Resources Unlimited Case Study

1. Resources UnlimitedCase Study Noah Finlan MSM – 630 Bellevue University Dr. Henry Dorr

2. Background • Resources Unlimited formed in 1985. • 38,000 miles of natural gas pipelines. • Natural gas industry regulated by the federal government. • Set profit margins.

3. Background (cont’d) • Merger of two companies. • New CEO appointed. • Industry deregulated. • Wild swings in cost price and selling price.

4. Base Line Profits

5. Base Line Profits • The quarterly data for the years of 1986 & 1987 are quite volatile and follow no specific trend that can be easily identified. • In addition, the method used to compute the profit is unknown at this point in time.

6. Base Line Profits

7. Gas vs. Oil Accounts

8. Gas vs. Oil Accounts • 1988 – (64 Oil – 32 Gas) = 32 variant • 1990 – (86 Oil – 32 variant) = 54 Gas accounts

9. Gas vs. Oil Accounts

10. Accountant Salaries

11. Accountant Salaries • Male 1 = $50,000 per year. • Male 2 = $55,000 per year. • Male 3 = $52,000 per year. • Female 1 = $32,000 per year. • Mean for 3 males = $52,333 per year.

12. Accountant Salaries

13. Accountant Salaries (cont’d) • Mean salary for 3 males = $52,333 per year. • Standard Deviation = 2,517 • Mean – (2 x Std. Dev.) = Legal Minimum • $52,333 – (2 x 2,517) = $47,300 • Legal Minimum – Female Salary = Raise amount. • $47,300 - $32,000 = $15,300 raise for the female accountant.

14. Hedge Fund Transfers

15. Hedge Fund Transfers Calculations: • 500 accounts / 30 days = 16.67 • 16.67 X 6 days = 100 accounts • 500 accounts – 100 accounts = 400 accounts. Determination: • The CEO transferred 400 gas accounts into a dummy hedge fund to lessen the cash demands. • This failed and the company filed for Bankruptcy in June 1994.

16. Summation • The CEO makes the decisions and then poorly conveys them to subordinates to carry out. • The accounting department seems to be concerned with “talk on the street” instead of offering solutions to the problems.

17. Summation (cont’d) • The lack of a clearly defined profit structure is due in large part to the volatility of the market. • The communication seems to flow from the top down only.