Hoffman Ltd makes two types of portable cooking stove, the Lightweight (LW) and the Megarange (MR). Last year it produced 4,500 LWs and 500 MRs. The direct materials cost £3.00 for one LW and £10 for one MR. The assembly workers who put the stoves together are all paid at the same rate of £6.30 an hour. When LWs are being produced each operative assembles nine stoves an hour and when MRS are being produced each operative assembles seven stoves an hour. This is the only labour that is classed as ‘direct labour’. The factory uses automated machinery to manufacture the components which are common to both stoves. The other components are bought in. Each stove uses 15 machine hours in its construction. It currently uses an absorption costing system but is considering introducing an activity-based costing system. The current overhead absorption rate is based upon machine hours. Last year’s activities have been analysed as follows: Activity Cost driver Activity Cost pool Purchasing Purchase order 20,000 Training Training hour 1,000 Setting up machines No. of set-ups 2,250 Running machines Machine hours 14,250 Total 37,500 The analysis also quantified the number of cost drivers by each stove: Activity No of cost drivers caused by LWs No of cost drivers caused by MRs Purchasing 360 40 Training 20 30 Setting up machines 60 30 Running machines 67,500 7,500 Tasks: 1. Calculate the absorption cost for each type of stove. 2. Calculate the activity-based cost for each type of stove.

CASE MATERIALS: THE CLASSIC PEN COMPANY CASE

Case Abstract

The case is designed to help you develop an understanding of how to build an activity-based-costing model and why activity-based-costing may be more appropriate in practice than functional unit-based overhead cost allocation methods. The case requirements ask you to apply overhead and calculate product costs and gross profit using traditional plant-wide overhead allocation methods, assess the accuracy of the costing methodology given the operational environment, apply activity-based-costing concepts to recalculate the product costs and gross profit, and then effectively communicate the results of your analysis, evaluation, and recommendations in the form of a professional written memo.

Case Narrative

Jane Dempsey, controller of the Classic Pen Company, was concerned about the recent financial trends in operating results. Classic Pen had been the low-cost producer of traditional blue pens and black pens. Profit margins were over 20% of sales.

Several years earlier, Dennis Selmor, the sales manager, had seen opportunities to expand the business by extending the product line into new products that offered premium selling prices over the traditional blue and black pens. As a result, five years ago, red pens were introduced. Red pens required the same basic production technology but could be sold at a 3% premium. Last year, purple pens were introduced because of the 10% premium in selling price they could command.

Jane reviewed the financial results for the most recent year and was keenly disappointed. While the new red and purple pens seemed to be more profitable than the blue and black pens, the overall profits were down and none of the product lines were earning profits at the level that the blue and black pens had earned in the past. She is wondering if more specialty pens selling at higher margins should be introduced to boost profits.

The production manager, Jeffrey Donald, was concerned about this approach. “Five years ago, life was a lot simpler. We produced just blue and black pens in long production runs, and everything went smoothly. Difficulties started when the red pens were introduced and we had to make more changeovers. To product red pens, we have to stop production; empty the vats, clean out all remnants of the previous color, and then start production of red pens. Making black pens was easy. We didn’t even have to clean out the residual blue ink from the previous run. It was absorbed in the darker black ink. However, even small traces of either blue or black ink caused quality problems with the red pens and to a lesser extent, with the purple pens.” Jeffrey also reported that the new pens caused more time to be spent on purchasing, scheduling, and tracking.

Operations

Classic produces pens in a single factory. The major task was preparing and mixing the ink for different colored pens. The ink was inserted into the pens in a semi automated process. A final packing and shipping stage was performed manually.

Each product had a bill of materials that identified the quantity and cost of direct materials required for the product. A routing sheet identified the sequence of operations required for each manufacturing process. The information was used to calculate the labor expenses for each of the four products. All of the plant’s indirect expenses were aggregated at the plant level and allocated to products based on direct labor cost. Labor is paid at the rate of $10 per hour.

Indirect costs were estimated as follows:

Fringe benefits were 40% of direct and indirect labor.

About half of the indirect labor resulted from scheduling production runs, which includes scheduling orders, purchasing, preparing, and releasing material for each run. Approximately 40% of the indirect labor was required for the physical changeover from one color pen to another. As noted previously, the changeover from blue to black ink was relatively short (1 hour) while the changeover for the other color pens was much more extensive, particularly for red pens. The remaining 10% of indirect labor was for time spent maintaining records on the four products. This activity was essentially equal for each product.

Most of the computer expense was used to scheduling production runs in the factory and to order and pay for the materials required in each production run. Since each production run was specific to a single customer, the computer time required to prepare shipping documents and to invoice and collect from a customer was also included in this activity. In total, about 80% of the computer resource was involved in the production run activity. The remaining time was used to keep records on the four products, which was essentially equal.

The remaining three categories of overhead expenses were incurred to supply machine capacity to produce the pens. The machines had a practical capability of 10,000 hours of productive time.

Sales and production information for the four product lines is as follows:

Case Requirements

1. Calculate a plant-wide predetermined overhead allocation rate based on direct labor cost and apply overhead to the four product lines. Calculate total product costs for the four lines using the plant-wide allocation rate and show the gross profit rate and unit cost for each.

2. What assumptions are implicit in this company’s method of allocating overhead costs to the product lines? Do you believe these assumptions are supported by the operational procedures described in this case? Discuss.

3. Identify the main activities performed in the production process. Perform a first stage cost allocation and calculate allocation rates for each activity. Comment on your results with respect to the current allocation method. Do you believe that the costs as currently calculated are accurate? Why or why not?

4. Determine the estimated cost of each product line using activity-based-costing and the gross profit rate for each. What can you conclude about the cost accuracy of the two methods? Were costs distorted using a single allocation rate method?

5. As a result of the new cost information calculated, what actions can management take to make this company more profitable? Be explicit.

[1] This case is an adaptation of a Harvard Business School Case 9/17/98.

6. Tudor brand car batteries are sold with the claim that they will last for at least 4 years. Weibang, having boosted his car (with a 3.5-year-old Tudor battery) many times this past winter, believes that the mean battery life is less than four years. A random sample of eight batteries was taken. The batteries were operational for the following time periods (months): 40, 41, 52, 48, 44, 47, 45, 43. (s =3.9 months). At the 5% significance level, can Weibang support his claim that Tudor batteries last less than four years?

A wheel of a diameter 180 cm is turning at 3.0 rev/s. Eventually it starts to slow down and when it does, time starts at t = 0s. From the moment it starts to slow down it stops after 26 revolutions.

a) What is the wheel’s angular acceleration, in rad/s2?

b) What is the time required to stop the wheel, from the moment it starts slowing down?

c) What are the initial tangential speed and initial centripetal acceleration, at t = 0s, of the point on the rim of the wheel?

d) What is the total initial acceleration of the point on the rim of the wheel at t = 0s?

e) A star is rotating about an axis that passes through its center. When the star “dies,” the balance between the inward pressure due to the force of gravity and the outward pressure from nuclear processes is no longer present and the star collapses inward; and its radius decreases with time. Which one of the following choices best describes what happens as the star collapses? a) The angular velocity of the star remains constant. b) The angular velocity of the star increases. c) The angular velocity of the star decreases. d) The angular momentum of the star decreases. e) Both angular momentum and angular velocity increase.

Stark Company has five employees. Employees paid by the hour receive a $12 per hour pay rate for the regular 40-hour workweek plus one and one-half times the hourly rate for each overtime hour beyond the 40 hours per week. Hourly employees are paid every two weeks, but salaried employees are paid monthly on the last biweekly payday of each month. FICA Social Security taxes are 6.2% of the first $118,500 paid to each employee, and FICA Medicare taxes are 1.45% of gross pay. FUTA taxes are 0.6% and SUTA taxes are 5.4% of the first $7,000 paid to each employee. The company has a benefits plan that includes medical insurance, life insurance, and retirement funding for employees. Under this plan, employees must contribute 5 percent of their gross income as a payroll withholding, which the company matches with double the amount. Following is the partially completed payroll register for the biweekly period ending August 31, which is the last payday of August.

1. Olsen Outfitters Inc. believes that its optimal capital structure consists of 70% common equity and 30% debt, and its tax rate is 40%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $4 million of retained earnings with a cost of r_s = 12%. New common stock in an amount up to $9 million would have a cost of r_e = 14%. Furthermore, Olsen can raise up to $3 million of debt at an interest rate of r_d = 10% and an additional $3 million of debt at r_d = 12%. The CFO estimates that a proposed expansion would require an investment of $5.8 million. What is the WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places.

2.

The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 8% per year. Callahan's common stock currently sells for $28.25 per share; its last dividend was $2.00; and it will pay a $2.16 dividend at the end of the current year.

1. Using the DCF approach, what is its cost of common equity? Round your answer to two decimal places. Do not round your intermediate calculations.
   %
2. 
   
3. If the firm's beta is 1.70, the risk-free rate is 7%, and the average return on the market is 12%, what will be the firm's cost of common equity using the CAPM approach? Round your answer to two decimal places.
   %
4. 
   
5. If the firm's bonds earn a return of 11%, based on the bond-yield-plus-risk-premium approach, what will be r_s? Use the midpoint of the risk premium range discussed in Section 10-5 in your calculations. Round your answer to two decimal places.
   %
6. 
   
7. If you have equal confidence in the inputs used for the three approaches, what is your estimate of Callahan's cost of common equity? Round your answer to two decimal places. Do not round your intermediate calculations.

Assume that lengths of newborn babies follow a normal distribution with mean μ. The lengths (in centimeters) of seven randomly selected newborn babies are :45、46、59、53、46、51、54

(give answer to TWO places past decimal)

1. Construct a 99% confidence interval for μ: Lower Bound?, Upper Bound: ？

2. Perform a hypothesis test to see if the population mean length is more than 50 centimeters (HA : μ > 50) at the significant level α = 0.05:

Compute the test statistic:_____

Indicate the rejection region
t > t_0.025,6
t > t_0.05,6
t > t_0.05,7
t > t_0.025,7

Is there enough evidence to reject the Null hypothesis (H₀: μ = 50)?
Yes, reject.
No, don't reject.

required rate of return = 15%

year

1. make a spreadsheet using excel to calculate irr, mirr, npv,

2. using excel, draw npv profile and find "two" IRRs.

3. based on the analysis, should you take on this project?

Value of a Statistical Life (VSL). (a) Describe VSL in terms that a non-economist can understand. (b) Lavetti (2017) studies the wage-risk tradeoff for one of the riskiest professions in the United States, crab fishing in Alaska. The riskiness of crab fishing is driven mainly by the season and weather conditions. Lavetti collects data on the weather conditions of specific fishing trips, and the wages paid to the crew. He then runs a regression of the wage on the expected fatality rate for each trip and finds that an increase in one fatality per 1000 full time workers per year increases the mean hourly wage by $2.10. Calculate the VSL implied by this estimate, assuming that the number of hours a full time worker works in a year is 2000. (c) Does this number seem high or low to you? Briefly discuss why this might be the case.

Using C++

In a separate header file:
Create a new type called "Patient" - you must use a  class.
Give your "Patient" type at least five (5) member elements of your choosing, and at least one member function.
You should have member elements to hold patient name, and visitReason (which can change), and other items of your choosing.

In your cpp file:
Create at least one instance of Patient type (example: CurrentPatient ).
Create a menu-driven program OF YOUR OWN DESIGN that runs record keeping for the dentist office.
(Example: add new patient record, show patient records, update patient records etc.)

Include File I/O options for saving and recalling patient records.