Transactions involves spot exchange, contract, Managerial Accounting

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Identify whether each of the following transactions involves spot exchange, contract, or vertical integration. For the last item if the contract length is optimal or suboptimal.

a. Elasticities R Us, a local econometric forecasting firm, purchases office equipment from Staples.

b. Exxon-Mobil uses the oil extracted from its wells to produce raw polypropylene, a type of plastic.

c. Arcadia University contracts with Marriott for housekeeping services and has a legal obligation to purchase these services for the next 3 years.

d. Wavy Wall Construction - a homebuilding contractor - purchases drywall from the local Home Depot.

e. As a manager of the WeDoWell Corporation, you have negotiated with several vendors and are on the verge of signing an eight-year contract with Bolts Enterprises. Under the contract, they would ship to you 2,000 titanium bolts per month at a price of $1,000 per bolt. Your assistant has just brought you an article from a trade publication that indicates another company has developed a new technology that reduces the cost of producing the titanium bolts. How would this information affect the optimal length of your contract with Bolts Enterprises? Explain.


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