SUBJECT: MANAGERIAL ECONOMICS

A case study to ponder:

Amcott Loses $3.5 Million: The Manager was Fired

On Tuesday software giant Amcott posted a year-end operating loss of $3.5 million. Reportedly, $1.7 million of the loss stemmed from its foreign language division. At a time when Amcott was paying First National a hefty 7 percent rate to borrow short-term funds, Amcott decided to use $20 million of its retained earnings to purchase three-year rights to Magicword, a software package that converts generic word processor files saved as French text into English. First-year sales revenue from the software was $7 million, but thereafter sales were halted pending a copyright infringement suit filed by Foreign, Inc. Amcott lost the suit and paid damages of $1.7 million. Industry insiders say that the copyright violation pertained to "a very small component of Magicword."

Ralph, the Amcott manager who was fired over the incident, was quoted as saying,

"I'm a scapegoat for the attorneys [at Amcott] who didn't do their homework before buying the rights to Magicword. I projected annual sales of $7 million per year for three years. My sales forecasts were right on target."

Do you know why Ralph was fired? Can you discuss the possible reasons?

Please see the file for Reference:

https://docs.google.com/presentation/d/1laTnGSW5yJXK2-n-2_ykowFL13lLKb0z/edit?usp=sharing&ouid=111347120008608445534&rtpof=true&sd=true