Msm – 630 Mgmt of Metrics & Measurement Assignment 11.1

1. Eric Gilson February 17, 2014 Msm – 630Mgmt of Metrics & MeasurementAssignment 11.1

2. Resources Unlimited Corporation • Formed in 1985 through the merger of two natural pipeline companies • Appointed a new CEO • Largest gas distribution network in the United States that consisted of 38,000 miles of pipeline • Production sites in the southwestern and mountain states • Industrial users and residential customers in the northeastern and Midwestern regions.

3. Resources Unlimited Corporation(Prior Merger) • Originally, the natural gas industry had been regulated by the federal government • Pipeline companies purchased gas at federally approved costs from the producers and then sold that gas at federally approved prices to the users. • The demand was steady and the margins were set. It was hard for a pipeline company not to make money.

4. Resources Unlimited Corporation(Post Merger) • The natural gas industry was deregulated by the federal government • Purchase costs at the wellhead and sales prices at the distribution point began to swing wildly with daily changes in supply and demand • Gas industry was viewed as risky but new CEO stated this as an opportunity

5. Resources Unlimited Profit Analysis / Structure(1986 – 1988) The volatile swings were evident each quarter and while a profit was turned it was hard to predict potential profit.

6. Resources Unlimited Gas / Oil Accounts • If we take the estimated expected growth for oil accounts from 1988 to 1990 you get about a 17% growth year of year ( or 11 accounts each year). This calculation would push Oil Accounts to 86 in 1990 while Gas Accounts would have presumably went to 43. • Regarding salaries, there was no information to determine how they were calculated for each employee. There was no way to draw a correlation on whether an employee made more handling a gas or oil account. • Although 500 gas accounts were needed for 30 days it appears they only had 43 accounts to transfer into a hedge in 1990 which obviously didn’t allow operations to run for more than 6 days.

7. Accountants Salary Discrepancy • The discrepancy was beyond 1 standard deviation of the top three salaries but just under 2 deviations. • Female 1 would have a legitimate lawsuit if this wouldn’t be addressed considering she falls well below 1 standard deviation. • Female employee 1 should receive and increase of $5,000 to her salary so she falls within the 1 standard deviation of the top salaries.

8. Corporate Sr. Management Style & Communication • CEO used complex processes so it would be difficult to process net gains and losses • CEO kept the decision making and information at the senior level • When concerns were presented to the CEO from lower management it went unanswered

9. Accounting Practices • Sr. Management used complex financial instruments called derivatives and hedges to absorb the risk of the cost and price swings • Accounting department felt corporate profits and quarterly sales reported to the media were skewed • Sr. Management provided little data not only to their team but Wall Street by design