ----Cash Balance Time Certificates of Deposit Accounts Receivable Inventory Total Current Assets Net Sales Office Net Manufacturing Plant Net Manufacturing Equipment Equity in Subsidiaries Other Investments Total Fixed Assets Total Assets 2500 0 2394 258 5152 1439 5702 2691 0 2000 11832 16984 1929 0 593 88 2610 361 2962 1609 6826 2000 13758 16368 100 0 577 0 677 361 0 0 0 0 361 1038 219 0 514 0 733 361 0 0 0 0 361 1094 1520 0 4277 1024 6821 2145 16492 6515 0 0 25152 31973

----- LIABILITIES ----Accounts Payable Bank Loans Taxes Payable Total Current Liabilities Bonds Outstanding Total Liabilities Capital Stock Accumulated Earnings Accum. Foreign Cur. Adjust. Total Equity Total Liabilities & Equity 1167 0 280 1447 1500 2947 10537 3526 -26 14037 16984 726 0 79 805 1500 2305 10537 3526 0 14063 16368 106 0 4 110 0 110 575 353 0 928 1038 104 0 0 104 0 104 539 451 0 990 1094 1393 0 1188 2581 0 2581 28159 1234 0 29393 31974

---------------------------------------------------------------------------Notes: Translation Exchange Rate 1.00 1.00 1.00 6.02

107

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

World 11 Company 1 Year 4 Quarter 2 CONSOLIDATED BALANCE SHEET 10-28-2013 C BUSINESS POLICY GAME, 6TH EDITION 14:37:56 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno M$000s M$000s M$000s M$000s Ps000s ----- ASSETS ----Cash Balance Time Certificates of Deposit Accounts Receivable Inventory Total Current Assets Net Sales Office Net Manufacturing Plant Net Manufacturing Equipment Equity in Subsidiaries Other Investments Total Fixed Assets Total Assets 1646 0 2804 322 4772 1425 5635 3737 0 2000 12797 17569 1500 0 682 136 2318 358 2936 1502 7698 2000 14494 16812 46 0 655 63 764 358 0 0 0 0 358 1122 100 0 609 0 709 358 0 0 0 0 358 1067 0 0 5200 746 5946 2126 16358 13546 0 0 32030 37976

----- LIABILITIES ----Accounts Payable Bank Loans Taxes Payable Total Current Liabilities Bonds Outstanding Total Liabilities Capital Stock Accumulated Earnings Accum. Foreign Cur. Adjust. Total Equity Total Liabilities & Equity 1448 0 364 1812 1500 3312 10400 3915 -58 14257 17569 887 0 110 997 1500 2497 10400 3915 0 14315 16812 117 0 30 147 0 147 575 400 0 975 1122 116 0 7 123 0 123 539 405 0 944 1067 1990 0 1316 3306 0 3306 32735 1936 0 34671 37977

---------------------------------------------------------------------------Notes: Translation Exchange Rate 1.00 1.00 1.00 6.06

108

MGMT 497 – ITM CORPORATION TWO YEAR PLAN World 11 Company 1 Year 4 Quarter 3 CONSOLIDATED BALANCE SHEET 10-31-2013 C BUSINESS POLICY GAME, 6TH EDITION 17:25:14 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno M$000s M$000s M$000s M$000s Ps000s ----- ASSETS ----Cash Balance Time Certificates of Deposit Accounts Receivable Inventory Total Current Assets Net Sales Office Net Manufacturing Plant Net Manufacturing Equipment Equity in Subsidiaries Other Investments Total Fixed Assets Total Assets 1173 0 2744 938 4855 1410 5565 4797 0 2000 13772 18627 1173 0 677 164 2014 355 2910 1395 9098 2000 15758 17772 0 0 629 260 889 355 0 0 0 0 355 1244 0 0 587 298 885 355 0 0 0 0 355 1240 0 0 5200 1321 6521 2107 16224 20788 0 0 39119 45640

----- LIABILITIES ----Accounts Payable Bank Loans Taxes Payable Total Current Liabilities Bonds Outstanding Total Liabilities Capital Stock Accumulated Earnings Accum. Foreign Cur. Adjust. Total Equity Total Liabilities & Equity 1595 1200 333 3128 1500 4628 9716 4389 -106 13999 18627 864 1200 103 2167 1500 3667 9716 4389 0 14105 17772 132 0 12 144 0 144 680 420 0 1100 1244 124 0 0 124 0 124 731 385 0 1116 1240 2901 0 1329 4230 0 4230 38753 2658 0 41411 45641

---------------------------------------------------------------------------Notes: Translation Exchange Rate 1.00 1.00 1.00 6.11

109

MGMT 497 – ITM CORPORATION TWO YEAR PLAN World 11 Company 1 Year 4 Quarter 4 CONSOLIDATED BALANCE SHEET 11-04-2013 C BUSINESS POLICY GAME, 6TH EDITION 14:48:14 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno M$000s M$000s M$000s M$000s Ps000s ----- ASSETS ----Cash Balance Time Certificates of Deposit Accounts Receivable Inventory Total Current Assets Net Sales Office Net Manufacturing Plant Net Manufacturing Equipment Equity in Subsidiaries Other Investments Total Fixed Assets Total Assets 1044 0 3466 1031 5541 1391 5463 4492 0 2000 13346 18887 604 0 866 277 1747 352 2884 1288 9392 2000 15916 17663 37 0 807 261 1105 352 0 0 0 0 352 1457 0 0 716 276 992 352 0 0 0 0 352 1344 2516 0 6723 1356 10595 2088 16090 19990 0 0 38168 48763

----- LIABILITIES ----Accounts Payable Bank Loans Taxes Payable Total Current Liabilities Bonds Outstanding Total Liabilities Capital Stock Accumulated Earnings Accum. Foreign Cur. Adjust. Total Equity Total Liabilities & Equity 1628 500 656 2784 1500 4284 9716 5133 -246 14603 18887 740 500 74 1314 1500 2814 9716 5133 0 14849 17663 152 0 80 232 0 232 680 545 0 1225 1457 130 0 23 153 0 153 750 441 0 1191 1344 3781 0 2988 6769 0 6769 38753 3242 0 41995 48764

---------------------------------------------------------------------------Notes: Translation Exchange Rate 1.00 1.00 1.00 6.24

110

MGMT 497 – ITM CORPORATION TWO YEAR PLAN In The Middle Inc. Consolidated Annual Balance Sheet For the Ending Year 4

World 11 Company 1

Cash Balance Time Certificates of Deposit Accounts Receivable Inventory Total Current Assets Net Sales Office Net Manufacturing Plant Net Manufacturing Equipment Equity in Subsidiaries Other Investments Total Fixed Assets Total Assets

Accounts Payable Bank Loans Taxes Payable Total Current Liabilities Bonds Outstanding Total Liabilities Capital Stock Accumulated Earnings Accum. Foreign Cur. Adjust. Total Equity Total Liabilities & Equity

Consolidated

Quarter 1

Quarter 2

Quarter 3

Quarter 4

M$000s M$000s M$000s M$000s M$000s 6363 0 11408 2549 20320

5665 22365 15717 0 8000 171747 0 72067

5838 1700 1633 9171 6000 15171 40369 16963 -­‐436 56896 72067

-­‐-­‐-­‐-­‐-­‐ ASSETS -­‐-­‐-­‐-­‐-­‐ 2500 1646 0 0 2394 2804 258 322

5152 4772

1439 1425 5702 5635 2691 3737 0 0 2000 2000 11832 12797

16984 17569

-­‐-­‐-­‐-­‐-­‐ LIABILITIES -­‐-­‐-­‐-­‐-­‐

1167 1448 0 0 280 364

1447 1812

1500 1500

2947 3312

10537 10400 3526 3915 -­‐26 -­‐58

14037 14257

16984 17569 1173 0 2744 938 4855 1410 5565 4797 0 2000 13772 18627

1595 1200 333 3128 1500 4628 9716 4389 -­‐106 13999 18627 18887

111

1044 0 3466 1031 5541 1391 5463 4492 0 2000 133346 18887

1628 500 656 2784 1500 4284 9716 5133 -­‐246 14603

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

In The Middle Inc. Consolidated Quarterly Balance Sheet Year 5 Quarter 1

World 11 Company 1

Y5Q1

ASSETS Cash Balance Time Certificates of Deposit Accounts Receivable Inventory Total Current Assets

Consolidated

Merica 1

Merica 2

Merica 3

Sereno

M$000s M$000s M$000s M$000s Ps000s

938 0 2883 883 4704

1326 5398 4391 9145 2000 22260

26964

1591 0 322 1913

1500

3413

17275 6317 -­‐40 23552

26965 17168 9816 4961 14777 1351 1163 1294 2391 680 483 1154 1500 188 741 414

802 0 89 891 0 140 17168

142 0 46 188 0 294 2897 1282 9145 2000 15618 1351

130 0 10 140

739 0 622 191 1551 354 0 0 0 0 354 1294

19 0 718 261 997 354 0 0 0 0 354

2 0 652 287 941

1158 0 5762 939 7858

2098 16157 20089 0 0 38344

46202

3341 0 1141 4482

0

4482

38770 2950

41720

46202

112

Net Sales Office Net Manufacturing Plant Net Manufacturing Equipment Equity in Subsidiaries Other Investments Total Fixed Assets Total Assets LIABILITIES AND EQUITY Accounts Payable Bank Loans Taxes Payable Total Current Liabilities Bonds Outstanding Total Liabilities Capital Stock Accumulated Earnings Accum. Foreign Cur. Adjust. Total Equity Total Liabilities & Equity

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

In The Middle Inc. Consolidated Quarterly Balance Sheet As Year 5 Quarter 2

World 11 Company 1

Y5Q2 ASSETS Cash Balance Time Certificates of Deposit Accounts Receivable Inventory Total Current Assets

Consolidated

Merica 1

Merica 2

Merica 3

Sereno

M$000s M$000s M$000s M$000s Ps000s

6.5 913 597 28 6 1837 0 0 0 0 3098 834 4835

1283 5312 4318 9269 2004 22120

26955

1674 0 365 2039

1000

3039

17386 6570 -­‐40 23917

26956 17416 1943 9866 5147 14813 1401 1199 1317 682 517 1173 1000 202 745 427

843 0 100 943 0 144 16956

149 0 53 202 0 263 2831 1235 9269 2000 15532 1401

134 0 10 144 694 143 1424 351 0 0 0 2 353 1317

760 261 1048 347 0 0 0 2 349 684 278 967 6242 995 9075

2093 16124 20040 0 2 38258

47332

3561 0 1314 4875

0

4875

39361 3096

42457

47332

113

Net Sales Office Net Manufacturing Plant Net Manufacturing Equipment Equity in Subsidiaries Other Investments Total Fixed Assets Total Assets LIABILITIES AND EQUITY Accounts Payable Bank Loans Taxes Payable Total Current Liabilities Bonds Outstanding Total Liabilities Capital Stock Accumulated Earnings Accum. Foreign Cur. Adjust. Total Equity Total Liabilities & Equity

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

In The Middle Inc. Consolidated Quarterly Balance Sheet As Year 5 Quarter 3

World 11 Company 1

Y5Q3 ASSETS Cash Balance Time Certificates of Deposit Accounts Receivable Inventory Total Current Assets

Consolidated

Merica 1

Merica 2

Merica 3

Sereno

M$000s M$000s M$000s M$000s Ps000s

6.97 878 618 27 4 1598 0 0 0 0 2835 828 4630

1264 5160 4150 9174 2009 21753

26384

1592 0 365 1957

1000

2957

17363 6542 -­‐477 23428

26384 16956 9891 5154 15045 1382 1181 1308 1911 681 500 1163 1000 202 743 420

823 0 88 911 0 145 16956

142 0 60 202 0 261 2844 1258 9174 2000 15534 1382

132 0 13 145 568 146 1421 352 0 0 0 4 356 1308

739 261 1026 350 0 0 0 4 354 668 282 954 6002 967 8566

2095 16140 20156 0 4 38395

46961

3451 0 1422 4873

0

4873

39065 3023

42088

46961

114

Net Sales Office Net Manufacturing Plant Net Manufacturing Equipment Equity in Subsidiaries Other Investments Total Fixed Assets Total Assets LIABILITIES AND EQUITY Accounts Payable Bank Loans Taxes Payable Total Current Liabilities Bonds Outstanding Total Liabilities Capital Stock Accumulated Earnings Accum. Foreign Cur. Adjust. Total Equity Total Liabilities & Equity

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

In The Middle Inc. Consolidated Quarterly Balance Sheet As Year 5 Quarter 4

World 11 Company 1

Y5Q4 ASSETS Cash Balance Time Certificates of Deposit Accounts Receivable Inventory Total Current Assets

Consolidated

Merica 1

Merica 2

Merica 3

Sereno

M$000s M$000s M$000s M$000s Ps000s

11.83 826 637 34 5 1768 0 0 0 0 2627 763 4216

1158 4201 2945 9189 2013 19505

23722

1386 0 355 1741

1000

2741

16900 6572 -­‐2492 20980

23721 16986 1935 9851 5201 15051 1404 1190 1316 682 508 1168 1000 215 744 424

813 0 122 935 0 148 16986

144 0 71 215 0 261 2837 1246 9189 2000 15533 1404

133 0 15 148 676 140 1453 354 0 0 0 6 360 1316

749 261 1044 349 0 0 0 6 355 676 280 961 6222 981 8971

2294 16132 20098 0 6 38529

47500

3506 0 1740 5246

0

5246

39195 3060

42254

47500

115

Net Sales Office Net Manufacturing Plant Net Manufacturing Equipment Equity in Subsidiaries Other Investments Total Fixed Assets Total Assets LIABILITIES AND EQUITY Accounts Payable Bank Loans Taxes Payable Total Current Liabilities Bonds Outstanding Total Liabilities Capital Stock Accumulated Earnings Accum. Foreign Cur. Adjust. Total Equity Total Liabilities & Equity

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

n The Middle Inc. Consolidated Quarterly Balance Sheet As Year 6 Quarter 1

World 11 Company 1

Y6Q1 ASSETS Exchange Rate Cash Balance Time Certificates of Deposit Accounts Receivable Inventory Total Current Assets

Consolidated

Merica 1

Merica 2

Merica 3

Sereno

M$000s M$000s M$000s M$000s Ps000s

12 448 270 28 9 1683 0 0 0 0 2592 740 3780

1196 4235 2979 9181 2017 19608

23389

1385 0 288 1672

1000

2672

14504 6263 -­‐51 20716

23388 16764 9771 5077 14848 1389 1189 1312 1916 682 506 1166 1000 201 743 422

818 0 98 916 0 146 16764

142 0 59 201 0 310 2890 1302 9181 2000 15684 1389

135 0 11 146 667 143 1080 353 0 0 0 8 361 1312

744 256 1028 350 0 0 0 8 358 672 273 954 6112 825 8620

2195 16136 20127 0 8 38465

47085

3479 0 1435 4914

0

4914

39130 3041

42171

47085

116

Net Sales Office Net Manufacturing Plant Net Manufacturing Equipment Equity in Subsidiaries Other Investments Total Fixed Assets Total Assets LIABILITIES AND EQUITY Accounts Payable Bank Loans Taxes Payable Total Current Liabilities Bonds Outstanding Total Liabilities Capital Stock Accumulated Earnings Accum. Foreign Cur. Adjust. Total Equity Total Liabilities & Equity

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

In The Middle Inc. Consolidated Quarterly Balance Sheet As Year 6 Quarter 2

World 11 Company 1

Y6Q2 ASSETS Exchange Rate Cash Balance Time Certificates of Deposit Accounts Receivable Inventory Total Current Assets

Consolidated

Merica 1

Merica 2

Merica 3

Sereno

M$000s M$000s M$000s M$000s Ps000s

13.5 623 454 31 7 1765 0 0 0 0 2552 686 3860

1154 4059 2764 9185 2021 19183

23043

1347 0 314 1662

800

2462

14600 6591 -­‐610 20582

23043 16825 9911 5189 15100 1400 1189 1309 1726 682 507 1167 800 211 744 423

817 0 109 926 0 142 16825

143 0 68 211 0 285 2864 1274 9185 2000 15608 1400

129 0 13 142 671 92 1217 354 0 0 0 10 364 1309

747 258 1036 349 0 0 0 10 359 674 268 950 6215 903 8883

2244 16134 20112 0 10 38500

47383

3492 0 1678 5170

0

5170

39162 3050

42213

47383

117

Net Sales Office Net Manufacturing Plant Net Manufacturing Equipment Equity in Subsidiaries Other Investments Total Fixed Assets Total Assets LIABILITIES AND EQUITY Accounts Payable Bank Loans Taxes Payable Total Current Liabilities Bonds Outstanding Total Liabilities Capital Stock Accumulated Earnings Accum. Foreign Cur. Adjust. Total Equity Total Liabilities & Equity

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

In The Middle Inc. Consolidated Quarterly Balance Sheet As Year 6 Quarter 3

World 11 Company 1

Y6Q3 ASSETS Exchange Rate Cash Balance Time Certificates of Deposit Accounts Receivable Inventory Total Current Assets Net Sales Office Net Manufacturing Plant Net Manufacturing Equipment Equity in Subsidiaries Other Investments Total Fixed Assets

Consolidated

Merica 1

Merica 2

Merica 3

Sereno

M$000s M$000s M$000s M$000s Ps000s

15.1 423 262 34 13 1724 0 0 0 0 2495 700 3619 1143 3946 2620 9183 2025 18917

22487

1325 0 275 1600

800

2400 800 1719 9841 5133 14974 22487 166693 1404

817 0 102 919 0 206 686 512 1198 1311

16644

145 0 61 206 0 145 744 423 1166

296 2877 1288 9183 2000 15644 1404

133 0 12 145 669 118 1049 356 0 0 0 12 368 1311

745 257 1036 344 0 0 0 12 356 673 268 954 6163 864 8751

2219 16135 20119 0 12 38486

47237

3485 0 1509 4994

0

4994

39171 3071

42243

47237

Total Assets LIABILITIES AND EQUITY Accounts Payable Bank Loans Taxes Payable Total Current Liabilities Bonds Outstanding Total Liabilities Capital Stock Accumulated Earnings Accum. Foreign Cur. Adjust. Total Equity Total Liabilities & Equity

14172 6295 -­‐381 20086

118

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

In The Middle Inc. Consolidated Quarterly Balance Sheet As Year 6 Quarter 4

World 11 Company 1

Y6 Q4 ASSETS Exchange Rate Cash Balance Time Certificates of Deposit Accounts Receivable Inventory Total Current Assets Net Sales Office Net Manufacturing Plant Net Manufacturing Equipment Equity in Subsidiaries Other Investments Total Fixed Assets

Consolidated

Merica 1

Merica 2

Merica 3

Sereno

M$000s M$000s M$000s M$000s Ps000s

16.9 521 358 40 10 1909

0 0 0 2460 686 3666 1084 3775 2421 9124 2029 18443

22099

1186 0 359 1545

600

2145

13927 6324 -­‐298 19954

22099 16549 9906 5189 15095 1420 1194 1314 1454 684 510 1166 600 227 744 423

717 0 137 854 0 148 16549

144 0 83 227 0

241 2820 1231 9124 2000 15426 1420

131 0 17 148 670 105 1133 358 0 0 0 14 372 1314

750 259 1049 347 0 0 0 14 361 674 270 953 6189 884 8981

2332 16134 20116 0 14 38596

47578

3289 0 2061 5350

0

5350

39167 3061

42228

47578

Total Assets LIABILITIES AND EQUITY Accounts Payable Bank Loans Taxes Payable Total Current Liabilities Bonds Outstanding Total Liabilities Capital Stock Accumulated Earnings Accum. Foreign Cur. Adjust. Total Equity Total Liabilities & Equity

119

MGMT 497 – ITM CORPORATION TWO YEAR PLAN In The Middle Inc. Consolidated Annual Balance Sheet Year 5
World
11 Company 1

YR 5 ASSETS Cash Balance Time Certificates of Deposit Accounts Receivable Inventory Total Current Assets Net Sales Office Net Manufacturing Plant Net Manufacturing Equipment Equity in Subsidiaries Other Investments Total Fixed Assets Total Assets LIABILITIES AND EQUITY Accounts Payable Bank Loans Taxes Payable Total Current Liabilities Bonds Outstanding Total Liabilities Capital Stock Accumulated Earnings Accum. Foreign Cur. Adjust. Total Equity Total Liabilities & Equity 104026 68924 26001 -­‐3049 91876 26965 12150 17275 6317 -­‐40 23552 26956 4500 3413 17386 6570 -­‐40 23917 26384

6243 0 1407 7650 1500 3039 17363 6542 -­‐477 23428 104025

1591 0 322 1913 1000 2957 16900 6572 -­‐2492 5031 20070 15804 36777 8025 85638 26964

1674 0 365 2039 1000 2741

3555 0 11443 3309 18386 1326 5398 4391 9145 2000 22260 26955

1592 0 365 1957 1000 Consolidated

Quarter 1

M$000s M$000s

938 0 2883 883 4704 1283 5312 4318 9269 2004 22120 26384

1386 0 355 1741

913 0 3098 834 4835 1264 5160 4150 9174 2009 21753 Quarter 2

M$000s

878 0 2835 828 4630 Quarter 3

M$000s

Quarter 4

M$000s

826 0

2627 763 4216

1158 4201 2945 9189 2013 19505

23722

20980

23721

120

MGMT 497 – ITM CORPORATION TWO YEAR PLAN In The Middle Inc. Consolidated Annual Balance Sheet Year 6

World 11 Company 1

YR 6 ASSETS Cash Balance Time Certificates of Deposit Accounts Receivable Inventory Total Current Assets Net Sales Office Net Manufacturing Plant Net Manufacturing Equipment Equity in Subsidiaries Other Investments Total Fixed Assets Total Assets LIABILITIES AND EQUITY Accounts Payable Bank Loans Taxes Payable Total Current Liabilities Bonds Outstanding Total Liabilities Capital Stock Accumulated Earnings Accum. Foreign Cur. Adjust. Total Equity Total Liabilities & Equity

Consolidated

Quarter 1

Quarter 2

Quarter 3

Quarter 4

M$000s M$000s M$000s M$000s M$000s

2014 0 10099 2813 14926 0 4577 16014 10785 36673 8091 76151 0 91018 0 0 0 5244 0 1236 6479 0 3200 0 9679 0 57204 25473 -­‐1340

448 0 2592 740 3780 1196 4235 2979 9181 2017 19608 23389

1385 0 288 1672 1000 2672 14504 6263 -­‐51 20716 23388 23043 14600 6591 -­‐610 20582 22487 2462 14172 6295 -­‐381 20086 22099 800 2400 13927 6324 -­‐298 19954

1347 0 314 1662 800 2145 23043

1325 0 275 1600 600 1154 4059 2764 9185 2021 19183 22487

1186 0 359 1545

623 0 2552 686 3860 1143 3946 2620 9183 2025 18917 22099

423 0 2495 700 3619 1084 3775 2421 9124 2029 18443 521 2460 686 3666

81337 0 91017

121

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

7.6

Pro forma analysis Like stated under pro forma assumptions (7.1), our pro forma statements reflect our

future desired goals and objectives. We can demonstrate that our plan works by evaluating each of the six performance criteria to show that our main weighting factors listed in section 3.3 are being met. In The Middle Corporation decided to focus on return on assets, return on equity, and marker share. Goals and Objectives Criteria ROA (Return on Assets) ROE (Return on Equity) MS (Market Share) SP (Stock Price) UPC (Unit Production Cost) TNI (Total Net Income)

Year 5 10% 10% 26% Year 6 11% 11% 27%

$

1.42

$

1.73

$

8.49

$

7.94 $

2331 $

2143

Goal •

Return on Assets (ROA)

Expect a positive return on assets of 10% in year 5 due to our steadily improving revenues and savings level increases to 4.

•

By year 6, we expect to be the leader in Return on Assets with a forecast of 11%, more than doubling our ROA in Y4Q4.

Pro forma results • Ending Year 5, In The Middle Corporation pro forma statements show ROA to be at 10%, an increase of 6.1% compared from Y4Q4.

122

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

•

Ending Year 6, In The Middle Corporation pro forma statements show ROA to be at 11%, and increase of 7.1% compared from Y4Q4 and 1% from Y5.

Goal •

Return on Equity (ROE)

We expect to increase ROE dramatically in years 5 & 6.

Pro forma results • Ending Year 5, In The Middle Corporation pro forma statements show ROE to be at 10%, and increase of 4.91 compared from Y4Q4. • Ending Year 6, In The Middle Corporation pro forma statements show ROE to be at 11%, and increase of 5.91 compared from Y4Q4 and 1% from Year 5. Goal • Be the leader in innovation and always have the latest model out with affordable quality and features. • Be a constant and consistent leader when it comes to market share. Market Share

Pro forma results • Ending Year 5, In The Middle Corporation pro forma statements show our market share to grow by .05% to a total of 26% compared from Y4Q4. • Ending Year 6, In The Middle Corporation pro forma statements show our market share to grow by 1% to 27% compared from Y4Q4.

Goal

123

Stock Price

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

• • •

Expect our stock prices to increase with no major expenses forecasted for Years 5 and 6. Continue to focus on ROE to increase our stock prices for the upcoming years 5 and 6. Increase our stock price by 5% every quarter starting in Y5Q1.

Pro forma results • Ending Year 5, In The Middle Corporation pro forma statements show our stock price to be at $1.42, an increase of $0.25 compared from Y4Q4. • Ending Year 6, In The Middle Corporation pro forma statements show our stock price to be at $1.73, an increase of $0.56 compared from Y4Q4. Goal • We expect our savings level to increase from 2 in Y4Q4 to 3 by year 6, which will decrease the UPC for In The Middle Corporation. Pro forma results • Ending Year 5, In The Middle Corporation expects our unit production cost to be at $8.49 in Merica 1, an increase of $2.92 compared from Y4Q4. • Ending Year 5, In The Middle Corporation expects our unit production cost to be at stock price to be at $7.94, an increase of $2.37 compared from Y4Q4 but a decrease of $0.55 from year 5. Goal • Plan to maintain our dominance in net income over other competitors Total Net Income Unit Production Cost

124

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

•

Invest heavily in advertisement and constantly beat our competitors with newer models.

Pro forma results • Ending Year 5, In The Middle Corporation expects our net income to be at $2,331, an increase of $1,587 compared from Y4Q4. • Ending Year 6, In The Middle Corporation expects our net income to be at $2,143, an increase of $1,399 compared from Y4Q4.

As shown by evaluating each of the six performance criteria and focusing on return on

assets, return on equity, and marker share our plan for ITM Inc. works. We focused on these three weighting factors on the basis that if we can succeed on these three criteria’s, we can be a successful company. Based on this pro forma analysis our weighing factors are being met, and therefore we are expected to be a successful company. Future stock price is shown above in the Capital Stock Estimation table in section 7.4

125

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

Appendix

126

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

Appendix A: Consolidated Historical Data World J1 11 CONSOLIDATED HISTORICAL DATA FOR YEARS 1 AND 2 THE BUSINESS POLICY GAME --------Year 1--------Qtr 1 Qtr 2 Qtr 3 Qtr 4 GDP (Merica) Y2Q4=100 GDP (Sereno) Y2Q4=100 CPI (Merica) Y2Q4=100 CPI (Sereno) Y2Q4=100 Exchange Rate (Sereno) Loan Interest Rate (%) Bond Interest Rate (%) 85.3 75.4 92.4 81.3 6.00 5.70 6.00 87.1 77.9 93.2 82.4 6.00 5.70 6.30 88.9 80.5 94.2 83.3 6.00 6.20 6.70 91.5 82.7 95.2 84.4 6.00 6.20 6.80 09-26-2013 15:53:15

--------Year 2--------Qtr 1 Qtr 2 Qtr 3 Qtr 4 93.9 87.1 96.2 87.0 6.00 6.70 7.00 95.9 91.8 97.3 89.6 6.00 6.70 6.80 97.7 96.7 98.5 93.7 6.00 6.40 7.00 100.0 100.0 100.0 100.0 6.00 11.20 9.10

Stock Market: Market Index 92.0 96.5 96.0 89.7 Company Stock Price($) 0.73 0.79 0.82 0.79 Company EPS ($) 0.010 0.052 0.056 0.070 Product Prices: Home Area ($) 10.00 10.10 10.20 10.40 Nonhome area ($) 10.60 10.60 10.60 10.70 Nonhome area ($) 10.60 10.60 10.60 10.70 Sereno (Ps) 62 64 66 75 Company Salespeople (#): Home Area 6 Nonhome area 6 Nonhome area 6 Sereno 7 Customer Orders (000s): Home Area 84 Nonhome area 77 Nonhome area 77 Sereno 36 Company Sales (000s): Home Area Nonhome area Nonhome area Sereno Advertising: Home Area (M$000s) Nonhome area (M$000s) Nonhome area (M$000s) Sereno (Ps000s) 55 51 51 36 30 30 30 90 7 7 7 9 88 81 81 42 95 60 60 42 32 31 31 94 42 7 7 7 9 80 67 67 39 80 67 67 39 33 32 32 97 46 7 7 7 9 103 88 88 50 93 73 73 50 37 35 35 100 51

101.2 102.0 107.3 100.0 0.92 0.96 1.03 1.18 0.050 0.061 0.038 0.059 10.40 10.20 10.10 10.00 10.60 10.40 10.20 10.00 10.60 10.40 10.20 10.00 75 75 75 75 9 7 7 10 79 66 66 43 79 66 66 43 45 37 37 105 56 10 8 8 11 93 77 77 49 93 77 77 49 45 37 37 105 62 11 9 9 12 88 73 73 45 88 73 73 45 46 38 38 105 68 12 10 10 13 93 93 93 57 93 93 93 57 46 40 40 105 72

R & D, Training ($000s): Product R & D 40

127

MGMT 497 – ITM CORPORATION TWO YEAR PLAN Employee Training Other Items (000s): Actual Output Ending Inventory Total Unit Sales 40 208 15 193 42 260 18 257 45 312 77 253 49 247 35 289 54 296 77 254 58 312 93 296 64 312 126 279 68 312 126 336

128

MGMT 497 – ITM CORPORATION TWO YEAR PLAN World J2 11 FINANCIAL DATA FOR YEARS 1 AND 2 THE BUSINESS POLICY GAME --------Year 1--------Qtr 1 Qtr 2 Qtr 3 Qtr 4 Consolidated Income Statement ($000s) Gross Sales Cost of Goods Sold Value Added Tax Gross Profit Selling Expenses Admin and General Exp Operating Profit 2004 851 37 1116 632 322 161 2680 1154 45 1481 662 273 546 2665 1092 43 1530 695 232 603 3154 1375 62 1717 705 282 730 2760 1138 54 1568 742 295 531 3163 1342 61 1760 801 315 644 2941 1295 56 1590 838 334 418 3502 1585 71 1846 872 360 615 09-26-2013 15:53:15

--------Year 2--------Qtr 1 Qtr 2 Qtr 3 Qtr 4

Capital Gain (Loss) 0 0 0 0 0 0 0 0 Interest Expenses 50 50 50 50 50 50 50 50 Time CD Interest 0 0 0 6 6 6 9 19 Net Profit Before Tax 111 496 553 686 487 600 377 584 Income Tax 50 187 216 268 190 234 147 228 Net Profit After Tax 61 309 337 418 297 366 230 356 -----------------------------------------------------------------------Consolidated Cash Flow Statement ($000s) Accounts Collected Less Production Cost Less Operating Expense Less Taxes Paid Net Operating CF Investment Receipts Less Investment Expend Net Investment CF Financing Receipts Less Financing Expend Net Financing CF 964 585 632 0 -253 0 0 0 0 0 0 2335 1009 929 87 310 0 0 0 0 0 0 2674 1233 915 232 294 0 0 0 0 0 0 2895 1169 955 259 512 0 500 -500 0 0 0 2972 1210 1009 330 423 500 500 0 0 0 0 2959 1317 1079 244 319 500 500 0 0 0 0 3066 1353 1141 296 276 500 700 -200 0 0 0 3172 1359 1194 203 416 700 1000 -300 0 0 0

Net CF for Quarter -253 310 294 12 423 319 76 116 -----------------------------------------------------------------------Consolidated Balance Sheet Items ($000s): Cash Time CDs Accounts Receivable Inventory Fixed Assets Total Assets 1347 1657 1951 1964 0 0 0 500 1040 1385 1375 1640 81 97 392 202 9755 9610 9464 9319 12223 12749 13182 13625 2387 2705 2783 3066 500 500 700 1000 1433 1645 1529 1823 410 495 641 621 9174 9029 8884 8737 13904 14374 14537 15247

129

MGMT 497 – ITM CORPORATION TWO YEAR PLAN Accounts Payable Bank Loans Taxes Payable Bonds Outstanding Total Equity Total Liab and Equity 574 646 717 669 0 0 0 0 87 232 259 330 2000 2000 2000 2000 9562 9871 10206 10626 12223 12749 13182 13625 738 791 815 839 0 0 0 0 244 296 203 299 2000 2000 2000 2000 10922 11287 11519 12109 13904 14374 14537 15247

130

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

Appendix B: Operating Information 1 Report for Years 3 & 4 World 11 Company 1 Year 3 Quarter 1 OPERATING INFORMATION REPORT 10-10-2013 D BUSINESS POLICY GAME, 6TH EDITION 15:18:26 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------PRODUCTION COST ANALYSIS Consolidated M$000s 872 374 76 0 1322 Merica Area 1 M$000s 872 374 76 0 1322 Merica Area 2 M$000s 0 0 0 0 0 Merica Area 3 M$000s 0 0 0 0 0 Sereno Ps000s 0 0 0 0 0

Labor Cost Materials Cost Maintenance Cost Temporary Layoff Costs Total Cash Expenditures

Equipment Depreciation 107 107 0 0 0 Plant Depreciation 26 26 0 0 0 Total Production Cost 1455 1455 0 0 0 Total Unit Production Cost 4.80 4.80 0.00 0.00 0 ---------------------------------------------------------------------------OUTPUT, INVENTORY, AND SALES ANALYSIS (in thousands of units) ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno Beginning Inventory 126 44 18 18 46 Normal Capacity 312 312 0 0 0 Actual Output 303 303 0 0 0 Sales Office Orders 306 87 102 100 17 Sales Office Purchases 214 0 100 98 16 Sold to Affiliates 0 214 0 0 0 Sold from Area Production 89 89 0 0 0 Customer Orders 301 84 82 82 53 Total Sales 315 89 82 90 54 Sold to Liquidators 0 0 0 0 0 Ending Inventory 114 44 36 26 8 Total Industry Sales 1532 422 420 423 267 Market Share 20.6 21 20 21 20 ---------------------------------------------------------------------------PRODUCTION CAPACITY STATUS Merica Area 1 6 2 Merica Area 2 0 0 Merica Area 3 0 0 Sereno 0 0

Production Lines Currently Producing Space Available for New Lines

131

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

World 11 Company 1 Year 3 Quarter 2 OPERATING INFORMATION REPORT 10-14-2013 D BUSINESS POLICY GAME, 6TH EDITION 14:17:10 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------PRODUCTION COST ANALYSIS Consolidated M$000s 1244 545 96 0 1884 Merica Area 1 M$000s 1244 545 95 0 1884 Merica Area 2 M$000s 0 0 0 0 0 Merica Area 3 M$000s 0 0 0 0 0 Sereno Ps000s 0 0 0 0 0

Labor Cost Materials Cost Maintenance Cost Temporary Layoff Costs Total Cash Expenditures

Equipment Depreciation 106 107 0 0 0 Plant Depreciation 26 26 0 0 0 Total Production Cost 2017 2017 0 0 0 Total Unit Production Cost 5.50 5.50 0.00 0.00 0 ---------------------------------------------------------------------------OUTPUT, INVENTORY, AND SALES ANALYSIS (in thousands of units) ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno Beginning Inventory 114 44 36 26 8 Normal Capacity 312 312 0 0 0 Actual Output 367 367 0 0 0 Sales Office Orders 360 80 87 108 85 Sales Office Purchases 280 0 87 108 85 Sold to Affiliates 0 280 0 0 0 Sold from Area Production 113 113 0 0 0 Customer Orders 353 99 96 95 63 Total Sales 398 113 96 109 80 Sold to Liquidators 0 0 0 0 0 Ending Inventory 83 18 27 25 13 Total Industry Sales 1802 489 494 487 332 Market Share 22.1 23 19 22 24 ---------------------------------------------------------------------------PRODUCTION CAPACITY STATUS Merica Area 1 6 1 2 0 103 Merica Area 2 0 0 0 0 0 Merica Area 3 0 0 0 0 0 Sereno 0 0 0 6 0

Production Lines Currently Producing Second-Shift Lines in Preparation Space Available for New Lines New Plant Construction Quarter 1 Memo: Employee Training Expense

132

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

World 11 Company 1 Year 3 Quarter 3 OPERATING INFORMATION REPORT 10-18-2013 D BUSINESS POLICY GAME, 6TH EDITION 15:43:12 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------PRODUCTION COST ANALYSIS Consolidated M$000s 1131 578 101 0 1809 Merica Area 1 M$000s 1131 578 100 0 1809 Merica Area 2 M$000s 0 0 0 0 0 Merica Area 3 M$000s 0 0 0 0 0 Sereno Ps000s 0 0 0 0 0

Labor Cost Materials Cost Maintenance Cost Temporary Layoff Costs Total Cash Expenditures

Equipment Depreciation 107 107 0 0 0 Plant Depreciation 26 26 0 0 87 Total Production Cost 1957 1942 0 0 87 Total Unit Production Cost 5.15 5.11 0.00 0.00 0 ---------------------------------------------------------------------------OUTPUT, INVENTORY, AND SALES ANALYSIS (in thousands of units) ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno Beginning Inventory 83 18 27 25 13 Normal Capacity 364 364 0 0 0 Actual Output 380 380 0 0 0 Sales Office Orders 395 111 87 101 96 Sales Office Purchases 267 0 82 95 90 Sold to Affiliates 0 267 0 0 0 Sold from Area Production 98 98 0 0 0 Customer Orders 352 98 96 93 65 Total Sales 359 98 96 93 72 Sold to Liquidators 0 0 0 0 0 Ending Inventory 104 33 13 27 31 Total Industry Sales 1648 439 457 439 313 Market Share 21.8 22 21 21 23 ---------------------------------------------------------------------------PRODUCTION CAPACITY STATUS Merica Area 1 6 1 2 0 Merica Area 2 0 0 0 0 Merica Area 3 0 0 0 0 Sereno 0 0 6 6

Production Lines Currently Producing Second-Shift Lines Currently Producing Space Available for New Lines New Plant Construction Quarter 2

133

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

World 11 Company 1 Year 3 Quarter 4 OPERATING INFORMATION REPORT 10-21-2013 D BUSINESS POLICY GAME, 6TH EDITION 14:24:56 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------PRODUCTION COST ANALYSIS Consolidated M$000s 1648 741 117 0 2506 Merica Area 1 M$000s 1648 741 117 0 2506 Merica Area 2 M$000s 0 0 0 0 0 Merica Area 3 M$000s 0 0 0 0 0 Sereno Ps000s 0 0 0 0 0

Labor Cost Materials Cost Maintenance Cost Temporary Layoff Costs Total Cash Expenditures

Equipment Depreciation 107 107 0 0 0 Plant Depreciation 25 26 0 0 134 Total Production Cost 2661 2639 0 0 134 Total Unit Production Cost 6.10 6.05 0.00 0.00 0 ---------------------------------------------------------------------------OUTPUT, INVENTORY, AND SALES ANALYSIS (in thousands of units) ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno Beginning Inventory 104 33 13 27 31 Normal Capacity 364 364 0 0 0 Actual Output 436 436 0 0 0 Sales Office Orders 419 105 120 104 90 Sales Office Purchases 314 0 120 104 90 Sold to Affiliates 0 314 0 0 0 Sold from Area Production 118 118 0 0 0 Customer Orders 440 118 117 118 87 Total Sales 466 118 117 118 113 Sold to Liquidators 0 0 0 0 0 Ending Inventory 74 37 16 13 8 Total Industry Sales 2156 558 592 571 435 Market Share 21.6 21 20 21 26 ---------------------------------------------------------------------------PRODUCTION CAPACITY STATUS Merica Area 1 6 1 0 2 0 0 Merica Area 2 0 0 0 0 0 0 Merica Area 3 0 0 0 0 0 0 Sereno 0 0 2 4 6 1351

Production Lines Currently Producing Second-Shift Lines Currently Producing New Lines Under Construction Space Available for New Lines New Plant Construction Quarter 3 Memo: Employee Training Expense

134

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

World 11 Company 1 Year 4 Quarter 1 OPERATING INFORMATION REPORT 10-24-2013 D BUSINESS POLICY GAME, 6TH EDITION 14:24:39 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------PRODUCTION COST ANALYSIS Consolidated M$000s 1230 642 107 57 2036 Merica Area 1 M$000s 1020 493 78 57 1648 Merica Area 2 M$000s 0 0 0 0 0 Merica Area 3 M$000s 0 0 0 0 0 Sereno Ps000s 1263 896 175 0 2334

Labor Cost Materials Cost Maintenance Cost Temporary Layoff Costs Total Cash Expenditures

Equipment Depreciation 147 107 0 0 241 Plant Depreciation 48 26 0 0 134 Total Production Cost 2231 1781 0 0 2709 Total Unit Production Cost 5.83 6.25 0.00 0.00 28 ---------------------------------------------------------------------------OUTPUT, INVENTORY, AND SALES ANALYSIS (in thousands of units) ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno Beginning Inventory 74 37 16 13 8 Normal Capacity 468 364 0 0 104 Actual Output 383 285 0 0 98 Sales Office Orders 416 89 110 100 117 Sales Office Purchases 195 0 94 85 16 Sold to Affiliates 0 195 0 0 0 Sold from Area Production 201 113 0 0 88 Customer Orders 426 113 112 113 88 Total Sales 409 113 110 98 88 Sold to Liquidators 0 0 0 0 0 Ending Inventory 48 14 0 0 34 Total Industry Sales 1933 507 541 501 384 Market Share 21.2 22 20 20 23 ---------------------------------------------------------------------------PRODUCTION CAPACITY STATUS Merica Area 1 6 2 Merica Area 2 0 0 Merica Area 3 0 0 Sereno 2 4

Production Lines Currently Producing Space Available for New Lines

135

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

World 11 Company 1 Year 4 Quarter 2 OPERATING INFORMATION REPORT 10-28-2013 D BUSINESS POLICY GAME, 6TH EDITION 14:37:56 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------PRODUCTION COST ANALYSIS Consolidated M$000s 1611 784 139 0 2533 Merica Area 1 M$000s 1386 621 105 0 2112 Merica Area 2 M$000s 0 0 0 0 0 Merica Area 3 M$000s 0 0 0 0 0 Sereno Ps000s 1362 986 202 0 2550

Labor Cost Materials Cost Maintenance Cost Temporary Layoff Costs Total Cash Expenditures

Equipment Depreciation 191 107 0 0 511 Plant Depreciation 49 26 0 0 134 Total Production Cost 2772 2245 0 0 3195 Total Unit Production Cost 5.69 5.91 0.00 0.00 30 ---------------------------------------------------------------------------OUTPUT, INVENTORY, AND SALES ANALYSIS (in thousands of units) ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno Beginning Inventory 48 14 0 0 34 Normal Capacity 468 364 0 0 104 Actual Output 487 380 0 0 107 Sales Office Orders 515 138 149 130 98 Sales Office Purchases 250 0 134 116 0 Sold to Affiliates 0 241 0 0 9 Sold from Area Production 237 130 0 0 107 Customer Orders 482 130 125 120 107 Total Sales 478 130 125 116 107 Sold to Liquidators 0 0 0 0 0 Ending Inventory 57 23 9 0 25 Total Industry Sales 2027 568 599 516 344 Market Share 23.6 23 21 22 31 ---------------------------------------------------------------------------PRODUCTION CAPACITY STATUS Merica Area 1 6 1 0 2 0 Merica Area 2 0 0 0 0 0 Merica Area 3 0 0 0 0 0 Sereno 2 0 2 2 1508

Production Lines Currently Producing Second-Shift Lines Currently Producing New Lines Under Construction Space Available for New Lines Memo: Employee Training Expense

136

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

World 11 Company 1 Year 4 Quarter 3 OPERATING INFORMATION REPORT 10-31-2013 D BUSINESS POLICY GAME, 6TH EDITION 17:25:14 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------PRODUCTION COST ANALYSIS Consolidated M$000s 1813 970 168 0 2950 Merica Area 1 M$000s 1364 637 105 0 2106 Merica Area 2 M$000s 0 0 0 0 0 Merica Area 3 M$000s 0 0 0 0 0 Sereno Ps000s 2741 2034 380 0 5155

Labor Cost Materials Cost Maintenance Cost Temporary Layoff Costs Total Cash Expenditures

Equipment Depreciation 238 107 0 0 798 Plant Depreciation 48 26 0 0 134 Total Production Cost 3235 2239 0 0 6087 Total Unit Production Cost 5.80 6.07 0.00 0.00 32 ---------------------------------------------------------------------------OUTPUT, INVENTORY, AND SALES ANALYSIS (in thousands of units) ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno Beginning Inventory 57 23 9 0 25 Normal Capacity 572 364 0 0 208 Actual Output 558 369 0 0 189 Sales Office Orders 572 132 156 161 123 Sales Office Purchases 302 0 149 153 0 Sold to Affiliates 0 236 0 0 66 Sold from Area Production 236 129 0 0 107 Customer Orders 468 129 120 112 107 Total Sales 468 129 120 112 107 Sold to Liquidators 0 0 0 0 0 Ending Inventory 147 27 38 41 41 Total Industry Sales 1915 536 512 518 349 Market Share 24.4 24 23 22 31 ---------------------------------------------------------------------------PRODUCTION CAPACITY STATUS Merica Area 1 6 1 0 2 0 Merica Area 2 0 0 0 0 0 Merica Area 3 0 0 0 0 0 Sereno 4 0 2 0 1608

Production Lines Currently Producing Second-Shift Lines Currently Producing New Lines Under Construction Space Available for New Lines Memo: Employee Training Expense

137

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

World 11 Company 1 Year 4 Quarter 4 OPERATING INFORMATION REPORT 11-04-2013 D BUSINESS POLICY GAME, 6TH EDITION 14:48:14 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------PRODUCTION COST ANALYSIS Consolidated M$000s 1822 1076 189 0 3087 Merica Area 1 M$000s 1030 489 80 0 1599 Merica Area 2 M$000s 0 0 0 0 0 Merica Area 3 M$000s 0 0 0 0 0 Sereno Ps000s 4940 3664 684 0 9288

Labor Cost Materials Cost Maintenance Cost Temporary Layoff Costs Total Cash Expenditures

Equipment Depreciation 235 107 0 0 798 Plant Depreciation 47 26 0 0 134 Total Production Cost 3370 1732 0 0 10220 Total Unit Production Cost 5.57 6.16 0.00 0.00 32 ---------------------------------------------------------------------------OUTPUT, INVENTORY, AND SALES ANALYSIS (in thousands of units) ConsoliMerica Merica Merica dated Area 1 Area 2 Area 3 Sereno Beginning Inventory 147 27 38 41 41 Normal Capacity 624 312 0 0 312 Actual Output 605 281 0 0 324 Sales Office Orders 624 179 167 141 137 Sales Office Purchases 288 0 156 132 0 Sold to Affiliates 0 101 0 0 187 Sold from Area Production 297 162 0 0 135 Customer Orders 582 162 151 134 135 Total Sales 582 162 151 134 135 Sold to Liquidators 0 0 0 0 0 Ending Inventory 170 45 43 39 43 Total Industry Sales 2279 673 585 603 418 Market Share 25.5 24 26 22 32 ---------------------------------------------------------------------------PRODUCTION CAPACITY STATUS Merica Area 1 6 1 2 Merica Area 2 0 0 0 Merica Area 3 0 0 0 Sereno 6 0 0

Production Lines Currently Producing 2nd Shift Lines Avail for Reactivation Space Available for New Lines

138

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

Appendix C: Operating Information 2 Report for Years 3 & 4 World 11 Company 1 Year 3 Quarter 1 OPERATING INFORMATION, Page 2 10-10-2013 E BUSINESS POLICY GAME, 6TH EDITION 15:18:26 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------STANDARD COSTS PER UNIT for Next Quarter Merica Area 1 M$ Model 2 Quality/Features 2 Savings Level 0 Model 1 Quality/Features 2 Savings Level 0 Note: Labor Cost Material Cost Labor Cost Material Cost 3.18 1.49 2.97 1.27 Merica Area 2 M$ 3.18 1.49 2.97 1.27 Merica Area 3 M$ 3.18 1.49 2.97 1.27 Sereno Ps 9.88 6.91 9.22 5.93

For Quality 3 add 10%. For Features 3 add 10%. For Quality 1 subtract 10%. For Features 1 subtract 10%. ---------------------------------------------------------------------------SALES FORCE ANALYSIS Merica Area 1 Active Salespeople (number of) Salespeople in Training Salespeople Resigned Memo: Sales Training Expense 13 1 0 10 Merica Area 2 11 1 0 10 Merica Area 3 11 1 0 10 Sereno 14 1 0 36

----------------------CURRENT PERIOD DECISION SUMMARY----------------------| | | Salespeople | | | | Price Adv | Hire Trans Comm Salary | Bank Loan 0 | |Area 1 | 9.89 50 | 1 0 20 3000 | Bond Issue 0 | |Area 2 | 9.89 40 | 1 0 20 3000 | Stock Issue 0 | |Area 3 | 9.89 40 | 1 0 20 3000 | Dividends 0 | |Sereno | 74 110 | 1 0 60 8941 | Time CDs 1500 | ---------------------------------------------------------------------------| | | | | | | |--------| | |Production | Capacity Adjustment| Construction | |R&D 200|Model 1|Sales |-------------------------------------------------|Trng 70| |Office| Schedule | Lay Deac- Reac-| New New New | |--------|Qual Fea|Orders|Lines Hours| Off tivate tivate| Lines Add Plant| | Area 1 | 2 2 | 87 | 6 40 | 0 0 0 | 0 0 0 | | Area 2 | 2 2 | 102 | 0 0 | 0 0 0 | 0 0 0 | | Area 3 | 2 2 | 100 | 0 0 | 0 0 0 | 0 0 0 | | Sereno | 2 2 | 17 | 0 0 | 0 0 0 | 0 0 0 | | | 2d Shft| | 0 0 | 0 0 0 | 0 | ---------------------------------------------------------------------------Market Research 0 0 0 0 0 ----------------------------------------------------------------------------

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World 11 Company 1 Year 3 Quarter 2 OPERATING INFORMATION, Page 2 10-14-2013 E BUSINESS POLICY GAME, 6TH EDITION 14:17:10 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------STANDARD COSTS PER UNIT for Next Quarter Merica Area 1 M$ Model 2 Quality/Features 2 Savings Level 1 Note: Labor Cost Material Cost 2.82 1.52 Merica Area 2 M$ 2.82 1.52 Merica Area 3 M$ 2.82 1.52 Sereno Ps 8.89 7.18

For Quality 3 add 10%. For Features 3 add 10%. For Quality 1 subtract 10%. For Features 1 subtract 10%. ---------------------------------------------------------------------------SALES FORCE ANALYSIS Merica Area 1 Active Salespeople (number of) Salespeople in Training Salespeople Resigned Memo: Sales Training Expense 14 0 0 0 Merica Area 2 11 0 1 0 Merica Area 3 11 0 1 0 Sereno 15 0 0 0

----------------------CURRENT PERIOD DECISION SUMMARY----------------------| | | Salespeople | | | | Price Adv | Hire Trans Comm Salary | Bank Loan 0 | |Area 1 | 10.07 52 | 0 0 21 3000 | Bond Issue 0 | |Area 2 | 9.99 44 | 0 0 21 3000 | Stock Issue 1700 | |Area 3 | 10.07 43 | 0 0 21 3000 | Dividends 0 | |Sereno | 76 130 | 0 0 62 8941 | Time CDs 1200 | ---------------------------------------------------------------------------| | | | | | | |--------| | |Production | Capacity Adjustment| Construction | |R&D 200|Model 2|Sales |-------------------------------------------------|Trng 72| |Office| Schedule | Lay Deac- Reac-| New New New | |--------|Qual Fea|Orders|Lines Hours| Off tivate tivate| Lines Add Plant| | Area 1 | 2 2 | 80 | 6 46 | 0 0 0 | 0 0 0 | | Area 2 | 2 2 | 87 | 0 0 | 0 0 0 | 0 0 0 | | Area 3 | 2 2 | 108 | 0 0 | 0 0 0 | 0 0 0 | | Sereno | 2 2 | 85 | 0 0 | 0 0 0 | 0 0 6 | | | 2d Shft| | 0 0 | 0 0 0 | 1 | ---------------------------------------------------------------------------Market Research 0 0 0 0 0 ----------------------------------------------------------------------------

140

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World 11 Company 1 Year 3 Quarter 3 OPERATING INFORMATION, Page 2 10-18-2013 E BUSINESS POLICY GAME, 6TH EDITION 15:43:12 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------STANDARD COSTS PER UNIT for Next Quarter Merica Area 1 M$ Model 3 Quality/Features 2 Savings Level 1 Model 2 Quality/Features 2 Savings Level 1 Note: Labor Cost Material Cost Labor Cost Material Cost 3.20 1.54 2.87 1.54 Merica Area 2 M$ 3.20 1.54 2.87 1.54 Merica Area 3 M$ 3.20 1.54 2.87 1.54 Sereno Ps 11.08 7.86 9.29 7.51

For Quality 3 add 10%. For Features 3 add 10%. For Quality 1 subtract 10%. For Features 1 subtract 10%. ---------------------------------------------------------------------------SALES FORCE ANALYSIS Merica Area 1 Active Salespeople (number of) Salespeople in Training Salespeople Resigned Memo: Sales Training Expense 13 0 1 0 Merica Area 2 11 1 0 11 Merica Area 3 11 1 0 11 Sereno 15 1 0 39

----------------------CURRENT PERIOD DECISION SUMMARY----------------------| | | Salespeople | | | | Price Adv | Hire Trans Comm Salary | Bank Loan 0 | |Area 1 | 10.07 52 | 0 0 21 3000 | Bond Issue -500 | |Area 2 | 9.99 44 | 1 0 21 3000 | Stock Issue 0 | |Area 3 | 10.07 43 | 1 0 21 3000 | Dividends 0 | |Sereno | 76 130 | 1 0 62 8941 | Time CDs 1000 | ---------------------------------------------------------------------------| | | | | | | |--------| | |Production | Capacity Adjustment| Construction | |R&D 200|Model 2|Sales |-------------------------------------------------|Trng 72| |Office| Schedule | Lay Deac- Reac-| New New New | |--------|Qual Fea|Orders|Lines Hours| Off tivate tivate| Lines Add Plant| | Area 1 | 2 2 | 111 | 6 44 | 0 0 0 | 0 0 0 | | Area 2 | 2 2 | 87 | 0 0 | 0 0 0 | 0 0 0 | | Area 3 | 2 2 | 101 | 0 0 | 0 0 0 | 0 0 0 | | Sereno | 2 2 | 96 | 0 0 | 0 0 0 | 0 0 0 | | | 2d Shft| | 1 40 | 0 0 0 | 0 | ---------------------------------------------------------------------------Market Research 0 0 0 0 0 ----------------------------------------------------------------------------

141

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World 11 Company 1 Year 3 Quarter 4 OPERATING INFORMATION, Page 2 10-21-2013 E BUSINESS POLICY GAME, 6TH EDITION 14:24:56 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------STANDARD COSTS PER UNIT for Next Quarter Merica Area 1 M$ Model 3 Quality/Features 2 Savings Level 1 Note: Labor Cost Material Cost 3.25 1.57 Merica Area 2 M$ 3.25 1.57 Merica Area 3 M$ 3.25 1.57 Sereno Ps 11.71 8.31

For Quality 3 add 10%. For Features 3 add 10%. For Quality 1 subtract 10%. For Features 1 subtract 10%. ---------------------------------------------------------------------------SALES FORCE ANALYSIS Merica Area 1 Active Salespeople (number of) Salespeople in Training Salespeople Resigned Memo: Sales Training Expense 12 1 1 11 Merica Area 2 11 0 1 0 Merica Area 3 12 0 0 0 Sereno 16 0 0 0

----------------------CURRENT PERIOD DECISION SUMMARY----------------------| | | Salespeople | | | | Price Adv | Hire Trans Comm Salary | Bank Loan 1296 | |Area 1 | 10.29 52 | 1 0 21 3000 | Bond Issue 0 | |Area 2 | 10.29 44 | 0 0 21 3000 | Stock Issue 0 | |Area 3 | 10.29 43 | 0 0 21 3000 | Dividends 0 | |Sereno | 79 130 | 0 0 62 8941 | Time CDs 0 | ---------------------------------------------------------------------------| | | | | | | |--------| | |Production | Capacity Adjustment| Construction | |R&D 150|Model 3|Sales |-------------------------------------------------|Trng 72| |Office| Schedule | Lay Deac- Reac-| New New New | |--------|Qual Fea|Orders|Lines Hours| Off tivate tivate| Lines Add Plant| | Area 1 | 3 2 | 105 | 6 47 | 0 0 0 | 0 0 0 | | Area 2 | 3 2 | 120 | 0 0 | 0 0 0 | 0 0 0 | | Area 3 | 3 2 | 104 | 0 0 | 0 0 0 | 0 0 0 | | Sereno | 3 2 | 90 | 0 0 | 0 0 0 | 2 0 0 | | | 2d Shft| | 1 40 | 0 0 0 | 0 | ---------------------------------------------------------------------------Market Research 0 0 0 0 0 ----------------------------------------------------------------------------

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World 11 Company 1 Year 4 Quarter 1 OPERATING INFORMATION, Page 2 10-24-2013 E BUSINESS POLICY GAME, 6TH EDITION 14:24:39 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------STANDARD COSTS PER UNIT for Next Quarter Merica Area 1 M$ Model 3 Quality/Features 2 Savings Level 2 Note: Labor Cost Material Cost 3.09 1.49 Merica Area 2 M$ 3.09 1.49 Merica Area 3 M$ 3.09 1.49 Sereno Ps 11.57 8.38

For Quality 3 add 10%. For Features 3 add 10%. For Quality 1 subtract 10%. For Features 1 subtract 10%. ---------------------------------------------------------------------------SALES FORCE ANALYSIS Merica Area 1 Active Salespeople (number of) Salespeople in Training Salespeople Resigned Memo: Sales Training Expense 12 0 1 0 Merica Area 2 11 0 0 0 Merica Area 3 12 0 0 0 Sereno 16 0 0 0

----------------------CURRENT PERIOD DECISION SUMMARY----------------------| | | Salespeople | | | | Price Adv | Hire Trans Comm Salary | Bank Loan 0 | |Area 1 | 10.49 53 | 0 0 22 3000 | Bond Issue 0 | |Area 2 | 10.49 45 | 0 0 22 3000 | Stock Issue 0 | |Area 3 | 10.49 44 | 0 0 22 3000 | Dividends 0 | |Sereno | 81 140 | 0 0 64 8941 | Time CDs 0 | ---------------------------------------------------------------------------| | | | | | | |--------| | |Production | Capacity Adjustment| Construction | |R&D 150|Model 3|Sales |-------------------------------------------------|Trng 72| |Office| Schedule | Lay Deac- Reac-| New New New | |--------|Qual Fea|Orders|Lines Hours| Off tivate tivate| Lines Add Plant| | Area 1 | 3 2 | 89 | 6 40 | 0 0 0 | 0 0 0 | | Area 2 | 3 2 | 110 | 0 0 | 0 0 0 | 0 0 0 | | Area 3 | 3 2 | 100 | 0 0 | 0 0 0 | 0 0 0 | | Sereno | 3 2 | 117 | 2 40 | 0 0 0 | 0 0 0 | | | 2d Shft| | 0 0 | 1 0 0 | 0 | ---------------------------------------------------------------------------Market Research 0 0 0 0 0 ----------------------------------------------------------------------------

143

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World 11 Company 1 Year 4 Quarter 2 OPERATING INFORMATION, Page 2 10-28-2013 E BUSINESS POLICY GAME, 6TH EDITION 14:37:56 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------STANDARD COSTS PER UNIT for Next Quarter Merica Area 1 M$ Model 4 Quality/Features 2 Savings Level 2 Model 3 Quality/Features 2 Savings Level 2 Note: Labor Cost Material Cost Labor Cost Material Cost 3.31 1.57 3.14 1.51 Merica Area 2 M$ 3.31 1.57 3.14 1.51 Merica Area 3 M$ 3.31 1.57 3.14 1.51 Sereno Ps 13.19 9.78 12.34 8.93

For Quality 3 add 10%. For Features 3 add 10%. For Quality 1 subtract 10%. For Features 1 subtract 10%. ---------------------------------------------------------------------------SALES FORCE ANALYSIS Merica Area 1 Active Salespeople (number of) Salespeople in Training Salespeople Resigned Memo: Sales Training Expense 11 1 1 11 Merica Area 2 10 0 1 0 Merica Area 3 12 0 0 0 Sereno 16 0 0 0

----------------------CURRENT PERIOD DECISION SUMMARY----------------------| | | Salespeople | | | | Price Adv | Hire Trans Comm Salary | Bank Loan 0 | |Area 1 | 10.49 60 | 1 0 22 3000 | Bond Issue 0 | |Area 2 | 10.49 50 | 0 0 22 3000 | Stock Issue -100 | |Area 3 | 10.49 50 | 0 0 22 3000 | Dividends 0 | |Sereno | 81 160 | 0 0 64 8941 | Time CDs 0 | ---------------------------------------------------------------------------| | | | | | | |--------| | |Production | Capacity Adjustment| Construction | |R&D 150|Model 3|Sales |-------------------------------------------------|Trng 72| |Office| Schedule | Lay Deac- Reac-| New New New | |--------|Qual Fea|Orders|Lines Hours| Off tivate tivate| Lines Add Plant| | Area 1 | 3 2 | 138 | 6 46 | 0 0 0 | 0 0 0 | | Area 2 | 3 2 | 149 | 0 0 | 0 0 0 | 0 0 0 | | Area 3 | 3 2 | 130 | 0 0 | 0 0 0 | 0 0 0 | | Sereno | 3 2 | 98 | 2 40 | 0 0 0 | 2 0 0 | | | 2d Shft| | 1 40 | 0 0 0 | 0 | ---------------------------------------------------------------------------Market Research 0 0 0 0 0 ----------------------------------------------------------------------------

144

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World 11 Company 1 Year 4 Quarter 3 OPERATING INFORMATION, Page 2 10-31-2013 E BUSINESS POLICY GAME, 6TH EDITION 17:25:14 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------STANDARD COSTS PER UNIT for Next Quarter Merica Area 1 M$ Model 4 Quality/Features 2 Savings Level 2 Note: Labor Cost Material Cost 3.34 1.58 Merica Area 2 M$ 3.34 1.58 Merica Area 3 M$ 3.34 1.58 Sereno Ps 13.86 10.28

For Quality 3 add 10%. For Features 3 add 10%. For Quality 1 subtract 10%. For Features 1 subtract 10%. ---------------------------------------------------------------------------SALES FORCE ANALYSIS Merica Area 1 Active Salespeople (number of) Salespeople in Training Salespeople Resigned Memo: Sales Training Expense 12 1 0 11 Merica Area 2 10 1 0 11 Merica Area 3 12 0 0 0 Sereno 15 0 1 0

----------------------CURRENT PERIOD DECISION SUMMARY----------------------| | | Salespeople | | | | Price Adv | Hire Trans Comm Salary | Bank Loan 1200 | |Area 1 | 10.49 60 | 1 0 22 3000 | Bond Issue 0 | |Area 2 | 10.49 50 | 1 0 22 3000 | Stock Issue -500 | |Area 3 | 10.49 50 | 0 0 22 3000 | Dividends 0 | |Sereno | 81 160 | 0 0 64 8941 | Time CDs 0 | ---------------------------------------------------------------------------| | | | | | | |--------| | |Production | Capacity Adjustment| Construction | |R&D 75|Model 4|Sales |-------------------------------------------------|Trng 72| |Office| Schedule | Lay Deac- Reac-| New New New | |--------|Qual Fea|Orders|Lines Hours| Off tivate tivate| Lines Add Plant| | Area 1 | 3 2 | 132 | 6 40 | 0 0 0 | 0 0 0 | | Area 2 | 3 2 | 156 | 0 0 | 0 0 0 | 0 0 0 | | Area 3 | 3 2 | 161 | 0 0 | 0 0 0 | 0 0 0 | | Sereno | 3 2 | 123 | 4 40 | 0 0 0 | 2 0 0 | | | 2d Shft| | 1 40 | 0 0 0 | 0 | ---------------------------------------------------------------------------Market Research 0 0 0 0 0 ----------------------------------------------------------------------------

145

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World 11 Company 1 Year 4 Quarter 4 OPERATING INFORMATION, Page 2 11-04-2013 E BUSINESS POLICY GAME, 6TH EDITION 14:48:14 Copyright (c) 2010 by Richard V. Cotter and David J. Fritzsche ---------------------------------------------------------------------------STANDARD COSTS PER UNIT for Next Quarter Merica Area 1 M$ Model 4 Quality/Features 2 Savings Level 2 Note: Labor Cost Material Cost 3.39 1.61 Merica Area 2 M$ 3.39 1.61 Merica Area 3 M$ 3.39 1.61 Sereno Ps 14.98 11.11

For Quality 3 add 10%. For Features 3 add 10%. For Quality 1 subtract 10%. For Features 1 subtract 10%. ---------------------------------------------------------------------------SALES FORCE ANALYSIS Merica Area 1 Active Salespeople (number of) Salespeople in Training Salespeople Resigned Memo: Sales Training Expense 13 0 0 0 Merica Area 2 11 0 0 0 Merica Area 3 11 0 1 0 Sereno 14 0 1 0

----------------------CURRENT PERIOD DECISION SUMMARY----------------------| | | Salespeople | | | | Price Adv | Hire Trans Comm Salary | Bank Loan 500 | |Area 1 | 10.69 60 | 0 0 22 3000 | Bond Issue 0 | |Area 2 | 10.69 50 | 0 0 22 3000 | Stock Issue 0 | |Area 3 | 10.69 50 | 0 0 22 3000 | Dividends 0 | |Sereno | 83 160 | 0 0 64 8941 | Time CDs 0 | ---------------------------------------------------------------------------| | | | | | | |--------| | |Production | Capacity Adjustment| Construction | |R&D 75|Model 4|Sales |-------------------------------------------------|Trng 72| |Office| Schedule | Lay Deac- Reac-| New New New | |--------|Qual Fea|Orders|Lines Hours| Off tivate tivate| Lines Add Plant| | Area 1 | 3 2 | 179 | 6 40 | 0 0 0 | 0 0 0 | | Area 2 | 3 2 | 167 | 0 0 | 0 0 0 | 0 0 0 | | Area 3 | 3 2 | 141 | 0 0 | 0 0 0 | 0 0 0 | | Sereno | 3 2 | 137 | 6 40 | 0 0 0 | 0 0 0 | | | 2d Shft| | 0 0 | 0 1 0 | 0 | ---------------------------------------------------------------------------Market Research 0 0 0 0 0 ----------------------------------------------------------------------------

146

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

Appendix D: Sales Forecasts for Years 5 & 6 SALES FORECAST WORKSHEET
Market Area Year 1 1 1 1 2 2 2 2 3 3 3 3 4 4 4 4 5 5 5 5 6 6 6 6 Quarter 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

M1
Time 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Seasonality 0.92 1.01 0.91 1.16 0.92 1.01 0.91 1.16 0.92 1.01 0.91 1.16 0.92 1.01 0.91 1.16 0.92 1.01 0.91 1.16 0.92 1.01 0.91 1.16 Industry Sales 263 370 361 405 356 417 395 465 422 489 439 558 507 568 536 673

Y
SA Sales 286 366 397 349 387 413 434 401 459 484 482 481 551 562 589 580

Choose Your Predictors (X)
Time 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Real GDP 92.32 93.45 94.37 96.11 97.61 98.56 99.19 100.00 99.03 97.82 96.55 96.61 99.28 100.44 103.78 104.58 Avg Price 10.36 10.40 10.44 10.58 10.52 10.32 10.16 10.00 9.78 9.82 9.82 9.90 9.95 10.05 10.18 10.25

Forecasting the Next 8 Quarters: Year 5 5 5 5 6 6 6 6 Quarter 1 2 3 4 1 2 3 4 Time 17 18 19 20 21 22 23 24 Seasonality 0.92 1.01 0.91 1.16 0.92 1.01 0.91 1.16 Forecasted Industry Sales SA Sales 606 623 644 664 678 695 717 736 Real GDP 104.98 105.12 108.57 110.65 108.13 108.27 111.83 113.97 Avg Price 10.33 10.41 10.48 10.56 10.64 10.72 10.80 10.88 Forecasted Company Sales

557 629 586 770 624 702 652 854

Time 17 18 19 20 21 22 23 24

140 158 147 193 156 176 163 214

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MGMT 497 – ITM CORPORATION TWO YEAR PLAN

Company's Market Share Projection:
Industry Sales in Market Area M2 (Latest Quarter) Company Sales in Market Area M2 (Latest Quarter) Unit Market Share in M2 (Latest Quarter) Expected Gain or Loss in Market Share (+ / - ) Expected Market Share 585 151 25.8 1.0 26.8 Units Units Percent Percent Percent

REGRESSION ANALYSIS FOR FORECASTING SUMMARY OUTPUT Regression Statistics Multiple R 0.963252993 R Square 0.927856329 Adjusted R Square 0.916757302 Standard Error 25.5156468 Observations 16 ANOVA df Regression Residual Total 2 13 15 SS 108852.651 8463.627011 117316.278 Standard Error 329.4035715 2.458549455 3.530916121 MS 54426.326 651.04823 F 83.597993 Significance F 3.787E-08 Market Area M1

Coefficients Intercept Time Real GDP 197.0739423 17.25644901 1.096831131

t Stat 0.5982751 7.0189554 0.3106364

P-value 0.5599361 9.081E-06 0.7610014

Lower 95% -514.55921 11.945076 -6.5312494

Upper 95% 908.70709 22.567822 8.7249116

Lower 95.0% 514.559209 11.9450758 6.53124939

Upper 95.0% 908.707094 22.5678222 8.72491165

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MGMT 497 – ITM CORPORATION TWO YEAR PLAN

SALES FORECAST WORKSHEET
Market Area Year 1 1 1 1 2 2 2 2 3 3 3 3 4 4 4 4 5 5 5 5 6 6 6 6 Quarter 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

M2
Time 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Seasonality 0.92 1.01 0.91 1.16 0.92 1.01 0.91 1.16 0.92 1.01 0.91 1.16 0.92 1.01 0.91 1.16 0.92 1.01 0.91 1.16 0.92 1.01 0.91 1.16 Industry Sales 263 370 361 405 356 417 395 465 420 494 457 592 541 599 512 585

Y
SA Sales 286 366 397 349 387 413 434 401 457 489 502 510 588 593 563 504

Choose Your Predictors (X)
Time 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Real GDP 92.32 93.45 94.37 96.11 97.61 98.56 99.19 100.00 99.03 97.82 96.55 96.61 99.28 100.44 103.78 104.58 Avg Price 10.36 10.40 10.44 10.58 10.52 10.32 10.16 10.00 9.78 9.81 9.81 9.91 9.95 10.05 10.17 10.25

Forecasting the Next 8 Quarters: Year 5 5 5 5 6 6 6 6 Quarter 1 2 3 4 1 2 3 4 Time 17 18 19 20 21 22 23 24 Seasonality 0.92 1.01 0.91 1.16 0.92 1.01 0.91 1.16 Forecasted Industry Sales SA Sales 598 615 633 650 667 684 701 718 Real GDP 104.98 105.12 108.57 110.65 108.13 108.27 111.83 113.97 Avg Price 10.33 10.41 10.48 10.56 10.64 10.72 10.80 10.88 Forecasted Company Sales

550 622 576 754 614 691 638 833

Time 17 18 19 20 21 22 23 24

147 167 154 202 165 185 171 223

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MGMT 497 – ITM CORPORATION TWO YEAR PLAN

Company's Market Share Projection:
Industry Sales in Market Area M2 (Latest Quarter) Company Sales in Market Area M2 (Latest Quarter) Unit Market Share in M2 (Latest Quarter) Expected Gain or Loss in Market Share (+ / - ) Expected Market Share 585 151 25.8 1.0 26.8 Units Units Percent Percent Percent

REGRESSION ANALYSIS FOR FORECASTING SUMMARY OUTPUT Regression Statistics Multiple R 0.921286589 R Square 0.848768979 Adjusted R Square 0.837966763 Standard Error 35.69907752 Observations 16 ANOVA df Regression Residual Total 1 14 15 SS 100136.0916 17841.9379 117978.0295 Standard Error 18.72075419 1.936054307 MS 100136.09 1274.4241 F 78.573599 Significance F 4.069E-07 Market Area M2

Intercept Time

Coefficients 306.5668566 17.1615243

t Stat 16.375775 8.8641751

P-value 1.585E-10 4.069E-07

Lower 95% 266.41483 13.009101

Upper 95% 346.71888 21.313948

Lower 95.0% 266.414832 13.0091008

Upper 95.0% 346.718881 21.3139478

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MGMT 497 – ITM CORPORATION TWO YEAR PLAN

SALES FORECAST WORKSHEET
Market Area Year 1 1 1 1 2 2 2 2 3 3 3 3 4 4 4 4 5 5 5 5 6 6 6 6 Quarter 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

M3
Time 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Seasonality 0.92 1.01 0.91 1.16 0.92 1.01 0.91 1.16 0.92 1.01 0.91 1.16 0.92 1.01 0.91 1.16 0.92 1.01 0.91 1.16 0.92 1.01 0.91 1.16 Industry Sales 259 335 348 385 343 401 380 465 423 487 439 571 501 516 518 603

Y
SA Sales 282 332 382 332 373 397 418 401 460 482 482 492 545 511 569 520

Choose Your Predictors (X)
Time 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Real GDP 92.32 93.45 94.37 96.11 97.61 98.56 99.19 100.00 99.03 97.82 96.55 96.61 99.28 100.44 103.78 104.58 Avg Price 10.48 10.50 10.52 10.64 10.56 10.36 10.18 10.00 9.78 9.82 9.82 9.91 9.95 10.05 10.21 10.29

Forecasting the Next 8 Quarters: Year 5 5 5 5 6 6 6 6 Quarter 1 2 3 4 1 2 3 4 Time 17 18 19 20 21 22 23 24 Seasonality 0.92 1.01 0.91 1.16 0.92 1.01 0.91 1.16 Forecasted Industry Sales SA Sales 517 509 551 572 523 514 557 579 Real GDP 104.98 105.12 108.57 110.65 108.13 108.27 111.83 113.97 Avg Price 10.37 10.45 10.53 10.60 10.68 10.76 10.84 10.93 Forecasted Company Sales

476 514 501 663 481 519 507 672

Time 17 18 19 20 21 22 23 24

111 119 116 154 112 121 118 156

151

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

Company's Market Share Projection:
Industry Sales in Market Area M3 (Latest Quarter) Company Sales in Market Area M3 (Latest Quarter) Unit Market Share in M3 (Latest Quarter) Expected Gain or Loss in Market Share (+ / - ) Expected Market Share 603 134 22.2 1.0 23.2 Units Units Percent Percent Percent

REGRESSION ANALYSIS FOR FORECASTING SUMMARY OUTPUT Regression Statistics Multiple R 0.881259505 R Square 0.776618314 Adjusted R Square 0.742251901 Standard Error 42.62288067 Observations 16 ANOVA df Regression Residual Total 2 13 15 SS 82108.66917 23617.22944 105725.8986 Standard Error 610.5628473 3.51562459 39.52423217 MS 41054.335 1816.71 F 22.598178 Significance F 5.872E-05 Market Area M3

Coefficients Intercept Real GDP Avg Price 315.5794514 15.26340902 -135.103272

t Stat 0.5168664 4.3415924 -3.418239

P-value 0.6139297 0.0007993 0.004579

Lower 95% -1003.4614 7.6683638 -220.49018

Upper 95% 1634.6203 22.858454 -49.71636

Lower 95.0% 1003.46139 7.66836385 220.490185

Upper 95.0% 1634.62029 22.8584542 49.7163598

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MGMT 497 – ITM CORPORATION TWO YEAR PLAN

SALES FORECAST WORKSHEET
Market Area Year 1 1 1 1 2 2 2 2 3 3 3 3 4 4 4 4 5 5 5 5 6 6 6 6 Quarter 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

M4
Time 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Seasonality 0.92 1.01 0.91 1.16 0.92 1.01 0.91 1.16 0.92 1.01 0.91 1.16 0.92 1.01 0.91 1.16 0.92 1.01 0.91 1.16 0.92 1.01 0.91 1.16 Industry Sales 180 210 195 250 215 245 225 285 267 332 313 435 384 344 349 418

Y
SA Sales 196 208 214 216 234 243 247 246 290 329 344 375 417 341 384 360

Choose Your Predictors (X)
Time 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Real GDP 92.74 94.54 96.64 97.99 100.11 102.46 103.20 100.00 103.95 107.89 108.08 112.35 116.87 120.45 120.53 121.94 Avg Price 62.00 64.00 66.00 75.00 75.00 75.00 75.00 75.00 73.40 71.00 71.00 72.00 72.40 77.00 78.25 79.25

Forecasting the Next 8 Quarters: Yea Quarte Tim Seasonalit r r e y 5 1 17 0.92 5 2 18 1.01 5 3 19 0.91 5 4 20 1.16 6 6 6 6 1 2 3 4 21 22 23 24 0.92 1.01 0.91 1.16 Forecasted Industry Sales SA Sales 409 428 437 451 461 480 489 503 Real GDP 126.30 132.38 130.57 132.77 131.35 137.68 135.79 138.08 Avg Price 80.04 80.84 81.65 82.47 83.29 84.13 84.97 85.82 Forecasted Company Sales

376 432 398 523 424 485 445 584

Time 17 18 19 20 21 22 23 24

125 144 133 174 141 161 148 194

153

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

Company's Market Share Projection:
Industry Sales in Market Area M4 (Latest Quarter) Company Sales in Market Area M4 (Latest Quarter) Unit Market Share in M4 (Latest Quarter) Expected Gain or Loss in Market Share (+ / - ) Expected Market Share 418 135 32.3 1.0 33.3 Units Units Percent Percent Percent

REGRESSION ANALYSIS FOR FORECASTING SUMMARY OUTPUT Regression Statistics Multiple R 0.963706373 R Square 0.928729973 Adjusted R Square 0.910912466 Standard Error 21.83099665 Observations 16 ANOVA df Regression Residual Total 3 12 15 SS 74526.53131 5719.108975 80245.64029 Standard Error 253.9103918 5.290657402 2.532474066 1.601856015 MS 24842.177 476.59241 F 52.124575 Significance F 3.724E-07 Market Area M4

Coefficients Intercept Time Real GDP Avg Price 395.6755676 15.62969977 1.141895284 -4.95569803

t Stat 1.5583276 2.9542075 0.4509011 -3.093723

P-value 0.145126 0.0120497 0.6601002 0.0092978

Lower 95% -157.54765 4.1023475 -4.3758917 -8.4458425

Upper 95% 948.89879 27.157052 6.6596823 1.4655536

Lower 95.0% 157.547652 4.10234754 -4.3758917 8.44584247

Upper 95.0% 948.898787 27.157052 6.65968227 1.46555359

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MGMT 497 – ITM CORPORATION TWO YEAR PLAN

Appendix E: Decision Set Data for Years 5 to 6 YEAR 5 QUARTER 1

YEAR 5 QUARTER 2

155

MGMT 497 – ITM CORPORATION TWO YEAR PLAN YEAR 5 QUARTER 3

YEAR 5 QUARTER 4

156

MGMT 497 – ITM CORPORATION TWO YEAR PLAN YEAR 6 QUARTER 1

YEAR 6 QUARTER 2

157

MGMT 497 – ITM CORPORATION TWO YEAR PLAN YEAR 6 QUARTER 3

YEAR 6 QUARTER 4

158

MGMT 497 – ITM CORPORATION TWO YEAR PLAN

159