Business law question with accounting

I need the total length both answers to be 2-1/2 – 3 pages TOTAL. Please use MLA format. Please see attached files for context. One attachment is the case itself and the other attachment is financials for the company. And one attachment is just addition info to help yo.

1. Was there a reasonable economic basis for the termination of the ten disabled workers (rather than the CPM employees also working for LCP)? If you do not think there is enough information, what other data would you like to be provided? (Consider the opportunity cost of using the ten workers provided by the Sheltered Workshop in contrast to the opportunity cost of using existing CPM staff and facilities.)

2. Could LCP be a viable business? If so, under what conditions and what level of
production (and, since production is directly related to production workers, employees)?

LOCAL CUSHION PRODUCTION
Local Cushion Production (LCP) was a small business that manufactured bleacher seat pads that sports
fans or picnickers could use to make wooden outdoor seating (or even convenient rocks) a bit warmer
and more comfortable. The primary markets for LCP’s product were college bookstores (to be sold to
students and alumni) and specialty advertising firms (for use as corporate give-a-ways). The firm was
organized in the second half of 2016 and began selling products in 2017.
LCP had a policy of providing an annual “cost of living” increase for its assembly workers to maintain a
constant annual cost of $24,500 per worker (1984 dollars). The production process requires one worker
for every sixteen tons manufactured. As of January 2020, up to ten of the assembly workers were
provided by a local Sheltered Workshop facility (a facility that provided and supervised disabled workers
for product assembly and piecework). This facility also rented the necessary manufacturing space to
LCP. Coast-to-Coast Prime Manufacturing (CPM), a local manufacturing conglomerate with some excess
capacity, provided the remaining workers and production space when more than ten disabled workers
were required. Coast-to-Coast Prime Manufacturing was also paid $24,500 (inflation-adjusted) apiece for
its workers plus an additional fee for the rental of equipment and space.
In addition to manufacturing labor, LCP employed a clerical worker and a general manager but no sales
staff. Through December 2020, sales were generated primarily by manufacturer’s representatives who
received a standard 5% of sales as their commission.
In January 2020, Coast-to-Coast Prime Manufacturing purchased LCP. CPM’s management team
immediately began supplementing sales efforts by adding the LCP products to their own manufacturer’s
representatives lines. Otherwise, they operated LCP without significant changes. The Coast-to-Coast
Prime Manufacturing managers soon found that while sales were growing, profits were shrinking. The
management responded for the second half of 2020 by increasing the commission to their manufacturer’s
representatives from 5% to 6%. The sales force responded quickly, and sales boomed.
By July 2021, CPM’s board of directors expressed some concern to management. Even though sales
were up, the deal was not proving to be profitable. At the end of July 2021, the board of directors was
informed that CPM’s management team had decided to reduce LCP’s production staff by letting go of
those employees provided by the Sheltered Work Facility.
It is now autumn 2022. CPM has been sued by a noted civil rights attorney claiming that closing down
the Sheltered Work Facility manufacturing operation was a wrongful termination of the workers in the
Sheltered Work Facility. Her court filings say that there was no valid business reason for selecting the
disabled workers for layoff rather than the nondisabled workers; in part, the court filings claim that the
layoff was wrongful because there was no economic justification for dismissing these workers who had
been at least as productive, and profitable, as their non-disabled counterparts for so many years. The
attorney claimed that this was obvious discrimination against the disabled and because of the
discrimination, her ten clients will be unemployed for an average of 20 years each.
The attorney is asking the court for a verdict of $19,600,000 as an appropriate award to her ten clients if
she prevails in her action. She estimated this figure by computing 20 years x 10 clients x $24,500 =
$4,900,000, doubling it to account for her fees, then doubling that to account for future inflation.
Required
You have been hired by CPM’s board of directors to help their attorney (and them) evaluate the claims in
the lawsuit and determine whether the management team made the right decision. You have been asked
to consider the following specific questions in preparing a report: (Use the guidelines for preparing a
report on the course website.)
You remember from your Business School days the following concepts that you think might be useful
here:
a.
b.
c.
d.
e.
f.
adjusting data for inflation (macroeconomics LDC concept 1)
marginal cost vs. average cost (microeconomics LDC concept 6)
opportunity cost vs. accounting cost (microeconomics LDC concept 1)
present value (financial accounting LDC concept 9)
duty to mitigate damages (business law LDC concept 5)
compensatory and punitive damages (business law LDC concept 9)
TABLE 1
2016 2h
2017 1h
2017 2h
2018 1h
2018 2h
2019 1h
2019 2h
2020 1h
2020 2h
2021 1h
Sales (Tons)
Average Real
Price/Ton
($000)
Nominal
Price ($000)
0
75
100
150
175
185
200
225
275
285
0
2.004
1.997
2.004
2.004
2.004
2.006
2.001
2.002
2.003
0
4.89
4.92
5.01
5.05
5.1
5.15
5.15
5.21
5.28
Nominal
Revenue
($000)
Total Cost
($000)
0
366.75
492
751.5
883.75
943.5
1030
1158.75
1432.75
1504.8
194.760
377.180
463.760
638.230
738.600
812.800
908.450
1090.950
1483.460
1563.200
Mfg. Rep’s
Commission
Rate
5%
5%
5%
5%
5%
5%
5%
5%
6%
6%
Earnings
before Tax
($000)
(194.76)
(10.43)
28.24
113.27
145.15
130.70
121.55
67.80
(50.71)
(58.40)
Year
2016 2h
2017 1h
2017 2h
2018 1h
2018 2h
2019 1h
2019 2h
2020 1h
2020 2h
2021 1h
Sales
(Tons)
0
75
100
150
175
185
200
225
275
285
Average Real
Price/Ton
($000)
0
2.004
1.997
2.004
2.004
2.004
2.006
2.001
2.002
2.003
Nominal
Price
($000)
Nominal
Revenue ($000)
0
0
4.89
366.75
4.92
492.00
5.01
751.50
5.05
883.75
5.1
943.50
5.15
1,030.00
5.15
1,158.75
5.21
1,432.75
5.28
1,504.80
Mfg. Rep’s
Commission
Rate
5%
5%
5%
5%
5%
5%
5%
5%
6%
6%
Total Cost
($000)
194.76
377.18
463.76
638.23
738.60
812.80
908.45
1,090.95
1,483.46
1,563.20
Earnings
before Tax
($000)
-194.76
-10.43
28.24
113.27
145.15
130.70
121.55
67.80
-50.71
-58.40
Local Cushion Production
Student Coaching Slides
1
Local Cushion Production
Is bigger always better?
◼ Is there a scale at which this money-losing
business could be viable?
◼ Are the lawyer’s claims economically
plausible or are they flawed? Why?
◼ Use the data from the case (also found on
the web page) to answer your questions
◼
2
Nominal vs. Real Variables – 1
Price
Nominal $ values are the actual prices at a
given time
◼ Real $ values are those prices expressed in
terms of a given year’s buying power—
rather like “adjusting for exchange rates”
but instead of pesos for dollars, it is current
year’s prices for 1984 prices
◼
3
Nominal vs. Real Variables – 2
Price
◼
◼
For a given price index,
Real Price x Index Value = Nominal Price
Or, by algebra,
Nominal Price / Real Price = Index Value
4
Nominal vs. Real Variables – 3
Interest Rates
◼
◼
It’s a little different for interest rates:
Let p denote the annual percentage
change in the price index. This is the
inflation rate, also the percentage
decline in buying power of Nominal $
from one year to the next.
5
Nominal vs. Real Variables – 4
Interest Rates
◼
◼
If “i” denotes the observed (nominal)
interest rate and if “r” denotes the
inflation adjusted (real) interest rate,
then i  r + p
The real interest rate plus how any lost
buying power due to inflation is
approximately the observed nominal
interest rate.
6
Nominal vs. Real Variables – 5
Present Value
The present value of an amount expressed
in nominal dollars should generally be taken
using a nominal interest rate
◼ The present value of an amount expressed
in real dollars, so expressed in “pure buying
power without inflation”, should generally
be taken using a real interest rate
◼
7
Is there an optimal business size?
◼
Graphing a profit measure, in this case
earnings before taxes, against units
produced may indicate the shape of the
profit function. From that, one might
determine an optimal level of output.
8
Some Statistics Review:
◼
Mean: The simple arithmetic average (a measure of
central tendency): The sum of a bunch of numbers divided
by how many numbers there are.
◼
Median: The 50th percentile (also called the midpoint, the
value in the middle). The median is useful when there are
“outliers” in the data which might distort the “measure of
central tendency”. (Example: suppose one of the students
in your group earns $1,000,000 per year. The mean
income of your group probably would not be reflective of
most of you, while the median would be.)
9
Some Legal Concepts – 1
Duty to Mitigate:
◼
◼
A party injured by a breach of contract may not
recover for any amount of damages they could
have avoided with reasonable efforts.
When one party perceives that the other has
breached or will breach the contract, the injured
party must try to prevent unnecessary losses or
risk not being able to recover for such losses.
10
Some Legal Concepts – 2
Punitive Damages:
◼
Define/Purpose
◼
Awarded under what circumstances?
◼
Applicable in this case?
11
Some Legal Concepts – 3
◼
Contingency attorneys are usually paid a
percentage (often 40%) of any damages
(including punitive damages) awarded to
the plaintiff
12