Natural Gas and Revenues

Citizen's Gas

Discuss the criteria that must be considered in specifying the basic structure and features of Citizen's Gas Company's new system to assist in planning its natural gas needs.

The criterion that must be considered by Citizen's Gas includes: accounting for sudden changes in demand and prices. Changes in demand are a major issue because the company has been losing money by overestimating the total amount of gas consumption. Once this occurred, it meant that the firm was unable to keep up with these changes. This is problematic, because these adjustments resulted in lost revenues. Over the course of time, this would have an adverse impact on the company's market share and bottom line numbers. Under the new system, managers will have greater amounts of flexibility by matching the previous trends with the current needs of customers. The way that this will help to improve planning of the company's natural gas needs is by directly matching demand with actual supply. This is accomplished by looking at the previous trends and then making an assessment as to what quantities are necessary. ("Citizen's Gas," n.d.)

Changes in prices are a major issue because they could eat away at the company's profit margins. This is troubling, because if left unaddressed the firm will have to raise prices for customers and there will more than likely be an increase in their operating costs. To deal with these challenges, the company has been requiring employees' to provide supporting schedules and data to upper management. This is a part of an effort to address these issues over the long-term by accurately matching supplies with customer demand. Over the course of time, this will prevent the Citizen's Gas from purchasing more or less than is necessary. This is when they will be able to maximize their profit margins. ("Citizen's Gas," n.d.)

Identify the major data items that should be incorporated into Citizen's Gas Company's new system to provide adequate planning capability. For each item identified, explain why the data item is important, and describe the level of detail that would be necessary for the data to be useful.

The major data items that Citizen's Gas should be incorporating into their system include: the number of customers they are working with, the customer rate structure and the heating factors. As far as the number of customers is concerned, this is when the company is estimating future usage among based on current demand. The reason why this data is important, is because it helps executives to determine, how much natural gas they will need to meet customer demand throughout the year. ("20.1 Adapted from CMA Exam," n.d.)

The customer rate structure is when monthly data is collected and sent to managers about changes in revenues. This helps everyone to determine if there are sudden shifts in usage. As a result, the level of data that would necessary for this to useful in decision making process is regular amounts of information that are collected and analyzed over long periods of time. Once this takes place, is when managers can compare the underlying trends with one another and the impact that they are having. ("20.1 Adapted from CMA Exam," n.d.)