ACC202 Assignments Week 3 - Discussion 1

American Airline Group- AAL

AAL is a holding company and its principal, wholly-owned subsidiaries are American Airlines, Inc. (American), Envoy Aviation Group Inc. (Envoy), PSA Airlines, Inc. (PSA) and Piedmont Airlines, Inc. (Piedmont). The core activity of American Airline is operating a major network carrier. This involves providing scheduled air transportation for passengers and cargo. American Airlines owns and operates aircrafts that it reports as assets and provide depreciation for. The principle source of revenue is sale of Airline tickets to passengers.

Pricing for tickets is based on a pure-competition market strategy, as Department of Transport doesn’t dictate any regulations on price. The organization maintains control over and can make allowances for seasonality of travel as well as demand for available seats to fluctuate prices. This is in addition to having differential cost and agreements to airspaces from one jurisdiction to another.

The key costs as identified are employee labor costs resulting from the large number of fixed wages for employees and fuel expenses per aircraft, which can be considered as fixed cost. American Airlines identifies a one cent per gallon increase in aviation fuel price would increase their 2019 annual fuel expense by $45 million.

In-flight catering is an example of a variable cost.

Samsung Electronics Company- SSNLF

SSNLF operates five core divisions classified as follows: Consumer Electronics (CE), Information Technology and Mobile Communications (IM), Semiconductor, Display Panels (DP) and Harman. Harman is responsible for all other segments. The operating segments are product-based and are identified based on the internal organization and revenue streams.

A division can set its fixed selling price for its finished product as well as a transfer price allowing divisions to transfer items between them at a price efficiently. This intersegment revenue is subsequently eliminated from the financials of the company.Key costs in the organization are those relating to material and wages used in manufacturing which are variable. However, research and development costs are fixed in nature and are significant costs.

I believe that AAL will have a larger markup on variable cost since AAL has low variable cost as compared to its higher fixed costs. As such, the fixed costs that will be bundled together with operating profit result in a higher markup on variable cost. This is as opposed to SSNLF which would require a lower markup on variable cost as the only significant fixed cost to be covered is for research and development. Most of its total cost is variable by nature.

For US Residents, Individuals are prohibited from trading Global Depository Receipts in the London Securities Exchange or Luxembourg Stock Exchange in accordance with Rule 144A of the US Securities Exchange Act which was implemented in order to induce foreign companies to invest in the US capital markets. Also, due to the lack of an international agreement with a trading partner in the United Stated, it is difficult to buy shares listed on the Korean Securities Exchange as well

“Annual Report Pursuant to Section 13 or 15(d).” SEC Emblem, 1 Nov. 2014, www.sec.gov/about/forms/form10-k.html  Links to an external site..

“How to Buy SEC Stock │ Stock │ Investor Relations │ Samsung Global.” Samsung Global, 21 Feb. 2018, www.samsung.com/global/ir/stock-information/how-to-buy-sec-stocks/  Links to an external site..

Kenton, Will. “Rule 144A.” Investopedia, Investopedia, 9 May 2019, www.investopedia.com/terms/r/rule144a.asp  Links to an external site..

“SEC Filings.” American Airlines, americanairlines.gcs-web.com/sec-filings?field_nir_sec_form_group_target_id[]=471&field_nir_sec_date_filed_value=#views-exposed-form-widget-sec-filings-table.