1. Based on historical data, your manager believes that 31% of the company's orders come from first-time customers. A random sample of 82 orders will be used to estimate the proportion of first-time-customers. What is the probability that the sample proportion is less than 0.28?

Answer =  (Enter your answer as a number accurate to 4 decimal places.)

2. In a recent year, the Better Business Bureau settled 75% of complaints they received. (Source: USA Today, March 2, 2009) You have been hired by the Bureau to investigate complaints this year involving computer stores. You plan to select a random sample of complaints to estimate the proportion of complaints the Bureau is able to settle. Assume the population proportion of complaints settled for the computer stores is the 0.75, as mentioned above. Suppose your sample size is 102. What is the probability that the sample proportion will be at least 3 percent more than the population proportion?

Answer =  (Enter your answer as a number accurate to 4 decimal places.)

3. Based on historical data, your manager believes that 27% of the company's orders come from first-time customers. A random sample of 186 orders will be used to estimate the proportion of first-time-customers. What is the probability that the sample proportion is less than 0.32?


Answer =  (Enter your answer as a number accurate to 4 decimal places.)

An analyst has gathered the following information about a company

Income Statement for the Year 2004
Sales                                                      $1,500
Expenses
COGS                        $1,300
Depreciation                     30
lnt Expenses                     40
Total expenses                                           1,370
Income from cont op                                     130
Gain on sale                                                   30
Income before tax                                         160
Income tax                                                     64
Net Income                                                   $96

Additional Information:                                              

Dividends paid                                                                                                 $30
Common stock sold                                                                                            20
Equipment purchased                                                                                         50
Bonds issued                                                                                                      80
Fixed asset sold for (original cost of $100 with accumulated depreciation of $70)     60
Accounts receivable decreased by                                                                        30
Inventory decreased by                                                                                       20
Accounts payable increased by                                                                             20
Wages payable decreased by                                                                               10

What is the cash flow from operations?

1. $170

2. $156

3. $135

How much variance in grades is explained by artistic sensitivity? Show how you derived your answer

A menswear manufacturer knows that the height of all men is normal with a mean of 69 inches and a standard deviation of 3 inches.
a) What proportion of all men have a height between 69 and 74 inches?
b) What proportion of all men have a height between 67 and 74 inches?
c) What is the 95th (and 99th) percentile of all men’s heights?

Fraud is intentional deceit or trickery that results in a misstatement of the financial statements. Management is responsible for taking steps to reduce the risk of fraud. After quite a few instances of fraud in many large, publicly owned companies in recent years, a number of accounting reforms have been instituted to safeguard against fraud. One major change was the Sarbanes-Oxley Act (SOX) of 2002.

SOX included a set of reforms that toughened penalties for corporate fraud, restricted the types of consulting that CPAs can perform for audit clients, and created the Public Company Accounting Oversight Board (PCAOB). SOX requires publicly traded companies to follow government policies and procedures.

Since cash is the most liquid of all assets, it needs to be safeguarded. Both large and small companies are susceptible to fraud and other unethical activities without proper controls in place. Managers and business owners can protect against fraud by using an internal control system to protect their assets. An effective control system can also help businesses to conduct reliable accounting, operate efficiently, and encourage employees to follow company policies.

To ensure that the internal controls implemented around cash are designed properly, there should be a segregation of duties:

• Recordkeeping
• Custody
• Authorization
• Reconciliation

In an ideal situation, there should be one individual assigned the responsibility of only one component. The record keeping function of an asset should be separated from the custody of an asset. In addition, the individual responsible for authorizing a transaction related to cash should not be the same person that has custody of that cash or performs the recordkeeping. Furthermore, reconciliations should be completed by different individuals to ensure that the internal controls are working effectively. This includes doing physical audits, checks, and reviews of internal control procedures that are in place to catch errors in time and to avoid fraud.

• Identify the type of company you own and briefly describe the nature of your business. Perhaps you sell shoes, clothing, furniture, or computers. You might own a restaurant or a small drug store or small walk-in health clinic.
• Identify at least two kinds of internal control procedures that you can implement to protect your cash.
  • How would you protect the inventory in your warehouse?
  • How would you protect the cash in your cash register?
  • How would you protect your electronic data, such as banking information?
• How can internal controls help to protect these assets?
• How can you use technology to implement an effective internal control system to help your business? Explain your answers.

Gallatin Carpet Cleaning is a small, family-owned business operating out of Bozeman, Montana. For its services, the company has always charged a flat fee per hundred square feet of carpet cleaned. The current fee is $22.55 per hundred square feet. However, there is some question about whether the company is actually making any money on jobs for some customers—particularly those located on remote ranches that require considerable travel time. The owner’s daughter, home for the summer from college, has suggested investigating this question using activity-based costing. After some discussion, she designed a simple system consisting of four activity cost pools. The activity cost pools and their activity measures appear below:

The total cost of operating the company for the year is $351,000 which includes the following costs:

Resource consumption is distributed across the activities as follows:

Job suport consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on.

Required:

1. Prepare the first-stage allocation of costs to the activity cost pools.

2. Compute the activity rates for the activity cost pools.

3. The company recently completed a 400 square foot carpet-cleaning job at the Flying N Ranch—a 60-mile round-trip journey from the company’s offices in Bozeman. Compute the cost of this job using the activity-based costing system.

4. The revenue from the Flying N Ranch was $90.20 (400 square feet @ $22.55 per hundred square feet). Calculate the customer margin earned on this job.

Gallatin Carpet Cleaning is a small, family-owned business operating out of, Montana. For its services, the company has always charged a flat fee per hundred square feet of carpet cleaned. The current fee is $22.70 per hundred square feet. However, there is some question about whether the company is actually making any money on jobs for some customers—particularly those located on remote ranches that require considerable travel time. The owner’s daughter, home for the summer from college, has suggested investigating this question using activity-based costing. After some discussion, she designed a simple system consisting of four activity cost pools. The activity cost pools and their activity measures appear below: Activity Cost Pool Activity Measure Activity for the Year Cleaning carpets Square feet cleaned (00s) 12,000 hundred square feet Travel to jobs Miles driven 199,500 miles Job support Number of jobs 1,900 jobs Other (organization-sustaining costs and idle capacity costs) None Not applicable The total cost of operating the company for the year is $351,000 which includes the following costs: Wages $ 136,000 Cleaning supplies 22,000 Cleaning equipment depreciation 8,000 Vehicle expenses 33,000 Office expenses 69,000 President’s compensation 83,000 Total cost $ 351,000 Resource consumption is distributed across the activities as follows: Distribution of Resource Consumption Across Activities Cleaning Carpets Travel to Jobs Job Support Other Total Wages 80 % 13 % 0 % 7 % 100 % Cleaning supplies 100 % 0 % 0 % 0 % 100 % Cleaning equipment depreciation 73 % 0 % 0 % 27 % 100 % Vehicle expenses 0 % 77 % 0 % 23 % 100 % Office expenses 0 % 0 % 58 % 42 % 100 % President’s compensation 0 % 0 % 30 % 70 % 100 % Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on. Required: 1. Prepare the first-stage allocation of costs to the activity cost pools. 2. Compute the activity rates for the activity cost pools. 3. The company recently completed a 800 square foot carpet-cleaning job at the Flying N Ranch—a 51-mile round-trip journey from the company’s offices in Bozeman. Compute the cost of this job using the activity-based costing system. 4. The revenue from the Flying N Ranch was $181.60 (800 square feet @ $22.70 per hundred square feet). Calculate the customer margin earned on this job.

Gallatin Carpet Cleaning is a small, family-owned business operating out of Bozeman, Montana. For its services, the company has always charged a flat fee per hundred square feet of carpet cleaned. The current fee is $22.35 per hundred square feet. However, there is some question about whether the company is actually making any money on jobs for some customers—particularly those located on remote ranches that require considerable travel time. The owner’s daughter, home for the summer from college, has suggested investigating this question using activity-based costing. After some discussion, she designed a simple system consisting of four activity cost pools. The activity cost pools and their activity measures appear below:

The total cost of operating the company for the year is $346,000 which includes the following costs:

Resource consumption is distributed across the activities as follows:

Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on.

Required:

1. Prepare the first-stage allocation of costs to the activity cost pools.

2. Compute the activity rates for the activity cost pools.

3. The company recently completed a 600 square foot carpet-cleaning job at the Flying N Ranch—a 57-mile round-trip journey from the company’s offices in Bozeman. Compute the cost of this job using the activity-based costing system.

4. The revenue from the Flying N Ranch was $134.10 (600 square feet @ $22.35 per hundred square feet). Calculate the customer margin earned on this job.

True or False

1-Financial analysts utilize a company's financial reports to assist them in making earnings forecasts and earnings per share projections.

2-The Public Company Accounting Oversight Board (PCAOB) sets auditing standards for independent auditors.

3-The primary responsibility for the information in a corporation's financial statements lies with the chief executive officer (CEO) and the chief financial officer (CFO).

4-The form 10-Q contains an unaudited set of quarterly financial statements.

5-The Securities & Exchange Commission (SEC) oversees the work of the Financial Accounting Standards Board (FASB)

6-The Financial Accounting Standards Board (FASB) oversees the work of the Public Company Accounting Oversight Board (PCAOB).

7-Comparative financial statements are those of a company in one industry presented with another company in the same industry.

8-The fraud triangle conditions necessary for financial statement fraud to occur are the existence of a system of internal control, the ability to invade the system, and rationalization to commit the fraud.

9-External users of accounting information include decision makers such as investors, creditors, and financial analysts.

10-The form 10-K is the annual report that publicly traded companies must file with the Securities & Exchange Commission (SEC).

11-The summary of significant accounting policies is typically included as one of the first notes to the financial statements.

12-Gross profit is calculated as gross sales less cost of sales.

13-Credit card discounts are reported as operating expenses on an income statement.

14-Sales returns and allowances is a contra-revenue account.

15-When goods are shipped FOB shipping point, title passes to the buyer on the shipment date.

16-Credit terms of "2/10, n/30" mean that if payment is made in two days, a 10% discount will be given; if not paid within two days, the full invoice price will be due in thirty days.

17-Sales discounts are deducted from sales in the calculation of net sales.

18-When goods are shipped FOB destination, the revenue from the sale is recognized on the shipment date

19-When completing the bank reconciliation, bank service charges should be deducted from the company's cash balance.

20-The allowance for doubtful accounts is reported as a contra-asset on the balance sheet.

21-When using the percentage of credit sales method, net sales multiplied by a historical percentage for credit losses equal bad debt expense.

22-An objective of preparing the bank reconciliation is to reconcile the bank balance at the end of the period with the company's book balance at the end of the period.

23-Deposits in transit are deducted from the bank balance when preparing the bank reconciliation

24-Effective internal control of cash should include the separation of the duties for receiving and disbursing cash.

25-The journal entry to record bad debt expense is made during the year in which it is determined that a particular receivable is uncollectible, regardless of the year of sale.

26-The LIFO inventory method allocates the oldest inventory purchase costs to cost of goods sold.

27-During periods of decreasing unit costs, use of the FIFO inventory method results in lower gross profit than would use of the LIFO method.

28-A grocery store would likely use the specific identification inventory costing method for most of the items in its inventory.

29-During periods of increasing unit costs, the LIFO inventory method results in lower income taxes.

30-Inventory turnover is calculated as cost of goods sold divided by average inventory.

31-The journal entry to write down inventory under the lower of cost or net realizable value rule results in a debit to cost of goods sold and a credit to inventory.

32-A company can use the LIFO inventory method for income tax purposes and the FIFO inventory method for financial reporting purposes during a given year.

33-Goods available for sale are allocated to both ending inventory and cost of goods sold.

34-LIFO liquidation results when a company has a lower level of inventory at the end of the year than it had at the beginning of the year.

35-The FIFO inventory method will result in the lowest net income in comparison with the LIFO method when costs are decreasing.

36-The FIFO inventory method allocates the earliest inventory purchase costs to ending inventory.

37-The LIFO Reserve represents the excess of FIFO inventory costs over LIFO inventory costs.

38-An increase in inventory is subtracted from net income when determining cash flow from operating activities.

39-An increase in accounts payable is added to net income when determining cash flows from operating activities.

Q1: Consider the following scenario.

A company operating in the airline sector has been experiencing a brand crisis following a video posted in social media showing rude behavior of staff. A brand crisis has significant impact on customers’ intention to buy from the brand, or to recommend it to family/friends.

Propose a qualitative research strategy to assess the impact of this brand crisis on the company’s revenue. Ensure to detail and motivate your recommended strategy including potential limitations of qualitative research in this case.