Carbon capture and storage

Carbon capture and storage Introduction Increasing numbers now recognise the potential devastation upon the worldwide environment climate change could have. With CO2 emissions increasing at a rate of 1.6%/Yr (1999-2005) and emissions from power production at 23,684 Mt/yr (2005)1 plus no current successor to the Kyoto Protocol*, it is clear that Carbon Dioxide is going to become an ever growing threat to our planets stability. Worryingly, not only in a climatic sense but a societal one as well. From solar and geothermal power to hydrogen fuel cells, the scientific community is working to develop ways of reducing CO2 output and one field of growing interest from both the research and business community is Carbon Capture and Storage (CCS). Serious research in this field is relatively new and many aspects of its viability, safety, efficiency and cost have still to be fully discovered. As CCS is simply storing CO2 and not actually decomposing it, many feel CCS is counter-productive and the resources should instead be channelled to focus on clean energy production. However with current emission trends, CCS will be an extremely useful tool should we see drastic changes in climate toward the end of this century and need a way to buy time to fully utilise and develop clean energy. This paper will briefly describe a range of potential CCS methods as shown in figure A as well as discuss the potential for CCS in our society. The smallest estimated potential storage for CO2 at 320Gt is worth approximately 32 years of emissions!2 Few dispute the fact that we should evolve to a more environmentally-friendly society in all senses of the word, CCS will buy the time needed for this to happen. Over the last 10-20 years several proposals have been put forward and developed such as the Sleipner oil field, Norway and ‘CarbFix in Iceland. We are now beginning to get live data from current CCS projects worldwide to analyse and use for the enhancement of CCS, this paper aims to synthesise this information from these pr ojects for a brief analysis of CCS potential. Deep Ocean or the deep seabed Many have hypothesised on potential CCS sites. One suggestion is storing CO2 in the deep ocean or seabed as shown in figure B. As the oceans are already absorbing ~8 billion tons of CO2and negating ~50% of our anthropogenic CO2 emissions3 it is already a natural CCS site. CO2 is denser than seawater in its supercritical state (both solid and liquid, see figure C)and so will sink and pond on the seabed staying there for thousands of years as figure B illustrates. Alternatively, ships would pump CO2 into the ocean as shown in figure B where natural thermohaline currents would dissolve the CO2 upon which that slightly denser body of water would pond on the seabed. While salinity, pressure and temperature all affect the dissolution of CO2, below 600m, 41-48kg/m3 CO2 can dissolve in a 1M brine solution,2 a fairly large figure. Increase the brine concentration and this figure will drop,however, with the average molarity of the oceans at 0.5M it is clear that this store has great potential . Unfortunately immediate acidification of the local water would occur as carbonic acid forms. Therefore this storage method would probably be devastating to local ecology. The cost:benefit analysis over acidifying patches of ocean as opposed to lowering atmospheric CO2 and thats effect upon terrestrial habitats and surface ocean marine communities could fill a thesis and resulted in much debate. This method has so far seen no field tests even though its potential storage capacity is vast and inestimable. Mineral Carbonation Of similar environmental concern is disposal via mineral carbonation. CO2 reacts with certain rocks to form carbonate minerals. This process is seen naturally in the form of weathering where ~1.8108 tons CO2 are mineralised annually yet this geochemical process could also occur underground. Rather than mine and crush rocks such as basalt and peridotite to react with atmospheric CO2 on the surface, causing major environmental disruption due to mass mining operation and a great increase in sediment flux,4 CO2 would be injected into deep geological stores of: olivine; pyroxene; and plagioclase.Here the CO2 would slowly react to form its carbonates over tens of thousands of years where it would then be a near permanent store. As these reactive minerals are found in reasonable abundance in basic rock, potential CCS sites of this nature are found worldwide. The Columbia River basalt has been predicted to be able to dispose of 36-148Gt/CO2 whereas the Caribbean flood basalts could potentia l store 1,000-5,500Gt/CO2. Similarly, the basalt basin offshore of Washington D.C. could hold 500-2,500Gt/CO2.10 The gaseous CO2 conversion to solid carbonate involves an increase in volume and pressure. It is hypothesised this process would cause major fracturing within the basalt rock which could potentially form an escape route for the still supercritical CO2 (see figure D).8 The ‘CarbFix Pilot Project in Iceland is monitoring the effects and potential of this style of CCS through intensive Geophysical monitoring as ~9.4Mt/CO2 is pumped into the ground. Coal-bed seams Worldwide there are many coal fields economically unviable for mining and these are potential CCS sites as figure A (4) shows. The coal seams contain natural micropores due to coal production process. These micropores currently contain methane molecules, again as a by-product of the coal creation. However, CO2 molecules adsorb to the micropores easier than the CH4.2 By pumping CO2 into these seams a volume of CH4 will be yielded proportional to the volume of CO2 injected,2 while still providing a deep underground store for CO2. This has been calculated at 20m3/ton coal from a field site in the San Juan Basin. Therefore there is an approximate minimum storage capacity of 150Gt/CO2 worldwide however exact volumes of unmineable coal are not available. Adsorption involves weak electrostatic forces to hold the CO2 molecules to the pore which are very dependent on a stable environment.2 Should any tectonic activity take place to alter the temperature or pressure of the storage site, the C O2 would detach and plume. This CO2 plume would then slow migrate to the surface through existing pore channels which figure D shows clearly. This is a worry faced in many CCS schemes, as any CO2 migration could cause interaction and dissolution into groundwater thereby polluting it, force saline groundwater to mix with freshwater and pollute the freshwater or alternatively migrate to the earth surface and plume. Also, dependent on the CCS site, CO2 could end up acidifying patches of ocean where ‘leaks have occurred. CO2 plumes on the earth surface have proven fatal before when 1,700 people and all fauna within a 14km radius perished in the Lake Nyos disaster when CO2 suddenly degassed from the base of the lake to the atmosphere. 14 Depleted oil and gas reservoirs or saline aquifers One of the most promising and researched suggestions is storage in depleted oil and gas reservoirs or saline aquifers. Figure A (1,3a,3b) illustrates these are both on and off shore and deep geological area of rock with high porosity and low permeability. The gas field ‘Sleipner West in the North Sea just off the Norwegian coast is an actual working CCS site where much research into CCS is being conducted and monitored. 1106 tons of CO2/Yr2 are being pumped into a space of 5.5x1011m32 previously occupied by predominantly methane gas. The CO2 is stored in the pore spaces in rocks identical to how groundwater is stored in aquifers. In the case of saline aquifers, while pumping in CO2, saline water is removed as well as forced into surrounding rock. These Porous rocks are commonly sedimentary rocks found in basins normally 600-1200m deep. Pressure increases with depth as well as temperature, by about 28Â °C/km2. This means CO2 would need to be stored in its supercritical state ( figure C) which is more compact than normal, 1 ton of CO2 occupies 6m3 rock2. Once injected, the CO2 will naturally migrate through the pore spaces trying to reach ground level (figure D). During this process the CO2 will become ‘trapped and well in pore routes which do not actually lead to the surface. The inevitable migration makes choosing a CCS site difficult. Any site needs an impermeable rock layer above it or a low permeability rock where the migration time will be equal to the sites desired lifespan to act as a ‘cap rock. Without a cap rock, the CO2 could migrate back to the surface in decades making the entire operation an epic fail. However, storing CO2 in these fields is not just about pocketing it underground. The geochemical processes of dissolution and mineral precipitation would also occur adding to the favourability of depleted reservoirs as the optimum CCS technique. For any single site 3 different forms of CCS would be occurring. Dissolution would take a few thousand years dependant on the surface area to volume ratio of water to CO2 and mineralisation would happen along similar timelines. Therefore, four factors will affect the usefulness of any CCS depleted reservoir site: immobilisation of CO2 in any traps or wells; geochemical reactions between the rock and CO2; dissolution into groundwater or saline water resident in the rock; and migration back to the surface.2 The benefits of this method of CCS do not stop here though! The process of pumping CO2 into the ground forces out the dregs of what was previously there, beneficial if it was gas or oil. Shows this as a separate process but it can easily be paired with depleted fossil fuel stores. This can be collected and sold, providing a slight economical offset to the cost of the project. This is referred to as Enhanced Oil Recovery (EOR). EOR has been embraced in the Americas and is in use at Pan-Canadians Weyburn field in Saskatchewan, another field example of CCS in use today. Only 18Mt/CO2 is its expected capacity2 however data on this specific technique will be invaluable. It does raise questions into the economics as it would take thousands of these sites worldwide to have a significant impact upon atmospheric levels and with each new site, the risks of a CO2 disaster associated with the storing of CO2 increases. Worldwide there is great uncertainty into the potential volumetric storage capacity of CO2 in underground reservoirs ranging from 400-10,000 Gt/CO2 according to Hendriks and Blok, 425Gt/CO2 was proposed by Van De Meer whereas Koide and team calculated it at 320Gt/CO2. There is such variation not only because worldwide high resolution mapping of the subsurface is scarce, but the presence of micropores is undetectable and the question of how do you incorporate figures from processes such as dissolution and geochemical mineral precipitation is raised. Figure E shows the IPCC calculation of potential worldwide storage sites. Either way, CCS can cl early buy the time we may need to avoid major global climate change. Conclusion As natural gas itself contains a fraction of CO2, this proves it is possible to store CO2 in a geological setting for millions of years, the exact purpose of CCS technology. Unfortunately, with all the ambition and optimism over CCS, its true benefits must be realistically analysed. Yes CO2 is a powerful greenhouse gas and the one most accountable to anthropogenic sources,1 but it is only one of many. CCS is completely unable to deal with methane, sulphur oxides and of apparent increasing importance, water vapour. Critics are also completely correct with their feelings of it only being a temporary fix. The earths surface system is dynamic enough that the stored carbon will eventually make its way back into the atmospheric carbon cycle . Although we will be far gone, is that a responsible excuse? CO2 migration will occur within the store and so will need constant monitoring. Is the economic cost of initiation, monitoring and potential clean-up should leaks develop enough to justify t he project? Current estimates reckon in the cement industry, it will cost $50-250/ton CO2 to be avoided2 and that electricity prices will have to double at minimum2, the lower figures representing technology advancement. The CO2 could pollute groundwater sources with saline water and Cox et. al. have perceived that a fault during late stage CO2 injection could produce a CO2 plume similar to that seen at Lake Nyos.[19] While this risk could be mitigated by placing CCS sites offshore it would still be an ecological disaster.2 Finally, who would be responsible for the CCS site? The purpose of the site is to store CO2 for 10,000 years or more.19 It is highly unlike any company will be around for its lifetime. While CCS is technically possible, it undoubtedly requires more research and development to convince not only the rest of the scientific community, but the general public as well. As of February 2010 Metz, B. et. al. IPCC Special Report on Carbon Dioxide Capture and Storage 2005 ISBN-13 978-0-521-86643-9 Holloway, S. Underground Sequestration of Carbon Dioxide a viable greenhouse gas mitigation option Energy 30 (2005) Pg2318-2333 Keeling, R. Triage in the greenhouse Nature Geoscience 2 (Dec 2009) Pg820-822 Bickle, M. Geological carbon storage Nature Geoscience 2 (Dec 2009) Pg815-818 Bachu S. Sequestration of CO2 in geological media in response to climate change Energy Conservation Management 2004 (Pg147-164) National Oceanographic Data Center www.nodc.noaa.gov/OC5/WOA05/pr_woa05.html (Data set 2005) Dessert, C. et. al. Weathering laws and their impact of basalt weathering on the global carbon cycle Chemical Geology 202 Pg257-273 (2003) Matter, J. Kelemen, P. Permanent storage of carbon dioxide in geological reservoirs by mineral carbonation Nature Geoscience 2 (Dec 2009) Pg837-840 McGrail, P. et. al. Potential for carbon dioxide sequestration in flood basalts Journal of Geophysical Research 111, 2006 Pg445-468 Goldberg, D. Slagle, A. A global assessment of deep sea basalt sites for carbon sequestration Energy Procedia 1 (2009) Pg3675-3682 Juerg, M. et. al. Permanent Carbon Dioxide storage into basalt: the CarbFix Pilot Project, Iceland Energy Procedia 1 (2009) Pg3641-3646 Creedy, D. An introduction to geological aspects of methane occurrence and control in British deep coal mines Geology 1991;24 Pg209-220 Glazer, E. CO2 Sequestration Princeton University Website www.princeton.edu/~chm333/2002/fall/co_two/geo/coal_beds.htm#_ftn7 2002 Le Guern, F. Sigvaldason, G. The Lake Nyos event and natural CO2 degassing Volcanol Geotherm Research 1989 Pg95-276 Czernichowski-Lauriol, I. The underground disposal of Carbon Dioxide British Geological Survey 1996 Pg183-276 Hendriks, C. Blok, K. Underground storage of Carbon Dioxide Energy Conservation Management 1995 36(6-9):539-542 Van De Meer, L. Investigation regarding the storage of carbon dioxide in Aquifers Energy Conservation Management 1992;33(5-8):611-618 Kodie, H. et. al. Subterranean containment and long term storage of carbon dioxide in unused aquifers and in depleted natural gas reservoirs Energy Conservation Management 1992;33(5-8):619-626 Cox, H. et. al. Safety and stability of underground CO2 storage British Geological Survey 1996 Pg116-162

Irony in Ballards Chronopolis :: Ballard Chronopolis Essays

Irony in J. G. Ballard's Chronopolis J. G. Ballard gives us a good idea of the irony in 'Chronopolis' from the very beginning - the actual name 'Chronopolis' - city of time - is an ironic name for a city that has no time Throughout the story Ballard's view of time acts as a focus to the story, around which the plot revolves. The central point of the story is a world without time, without which the story would have no point - none of it would have happened, and it would be just like our world. The impression of time we are given at the beginning of the story is an ironic one, because it seems that time is important, but not really understood; we are told that Newman is in prison for understanding time - yet while he is in prison he controls the situation because of his knowledge of time, and organises the events of the day for Brocken (the block sergeant); 'Brocken... relied on Newman to programme the day for him'. The fact that Newman is 'serving time' for being obsessed with time is the first instance of irony through language that we are given in Chronopolis. This again brings our attention to the irony of Ballard's view of time, and provokes the reader to look more deeply into the text, thus discovering more about the way time works in the world of Chronopolis. At this point we do not learn any more about what happens to Newman, but instead the story has a flashback to when he was a child, and became interested in time. In this way the story is anachronistic - it is not in chronological order, and instead it switches between different points in time. This brings our attention to the way time works in 'Chronopolis'. Due to the fact that they have no time, their world is muddled up, and thinks have no real order - and this is reflected in the way Ballard writes the story. We are then told the story of Newman's childhood, and the way he slowly discovers time and gains an interest in it. Next we are told by Stacey (Newman's English teacher) why time is against the law: 'You can time [someone], know exactly how long it takes him to do something... then you can make him do it faster.

Chaucers View of the Pardoner as a Character Essay -- Geoffrey Chauce

Chaucer's View of the Pardoner as a Character In the Pardoner’s Tale, Chaucer presents the Pardoner in a particular light, and being a religious figure, this allows him to make a general statement about religion at the time. Chaucer’s view of the Pardoner as a character, and also as something to epitomise religion at the time, is evident from his use of vocabulary, his style, and by using strong imagery and description. In this way, Chaucer builds the character of the Pardoner as someone who is ironically deceptive and driven by his own selfish motives. A key theme that runs throughout the Pardoner’s Prologue is religion, and as the Pardoner’s proper role is to act as an intercessor between those who wish to repent and God himself, it is appropriate that Chaucer uses a great deal of religious lexis. There are many examples of this all through the text, such as when he mentions that the Pardoner carries ‘Bulles of popes and cardinals’ or ‘official documents’ signed by popes and cardinals. The plural use of the word ‘popes’ reveals a lot about the Pardoner in that it immediately shows his disregard and contempt for the clergy. Religiously, there is only meant to be one Pope and pluralizing the word devalues the pro-noun to a simple noun. The lack of determiners only further degrades the Pope as it shows no differentiation in these religious figures and others. They are simply the same and en masse, whereas, believers of the religion would disagree and be of the opinion that the Pope is the highest religious authority, but the Pardoner brings him down to basic levels and standards. Another example of lexis related to religion is when the Pardoner says ‘I stonde lyk a clerk in my pulpet’. This simile un... ...oner and Chaucer does not let his readers forget it as he gives continuous reminders throughout the text. Chaucer is not always so subtle in his presentation of the Pardoner. Near the end of the prologue, the Pardoner boldly asserts that ‘though myself be a full vicious man, A moral tale yet I you telle kan.’ The pardoner describes himself as we have aready been made to see him by Chaucer’s other techniques and here he admits it shamelessly, which only adds to the readers’ negative impression of him, in that he is not only deceptive, deceitful and ‘vicious’ but he also has no regret or remorse for his actions and attitudes, hence he is unlikely to change. It is ironic that the Pardoner admits to this characteristic of his and then claims that he will still be able to tell a moral tale, although his admittance also shows that he is aware of this irony.

Security And Privacy On The Internet Essay -- Computer Security

Many users are subject of Security and Privacy on the Internet issue. The term "information" now is more used when defining a special product or article of trade which could be bought, sold, exchanged, etc. Often the price of information is higher many times than the cost of the very computers and technologies where it is functioning. Naturally it raises the need of protecting information from unauthorized access, theft, destruction, and other crimes. However, many users do not realize that they risk their security and privacy online. First, I want to describe who the subjects of the issue are. In my opinion, the issue is the most relevant for the private and commercial information. Home users risk their security while connected to Internet. It is obvious that many people store private information such as Social Security and credit card numbers, as it is more convenient than to enter them every time completing a form for an online purchase. Hackers do not have to attack every user individually, they write special viruses named "Worms" and "Trojan horses" which, once run, could spread in a global scale. These programs may have different functions from gathering personal data to logging pressed keys and e-mailing the information to a hacker. Even if a user does not keep any valuable information, his or her computer does have a value for a hacker. "If you think that your small computer could not become an object of offence because it is very small, then you are mistaken. Even if it doesn't contain anything worthwhile , it could be perfectly used for breaking in other, more significant system." (A. Zaharchenko, Futurology without future [Computerra], 2002). Not rarely, competing entrepreneurs with the help of unlawful means wan... ...nowledge about threats of security and privacy issue on the Internet, one could feel less vulnerable and use Internet with confidence. References Zaharchenko, A. (2002, December 24). Futurology without future. Retrieved March 14, 2005, from http://www.computerra.ru/print/softerra/technologizm/22926/ Honeycutt, J. (2004, April 20). How to protect your computer from Spyware and Adware. Retrieved March 14, 2006, from http://www.microsoft.com/windowsxp/using/security/expert/honeycutt_spyware.mspx IDS: Classification (2002, December 4). Retrieved March 12, 2005, from http://www.xakep.ru/post/17052/default.asp Stalsen, (2001, February 28). Researching Firewalls. Retrieved March 13, 2005, from http://www.xakep.ru/post/17052/default.asp Anonymity for lazy people (2004, June 17). Retrieved March 14, 2005, from http://www.xakep.ru/post/22763/default.asp

Gatsby, Corruption of Wealth

Cold Cash Turns to Cold Hearts The 1920s’ was a hectic time period for many young and wealthy people living in New York City. Many entrepreneurs took advantage of these economic opportunities and profited greatly. Although, some took their wealth in strife, to benefit others, some people misused their new power. In the novel The Great Gatsby, F. Scott Fitzgerald shows how money and power are often abused. Gatsby never understood the genuine value of hard work. While Tom and Gatsby are talking, Gatsby exclaimed, â€Å"After that, I lived like a rajah in all the capitols of Europe† (Fitzgerald 65). Gatsby was constantly living the life of extreme leisure and luxury, having no responsibilities, and no problems. It is almost as if Gatsby is the â€Å"king† of West Egg, with his huge palace and nice cars. As an article states, Gatsby had â€Å"his white suit, silver shirt, and gold tie-his palatial house, his grand parties, his fancy automobile, his hydroplane, and his library of real books. †(Pauly) With endless amounts of materialistic items and fake friendships what is there to live for? Although Gatsby tells people that he had â€Å"inherited† his wealth, Nick believes he made the money a different and immoral way. When Nick and Gatsby travel to the city one afternoon, they meet a shady man who claims to be good friends with Gatsby. At first, Nick mistakes him for a businessman but, Gatsby explains â€Å"Meyer Wolfsheim? No, he’s a gambler†¦ He’s the man who fixed the World Series back in 1919† (Fitzgerald 78). Gatsby appears to be an honest man, but there is a shady and crafty to side to him as well. A quote from an article proclaimed, â€Å"Jay Gatz, whose ill-gotten wealth is acquired solely to gain acceptance into the sophisticated, moneyed world of the woman he loves, Daisy Fay Buchanan† (Telgen). When people picture a sleazy gangster they see someone who is dirty, probably poorly dressed. However, Thomas H. Pauly’s article demonstrates, â€Å"Jay Gatsby effectively overturned the dated assumption that gangsters were lowlifes from the Bowery and replaced it with an upscale figure who was enviably wealthy and fashionably stylish. † Judging someone based on their appearance can have its repercussions. The squalid acts Gatsby would do just to get rich is mind-boggling, the money can bring out the most deceptive people. Some people may speculate that money can buy happiness, friends, and security. However, in the end Gatsby ended up with nothing, when he sadly discovered that money cannot buy true love. When people obtain a large amount of money, they either spend it wisely and profit or â€Å"blow† it, spending on superficial possessions they do not need. Unfortunately, with obvious disregard for morals, ethics and even the law, there is a corruption of wealth and power in the novel The Great Gatsby and in modern society as we know.

Matrix

Phoenix Material Representation of Interests Matrix Follow the instructions below to complete the matrix: Identify, in the first column, a minimum of five interests that are affected by public policy decisions, one per row of the table. List, in the second column, any groups or organizations that support the Interests you Identified In column one. List, In the third column, any groups or organizations that oppose the Interests you Identified In column one. Identify classes or groups affected by policies related to the interests you identified in column one.Identify classes or groups who have an Interest in the outcomes of policies related to the interests you identified in column one. Interests affected by Public Policy Groups and Organizations Supporting the Interest Groups and Organizations Opposing the Interest Classes or Groups Affected by the Interest Classes or Groups Interested in Policy Outcomes (MAD) The mission of mothers against drunk driving. National Highway Traffic and Safety Administration and with the Law Enforcement community. ADAM) is an organization founded by a group of responsible citizens ho were astonished to learn how legislator and other groups that have created an entire DOI industry in there quest for government revenues. (PIP) Victim Impact Panels The National Institute of Alcohol Abuse National Mullen Drinking Age Act. (ARP) They work to improve the quality of life for people age 50 and older and helps them with issues they face. The united Health Group and Optimum Labs organization 60 Plus Organization is an conservative alternative to (ARP) (MAC) The voice of Americans 50 and more Generation AmericaRAJA has partnered with ARP on the Future of Nursing Campaign for Action. It affects about 40 million Americans over the age of 50 including workers and retirees. (NEAR) The National Rifle Association. Woman Warriors Pack which supports strong conservative woman which emphasizes that Its The National Right to Life Committee Issued an at tack on the legislation on and sellers of firearms, ammunition There are several politicians who take a great interest in the out come of the (NEAR) (AMA) The American Medical Association works to promote the art and Science of medicine and to improve public health.Members are warriors and not helpless warriors. The Second Amendment Foundation is the country's oldest legal-action group focusing on gun rights. Special treatment. Several religious groups such as The American Jewish Committee. And related wares. Millions of citizens are in favor of the (NEAR) and could be effected in countless ways according to the policies given to the (NEAR) Policies because they receive thousands of dollars for their personal campaigns from the (NEAR) The gun control activist groups are interested in the out come of the (NEAR) policies since they don't agree tit them.The Christian Coalition of America works to represent the pro-family agenda and support policies that will strengthen and preserve, ra ther than threaten our families and our values. The National Wildfire Federation. The Republican Senatorial Committee The Family Research Council The (C) has a major impact in state and national elections, which as an impact on everyday citizens. Congress is affected because (C) is a major lobbying force for it. The Focus on the Family group The Board of Education Website organizations

North Country Auto, Inc Essay

Each of the departments of North Country Auto, Inc. namely, the new cars sales and used cars sales, service, parts, body shop and oil change â€Å"operated as part of one business† before George Liddy bought into the dealership. The Department Managers were paid salaries and a year-end bonus. However, feeling that this system would not motivate employees, he devised a system wherein he could track effectively the departmental performance. For this, he developed a system for so that each department will be treated as decentralized profit centers. This new system requires that cost be broken down per department. Also, the bonuses per each department head will be based on departmental gross profits. So far as the outcome of the new system is concerned, a recent new car purchase sparked friction and disagreements among division heads on the matter of setting of transfer prices and allocation of costs and profits. It was important that as one department aims to maximize profit, it does not negatively affect other departments. Issues that needed to be resolved include setting of transfer prices between departments, formalizing intercompany transactions, the divisional structure (use of profit or cost center), and the proper allocation of company profits among departments. Problem The different departments of North Country Auto, Inc. must choose between three pricing systems: base on market price, full retail better than others, and based on book value. Also, the company must decide whether they should continue treating each department independently in order to gain huge profits considering that the manager’s incentives are determined upon the department’s earnings. Point of View In this case, we take the point of view of George Liddy, owner of North Country Auto, Inc. Analysis In examining the issues faced by the company, the car purchase discussed in the interdepartmental meeting is used as illustration. †¢ Company’s current operation Comparison: -retail full price considered (new car sold for $5200 without any repairs) -book value considered (used car sold for $5200) Revenue Costs Profit new car (full retail price) $14,150 , $11,4 , 20 , $2,7, 30, used car (book value) , 5200, 4800 , 400 †¢ Price-transfer shown by profits guide book value at wholesale and assumed market Price $3,500 , retail price 5200 , trade in allowance 4800 The trade in allowance of $4800 is the value that is essentially believed by the new and used car sales force believes that the car can be sold. Considering the market price of $3500, the calculated profit is $1700. But, it should be recognized that this profit is at the expense of the $1300 profit from the initial transaction. This is due to the difference between the car’s trade value ($4800) and the market price ($3500). With this, the used car manager must receive the credit or consequences for the profit or loss. This is due to the fact that the used car managers are the appropriate ones to receive incentives in selling the used cars. On the other hand, the new car managers are the ones to receive the incentives in increasing the trade-in value of the cars above the market value. This in turn, makes it easier for people to buy new cars. The illustration above brings up the issue of having the used car manager receive incentives because of the car’s value determined by the new car manager Explanation on $59000 loss on wholesaling of used cars The loss may have occurred because new car owners are pushing for trade-in car values above market valuations on their used cars. For example, if new cars are sold for $4800 and used cars for $3500, the used car group would have a difficult time making a profit. This is because they may have sold the car for $5200 (as shown in the example above). Most of the time, it will be hard for the used car department to sell the used cars above its book value of $3500. Thus, the used car division may incur loss since they are using cost for the used cars that is too high. Recommendations Incentives should be based on company profits. A better system should be established such that managers of the two departments are given incentives based not on the gross profits of their respective departments but on the  profits of the company as a whole. This would help ensure that conflicts of the two departments will be lessened and that the two departments will no longer compete but will work together to enrich the value of the firm. In order to be more profitable, the firm could use blue book values for the trade-in value and use that as the cost to the used car division. However, if it is better for the firm to provide added incentive to customers to trade in their cars, the firm could allow for higher trade-in values but responsibility for those added costs should reside in the new sales division. Regarding the issue of costs, whether it should be at wholesale or retail, it should be considered that North Country is a company offering more on services. The cost of service of making the cars sellable differs minimally from the market price. And these service costs should be added to the cost of used cars in wholesale. The profit on repairs must be akin to competitor’s values as well as to the industry. QUESTION and ANSWERS 1. Using the data in the transaction, compute the profitability of this one transaction to the new, used, parts, and service departments. Assume a sales commission of $250 for this trade-in on a selling price of $5000. (note : use the following allocations [new,$385; used,$665; parts,$32; service,$114] for overhead expense while computing the profitability of this one transaction. These overhead allocations are also shown as Note 13 in Exhibit 3.) Using the data in the transaction , compute the profitability of this one transaction to the new, used, parts and service departments. Assume a sales commission of $250 for the trade in on a selling price of $5000 2. How should the transfer – pricing system operate for each department (market price, full retail, full cost, variable cost)? The transfer pricing system should be operated at full retail . But at the same time care should be taken that the retail transfer price of the repairs should not encourage the used car sales manager to avoid the possibility of losses in her department by wholesaling trade in cars that  could be resold at a profit for the dealership. This cud hurt the dealership by making its deals less attractive for new car customers. Hence while maximizing profits in one’s department it should not affect the other departments negatively. 3. If it were found one week later that the trade-in could be wholesaled for only $3000, which manager should take the loss? If the used car is sold at auction for $3,000 after the trade-in value was set at $4,800, the company should note a loss of $1,800. However, if the new car salesman only gives $3,500 of value to the new customer based on the Blue Book value, then the loss reflected on the income statement and balance sheet should only be $500. In the case of the $1800 loss, responsibility should fall on both the new car salesman and the used car salesman. The new car salesman is at fault for giving the customer $4,800 in value when the car was only worth $3,500. The used car salesman is responsible for the additional loss of $500 for being unable to receive market value for the car. If the used car had a trade-in value at Blue Book of $3,500, then the used car salesman alone would be responsible for the loss of $500 in this transaction. 4. North Country incurred a year-to-date loss about $59.000 before allocation of fixed cost on the wholesaling of used cars (see note 2 in Exhibit 3). Wholesaling of used cars is the theoretically supposed to be a break-even operation. Where do you think the problem lies? It is possible that this loss occurred because new car owners were giving customers looking to trade-in existing cars above market valuations on their used cars. If new owners were providing credit for $4,800 for a used car that is worth $3,500, the used car group would have a difficult time making a profit. While there would be times (like the example above) where they could sell the car for $5,200 and still make a profit despite the inflated prices, most of the time they will have difficulty selling the used car above its Blue Book value of $3,500. Therefore, the used car division may be operating at a loss because the cost they are using for the used cars is too high. 5. Should profit centers be evaluated on gross profit or â€Å"full cost: profit? Incentives should be based on company profits. A better system should be established such that managers of the two departments are given incentives based not on the gross profits of their respective departments but on the profits of the company as a whole. This would help ensure that conflicts of the two departments will be lessened and that the two departments will no longer compete but will work together to enrich the value of the firm. 6. What advice do you have for the owners? The owners of the business should make sure the managers of their various groups are properly incented to do what is most profitable for the firm as a whole. Probably, the firm should use blue book values for the trade-in value and use that as the cost to the used car division. However, if it is better for the firm to provide added incentive to customers to trade in their cars, the firm could allow for higher trade-in values but responsibility for those added costs should reside in the new sales division. On the other hand, if a case can be made that the used cars are worth more to this organization than to the market as a whole because they have an ability to consistently sell used cars above blue book value or because the service organization can increase those used cars more than other organizations can at similar cost, the additional costs of allowing trade-ins above Blue Book value might be appropriately split between both the new car and used car divisions.