Article from TIME:http://www.time.com/time/world/article/0,8599,1844750,00.html
Summary
This article I read is about the tainted-milk scandal that broke out in China recently. China used to have the world's third largest dairy industry, but not anymore. More than 20 of the dairy companies in China have been found producing contaminated milk containing a banned chemical called Melamine. Adding this chemical to the dairy products can boost up the amount of protein in them. But on the other hand, melamine also causes kidney stones, a serious disease that can be fatal to infants. The scandal broke out when 4 infants were found dead, and more than 53,000 were found sick because of drinking the contaminated milk. Since then, milk consumption in China fell to the bottom. Many of the Chinese citizens are not willing to trust the quality of the milk in China anymore. Supermarkets and retailers clearing all contaminated dairy products off their shelf and their inventories. Contaminated dairy products imported from China are also found in other countries. The Chinese government arrested several people that are associated with producing the illegal products. Milk farmers seem to suffer the most because many dairy companies stop producing and therefore are not buying their milk. Their attempt to directly sell milk to citizen is also unsuccessful. They are now pouring away all the unsold milk left in their inventories and are facing the difficult decision of slaughtering the cattles.
Connection
I connect this article to the merchandise inventory section of Chapter 11. To the milk farmers, supermarkets and retailers, since the milk dairy products are banned and can not be sold, they are no longer profitable and would have to be thrown away. The cost of all the destroyed goods will have to be credited from the merchandise inventory account. The same amount will be debited from the loss of goods expense account. At the end of the accounting period, since the ending inventory account will be lower, the cost of goods sold amount will increase. But because the sales account remains the same, the gross profit will decrease when we subtract the cost of goods sold by the sales. Also, because there will be a large amount in the loss of goods expense, when we subtract the total expenses by the gross profit, the net income will decrease significantly.
Reflection
I have to admit that I was quite shocked when I read this article. It is really unmoral to make big profit by selling products that causes harm to one's health, especially when most of the victims are infants. The dairy companies should know that this scandal will eventually break out, and once it does, they will have face very serious consequences (At least all their earnings through illegal means will be confisticated). Therefore, I think that their "way" of trying to make BIG money is extremely foolish and selfish. Also, the Chinese government should really start inspecting the quality and content of food products more carefully. According to recent surveys after the incident, it seems that many Chinese citizens have completely lost faith in the dairy products produced in China. Some of them are even trying to buy milk from Taiwan, Hongkong, or even from other countries. The government should punish the criminals associated with the scandal hardly and at the same time, carry out actions to make citizens confident about the dairy products produced in China once again. All in all, the precondition for the dairy market in China to recover is that from now on, all dairy products produced in China must be checked to be healthy and most importantly, Melamine-free!
5 comments:
I understand how shocked you were about this incident too seeing as some Canandains are still suffering from Listeriousis because of Maple Leaf.China was the last place I would expect a contamination outbreak to happen.I too hope the people responsible for this incident face the full consequences of thier careless actions.
I was quite shocked when i heard the news. Good analysis and connection to the chapter. I think the main reason for the mistake made by the company is the disordered management. The company tends to speed up the inventories' production rate and care less about the quality. Knowing that China is the country with the greatest population, milk companies have a great competition toward the stock market. This company maybe losing lots of profit and outcomes a fatal net loss which may close down the company. Also, this scandal also brings down the total milk stock market due to fear of unhealthy milk products.
I agree with you Shunzhi. It is just wrong to do such a thing without any considerations about the consequences. And now see, the people/factories who have decided to do such a foolish and selfish thing have not just ruin their lives, but of many others' as well; not including the catastrophe in the nation's economy, and the cost of trusts from other countries, yet. There is nothing much that can be done, when even the people who are suppose to support the country are losing faith in it, The Chinese dairy industry WILL require a long, long, long period of time to get back into business, or it might as well never be returned, and that's just so not worth it, and a shame that will forever be tagged to the reputation of the country's and its people.
顶 What i am thinking is how does a company keep the balance of their price and quality? There is a limit for the sales and price. No one is going to buy from you, if your price is higher than the others. Seeking a better way to make higher profit, the company neither reduce the price or the quality of their product. I admit there are some other ways or options you can choose, but usually they can't long(there is always a exception). such as projectile motion graph when it reaches the highest point it starting to fall.
hi Shunzhi....
When I first time heared about this news. I was shocked the same as you. My friend in China told me that they already stop buying any milk products from supermarket, and they haven't drink any milk products include coffee(with cream) for a while.
The prices of milk stocks went to the lowest point and did not bound up, and this could persist for a long time since the economy is in depression. In addtion, this scandal absolutely made dairy company in China lost a lot profits and customers; also it's a reminder to Chinese goverment that they have to pay serious attentions on every food quality.
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