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HONG KONG MANAGEMENT PARAMETERS
TABLE 1 - DEMOGRAPHY
 
   
Area ('000 KM2)
Population (millions)

China
 

9.600
 

1200
North American Free Trade Agreement (NAFTA)
21.457
278
Rest of Developed World
44.120
2.486
     
 
TABLE 2 - MARKETING COSTS  

Information on competitors' activities

HKD 75 000
 
Market share information
HKD 50 000
 
     

 
TABLE 3 - AGENTS (CHINA), DISTRIBUTORS (NAFTA) & INTERNET DISTRIBUTOR COSTS  

Minimum support cost, per agent/distributor, per quarter

HKD 75 000
 
Cost of setting up an agent/distributoR
HKD 50 000
 
Cost of terminating an agent/distributor
HKD 75 000
 
TABLE 4 - INTERNET COSTS

% of value

3%
First time joining fee to Internet Service Provider
HKD 75 000
Quarterly cost per Internet Port
HKD 10 000
Cost of closing down an internet operation
HKD 50 000
TABLE 5 - MANUFACTURING PARAMETERS  
 
Product 1
Product 2
Product 3
Minimum machining time per unit
60 min.
75 min.
120 min.
Minimum assembly time per unit
100 min.
150 min.
300 min.
Raw material content per unit
1 unit
2 units
3 units
TABLE 6 - MAINTENANCE COSTS  
Maintenance cost per machine, per hour
HKD 850
 
Cost per hour of emergency maintenance (not contracted for)
HKD 1 750
 
TABLE 7 - MAXIMUM HOURS AVAILABLE PER MACHINE (PER QUARTER, RELATIVE TO SHIFT LEVEL WORKED)  
     
Shift level
Maximum hours per quarter that each machine can work, 
accumulating hours to each successive level of shift
Unskilled workers needed for each machine
Single (1)
588 hours
4
Double (2)
1 092 hours
8
Treble (3)
1 638 hours
12
TABLE 8 - SCRAP VALUES FOR REJECTED PRODUCTS  
 
Product 1
Product 2
Product 3
Scrap value per product unit
HKD 400
HKD 800
HKD 1 200
 
TABLE 9 - CHARGE FOR GUARANTEE REPAIRS & SERVICING
       
 
Product 1
Product 2
Product 3
Retail servicing cost, per unit
HKD 600
HKD 1 500
HKD 2 500
Note that repairs carried out as a result of a product recall are charged at 75% of normal charge
TABLE 10 - PRODUCTION COSTS
Cost of supervision per shift
HKD 125 000
Production overheads, per machine
HKD 35 000
Running cost per machine hour
HKD 80
Production planning cost per unit requested
HKD 10
Cost of quality control department
HKD 80 000
TABLE 11 - CONTAINER CAPACITY  
            Product 1 Product 2 Product 3
Container capacity in terms of products
500
250
125
Note: Mixed loads can be carried: eg, 1 unit Prod. 3 = 2 units Prod. 2 or 4 units Prod. 1
TABLE 12 - TRANSPORTATION COSTS
Daily all-in hire cost of container
HKD 6 500
Maximun vehicle distance allowed each day
400 KM
Distance to Nafta shipping port
250 KM
Cost of container hire
HKD 80 000
Distance to Internet Distribution Agent
150 KM
TABLE 13 - WAREHOUSING & PURCHASING

Available raw material storage at factory (units)
2 000
Quarterly cost of factory warehouse and administration
HKD 125 000
Cost of external storage per raw material unit
HKD 25
Cost of storage per product unit at China Agents and Internet   Distributors
HKD 35
Cost of storage per product at Nafta Distributor 
USD$ 4
TABLE 14 - METHOD OF CALCULATING AVERAGE QUARTERLY STOCK HOLDINGS & INTEREST
0.5 x (opening value + closing value)
TABLE 15 - HUMAN RESOURCE DEPARTMENT COSTS
    Recruitment Compensation for Dismissal Initial Training
Skilled assembly workers
HKD 20 000
HKD 50 000
HKD 85 000
Unskilled machinists
HKD 10 000
HKD 20 000
---
TABLE 16 - MAXIMUM HOURS EACH PRODUCTION WORKER CAN WORK AND PAY PREMIUMS
Shift Level Hours Per Worker 
at Basic Rate
Hours Per Worker 
at Saturday Rate
(basic pay + 50%)
Hours Per Worker 
at Sunday Rate
(basic pay + 100% )
Machinists
Shift Premium
Single (1)
420
+ 84
+84
0
Double (2)
420
+ 42
+84
1/3
Treble (3)
420
+ 42
+84
2/3
TABLE 17 - MINIMUM HOURS & SALARIES

Unskilled machinists' minimum paid hours per quarter
350 hours
Skilled assembly workers' strike hours per week
49 hours
Skilled assembly workers' minimum hours per quarter
0
Skilled assembly  workers' minimum hourly rate of pay
HKD 40
Minimum management budget per quarter
HKD 300 000
Ratio of unskilled machinists' rate of pay to skilled rate
65%
TABLE 18 - COST OF MACHINES

Cost per machine (total)

HKD 3 500 000
Payable at time of order
HKD 1 750 000
Payable on installation
HKD 1 750 000
Machine rate of depreciation per quarter
2,50%
TABLE 19 - METHOD OF COMPUTATIONS

Financial Limits Overdraft:

50% of value of (property + raw material stock + product stock)
  plus 90% of debtors
  less 100% tax due
  less 100% of creditors
Note: All of these values are taken from last quarter's Balance Sheet

Borrowing Power:
 
0.5 x (share price at the end of last quarter x number of shares)
  less 100% of (term loans already in place + bank overdraft limit as calculated above)

Credit-worthiness for buying machines:

Borrowing Power + Cash + Investments (all from last quarter's Balance Sheet)
  less 50% of the value of each machine due to be installed next quarter
Note: If any of these limits work out to be less than 0, the limit will be set to 0.
 
TABLE 20 - FINANCIAL PARAMETERS

Tax rate per annum (assessed in the fourth quarter of the year, and paid in the second quarter)
30%
Fixed overheads per quarter
HKD 300 000
Variable overhead rate per quarter
0.30%
Credit control cost per unit sold in China and Nafta
HKD 10
Credit card rate on internet sales
HKD 10

Interest rates on:
   
Investments Annual China base rate announced last quarter
Overdraft Annual China base rate announced last quarter plus 4%
Unsecured loans Annual China base rate announced last quarter plus 10%
Term loans Fixed annual rate of 12%
     
       
 
TABLE 21 - PRODUCT STOCK & RAW MATERIAL STOCK VALUATION

Product Stock:
   
110% of the total cost of all products, with each product calculated as:  
      The raw material content valued at six-month price quoted last quarter
    plus The basic skilled wage rate times the assembly-time for the product
    plus (The machining time for the product x 4) x (65% of the basic wage rate) 
      x (the % shift premium)  
Raw Material Stock:    
90% of the lowest of the Spot, 3-month or 6-month quoted last quarter, times the number of units in stock or due to be delivered
 
TABLE 22 - INSURANCE OPTIONS  
Insurance Plan Number Insurance Excess Insurance Premiun
0
100%
no insurance
1
0,10%
0,60%
2
0,20%
0,35%
3
0,30%
0,20%
4
0,40%
0,10%
Note:The monetary value of the primary risk is calculated as: 
the quoted percentage of Property plus Machines plus Raw Material Stock plus Product Stock taken from last quarter's Balance Sheet
 
TABLE 23 - TARGET PAYMENT PERIODS FOR DEBTORS

Internet

0 days (credit card)
China agents
60 days
NAFTA distributors
90 days
TABLE 24 - TIMING OF PAYMENTS TO CREDITORS  

External Cost Items
(Internal and labor costs omitted)

If goods are delivered or services are provided next quarter,
 the charged amount will be paid:
 
Next Quarter
Quarter after Next
Advertising  
100 %
Guarantee servicing  
100 %
Internet Service Provider
100%
 
Payments to agents and distributors
100%
 
Transportation costs  
100%
Warehousing costs  
100%
Personnel costs
100%
 
Research & Development
100%
 
Maintenance  
100%
Business intelligence  
100%
Web-site development  
100%
Other miscelaneous costs
100%
 
Raw materials (Note 1)
50%
50%
Machines (Note 2)
50%
50%
Interest
100%
 
Insurance
100%
 

Note 1: All materials ordered next quarter (regardless of date of future delivery) will be paid 50% next quarter and 50% in the quarter after next.  The second payment will not be affected by changes in the exchange rate in the meanwhile.
Note 2:  Machines will be ordered next quarter and a 50% deposit paid; and installed in the quarter after next at which time the second 50% of the payment will be made
.
TABLE 25 - WEB-SITE CAPACITY  

Demand on your web-site will vary considerably from hour to hour across the day. If you are not able to givequick and efficient service to visitors at peak times, your marketing image can decline quite sharply. However, it is difficult to assess the capacity of your web-site which depends on the number of ports linking you to your ISP. The following table gives a guide to the link between ports and service.

Number of Ports in parallel

1

2

5

10

20

50
12
24
60
120
240
600
2
7
31
81
190
537
Maximum theoretical capacity number of visits per hour
Practical working capacity number of visits per hour
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