North America The North America segment is responsible for our chocolate and non-chocolate confectionery market position, as well as our grocery and growing snacks market positions, in the United States and Canada. This includes developing and growing our business in chocolate and non-chocolate confectionery, pantry, food service and other snacking product lines. North America accounted for 88.1%, 87.8% and 87.6% of our net sales in 2017, 2016 and 2015, respectively. North America results for the years ended December 31, 2017, 2016 and 2015 were as follows: For the years ended December 31, 2017 2016 2015 Percent Change 2017 vs 2016 vs 2016 2015 $ In millions of dollars Net sales Segment income Segment margin 6,621.2 $ 6,533.0 $ 2,045.6 2,041.0 30.9% 31.2% 6,468.1 2,074.0 32.1% 1.3% 0.2% 1.0 % (1.6)% 2017 compared with 2016 Net sales of our North America segment increased $88.2 million or 1.3% in 2017 compared to 2016, driven by increased volume of 0.5% due to a longer Easter season, as well as 2017 innovation, specifically, Hershey's Cookie Layer Crunch, and the launch of Hershey's Gold and Hershey's and Reese's Popped Snack Mix and Chocolate Dipped Pretzels. Additionally, the barkTHINS brand acquisition contributed 0.3%. Net price realization increased by 0.4% due to decreased levels of trade promotional spending. Excluding the favorable impact of foreign currency exchange rates of 0.1%, the net sales of our North America segment increased by approximately 1.2%. Our North America segment income increased $4.6 million or 0.2% in 2017 compared to 2016, driven by higher gross profit, partially offset by investments in greater levels of advertising expense and go-to-market capabilities, as well as unfavorable manufacturing variances and higher freight and warehousing costs. QUESTION 1 Hershey says revenues were higher because Easter was later in the year. Should Hershey's accountants have been able to forecast this? a. No. Accountants should just forecast the same level of sales each yea. b. No. Easter occurs different times each year and no one can know when it will pop up each year. C. Yes. We can use a calendar and count the days between Valentine's Day and Easter know there is a longer selling season and forecast additional sales. d. No. Accountants are not fortune-tellers and cannot forecast what will happen to sales. QUESTION 2 The costs and revenues related to the launch of new products, "Hershey's Gold" and "Popped Snack Mix (Hershey's and Reese's)" should have been included in the budget for Hershey. a. False. Marketing likes to keep new products secret, so accountants would have had no way of knowing that new products would be forthcoming. b. False. New products are not included in the budget since they are new. C. True. Launching new products takes a lot of preparation and the accountants should have had forecast for cost and sales of the new products. d. False. Management probably just decided to launch new products without telling anyone, so accountants could not have included costs and revenues. QUESTION 3 The acquisition costs and projected revenues of the barkThins brand should have been included in the budget. a. True. Purchasing a business would have required years of planning and executives would want everyone involved so that competitors would help to up the purchase price. b. False. Purchasing a business probably would not be discussed openly with personnel to keep the purchase confidential until it is completed. C. True. barkThins would contact Hershey accountants to make sure the purchase was budgeted. d. True. Every business that Hershey would purchase would have the same costs/revenues and accountants should just include a purchase each year just in case. QUESTION 4 Hershey accountants should have included the greater level of investment in advertising/marketing expense in the budget. a. False. Marketing is all pre-paid so there is no budget. O b. False. Marketing is a cost that cannot be controlled so it is what it is. O c. False. Marketing people will not adhere to a budget because they are too creative. d. True. Management typically has a marketing budget laid out for the year. The accountants would include these costs in the budget. QUESTION 5 Hershey accountants should have included higher freight and warehousing costs in its budget. a. False. If FedEx or UPS decide to increase their rates, how would Hershey's accounts be able to forecast this? b. True. Accountants should always assume that costs will increase and make up a number in the budget. C. True. FedEx and UPS will contact Hershey to let them know they are thinking about increasing their rates in the coming year so Hershey can budget for the change. d. True. Accountants should purchase Forever stamps from the post office so shipping costs will not increase ever