Sales revenue                                                               $5,625,000

Variable manufacturing expense                  1,875,000

Variable selling and admin expense                 625,000

Fixed manufacturing expense                      1,000,500

Fixed selling and administrative expense        562,000

Total Expenses                                                             (4,062,500)

Net operating income                                                    $ 1,562,500

Company produced and sold 625,000 units of products.

Requirements:

1. Compute Break-even point in unit and explain what that number means.
2. Compute Break-even point in dollar sales volume and explain what that number means.
3. If company want to have a pretax profit of $2,000,000, how much they should sell in dollar amount? Explain that number

Case Study: Furniture Fire [from McClave, Benson, and Sincich 1998] "A wholesale furniture retailer stores in-stock items at a large warehouse located in Tampa, Florida. In early 1992, a fire destroyed the warehouse and all the furniture in it. After determining the fire was an accident, the retailer sought to recover costs by submitting a claim to its insurance company."

"As is typical in a fire insurance policy of this type, the furniture retailer must provide the insurance company with an estimate of 'lost' profit for the destroyed items. Retailers calculate profit margin in percentage form using the Gross Profit Factor (GPF). By definition, the GPF for a single sold item is the ratio of the profit to the item's selling price measured as a percentage, i.e. Item GPF = (Profit/Sales price) x 100 Of interest to both the retailer and the insurance company is the average GPF for all of the items in the warehouse. Since these furniture pieces were all destroyed, their eventual selling prices and profit values are obviously unknown.

One way to estimate the mean GPF of the destroyed items is to use the mean GPF of similar, recently sold items. The retailer sold 3,005 furniture items in 1991 (the year prior to the fire) and kept paper invoices on all sales. Rather than calculate the mean GPF for all 3,005 items (the data were not computerized), the retailer sampled a total of 253 of the invoices and computed the mean GPF for these items. The 253 items were obtained by first selecting a sample of 134 items and then augmenting this sample with a second sample of 119 items. The mean GPFs for the two subsamples were calculated to be 50.6% and 51.0%, respectively, yielding an overall average GPF of 50.8%. This average GPF can be applied to the costs of the furniture items destroyed in the fire to obtain an estimate of the 'lost' profit." "

According to experienced claims adjusters at the insurance company, the GPF for sale items of the type destroyed in the fire rarely exceeds 48%. Consequently, the estimate of 50.8% appeared to be unusually high. (A 1% increase in GPF for items of this type equates to, approximately, an additional $16,000 in profit.) When the insurance company questioned the retailer on this issue, the retailer responded, 'Our estimate was based on selecting two independent, random samples from the population of 3,005 invoices in 1991. Since the samples were selected randomly and the total sample size is large, the mean GPF of 50.8% is valid.

A dispute arose between the furniture retailer and the insurance company, and a lawsuit was filed. In one portion of the suit, the insurance company accused the retailer of fraudulently representing their sampling methodology. Rather than selecting the samples randomly, the retailer was accused of selecting an unusual number of 'high profit' items from the population in order to increase the average GPF of the overall sample.

To support their claim of fraud, the insurance company hired a CPA firm to independently assess the retailer's 1991 Gross Profit Factor. Through the discovery process, the CPA firm legally obtained the paper invoices for the entire population of 3,005 items sold and input the information into a computer. The selling price, profit, profit margin, and month sold for these 3,005 furniture items are available" on the assignment page in Learning Suite (in Stata format), and are described on a page linked in Learning Suite.

Your objective in this case is to use these data to determine the likelihood of fraud. Is it likely that a random sample of 253 items selected from the population of 3,005 items would yield a mean GPF of at least 50.8%? Or, is it likely that two independent, random samples of size 134 and 119 will yield mean GPFs of at least 50.6% and 51.0%, respectively? (These were the questions posed to a statistician retained by the CPA firm.) Use the ideas of probability and sampling distributions to guide your analysis." You are working as clerk (with statistical expertise) for a judge (without statistical expertise).

Prepare a professional memo which presents the results of your analysis and gives your opinion regarding fraud. Be sure to describe the assumptions and methodologies used to arrive at your findings." Assume that your audience--the judge--has only a vague familiarity with statistics (i.e., he/she is a layperson)

Variable Type Description

Month QL month in which item was sold in 1991

Invoice QN Invoice Number

Sales QN Sales Price of item in dollars

Profit QN Profit amount of item in dollars

Margin QN Profit margin of item = (profit/Sales) * 100%

The well-known Danish toy company Lego Group reported its first loss in 1998 since the 1930s. While its bright plastic bricks are famous around the globe, Lego is rapidly losing its market share to the computer and video games. The company’s President said, “The Lego Group is not in critical condition, but action is needed. We need to acknowledge that growth and innovation are not enough. We also have to be a profitable business.” Discuss the meaning of profitability with respect to President’s announcement. What other goal(s) must a business achieve? Why is the goal of profitability important to Lego’s President? How is accounting profitability measured?

As Nipah virus spread from September 1998 through May 1999 in Malaysia, 265 patients were diagnosed with encephalitis, and 105 of these patients died. An additional 110 individuals were found to have antibodies to Nipah virus but did not have any clinical symptoms. Of those infected, 224 were from Port Dickson, which has a population of about 97,800 people. 1. Using this information and the calculations described in the “Student Reading” handout, calculate the following values for this Nipah outbreak: (1pt each) a. Incidence in Port Dickson, Malaysia: ____ new cases/______ people in the population/_____ months b. Prevalence in Port Dickson, Malaysia: ___________% c. Morbidity nationwide for Malaysia: ___________% d. Mortality nationwide for Malaysia: ____________% e. Case fatality ratio nationwide for Malaysia: _____________% 2. The R0 of Nipah virus is estimated to be 0.48. Based on this information, make a claim about whether the outbreak in Malaysia is likely to have become an epidemic.

The maximum discount value of the Entertainment® card for the "Fine Dining" section for various pages is given in the table below.

Let page number be the independent variable and maximum value be the dependent variable.

a) Calculate the least-squares line. Put the equation in the form of: ŷ = a + bx. (Round your answers to three decimal places.)

ŷ = (?)  + (?) x

b) Find the correlation coefficient. (Round your answer to four decimal places.)

r =
Is it significant? (Use a significance level of 0.05.)

Yes

No  

c) Find the estimated maximum values for the restaurants on page ten and on page 70. (Round your answers to the nearest cent.)

d) Does it appear that the restaurants giving the maximum value are placed in the beginning of the "Fine Dining" section? How did you arrive at your answer?

Yes, there is a significant linear correlation so it appears there is a relationship between the page and the amount of the discount.

No, there is not a significant linear correlation so it appears there is no relationship between the page and the amount of the discount.    

e) Suppose that there were 200 pages of restaurants. What do you estimate to be the maximum value for a restaurant listed on page 200? (Round your answer to the nearest cent.) (?)

f) Is the least squares line valid for page 200? Why or why not?

Yes, the line produced a valid response for the maximum value.

No, using the regression equation to predict the maximum value for page 200 is extrapolation.  

g) What is the slope of the least-squares (best-fit) line? (Round your answer to three decimal places.)
(?) Interpret the slope.

As the page number increases by one page, the discount decreases by how much?

The maximum discount value of the Entertainment® card for the "Fine Dining" section for various pages is given in the table below.

Let page number be the independent variable and maximum value be the dependent variable.

a) Calculate the least-squares line. Put the equation in the form of: ŷ = a + bx. (Round your answers to three decimal places.)

ŷ = (?)  + (?) x

b) Find the correlation coefficient. (Round your answer to four decimal places.)

r =
Is it significant? (Use a significance level of 0.05.)

Yes

No  

c) Find the estimated maximum values for the restaurants on page ten and on page 70. (Round your answers to the nearest cent.)

d) Does it appear that the restaurants giving the maximum value are placed in the beginning of the "Fine Dining" section? How did you arrive at your answer?

Yes, there is a significant linear correlation so it appears there is a relationship between the page and the amount of the discount.

No, there is not a significant linear correlation so it appears there is no relationship between the page and the amount of the discount.    

e) Suppose that there were 200 pages of restaurants. What do you estimate to be the maximum value for a restaurant listed on page 200? (Round your answer to the nearest cent.) (?)

f) Is the least squares line valid for page 200? Why or why not?

Yes, the line produced a valid response for the maximum value.

No, using the regression equation to predict the maximum value for page 200 is extrapolation.  

g) What is the slope of the least-squares (best-fit) line? (Round your answer to three decimal places.)
(?) Interpret the slope.

As the page number increases by one page, the discount decreases by how much?

Johnson Entertainment Systems is setting up to manufacture a new line of video game consoles. The cost of the manufacturing equipment is $1,773,750. Expected cash flows over the next four years are $350,000, $828,000, $1,230,000, and $1,350,000. Given the company's required rate of return of 11 percent, what is the NPV of this project?

Group of answer choices $300,672.27 $400,896.36 $1,102,465.00 $1,002,240.91

Question 8 TeleNyckel, Inc, has a beta of –0.29 and is trying to calculate its cost of equity capital. If the risk-free rate of return is 2 percent and the market risk premium is 5 percent, then what is the firm's after-tax cost of equity capital if the firm's marginal tax rate is 30 percent?

Group of answer choices .61% .72% .55% .39%

Question 9 Car Depot expects earnings and dividends to grow at a rate of 25% for the next 4 years, after the growth rate in earnings and dividends will fall to zero, i.e., g = 0. The company's last dividend, D0, was $1.25, its beta is 1.20, the market risk premium is 5.50%, and the risk-free rate is 3.00%. What is the current price of the common stock?

Group of answer choices $29.05 26.77 27.89 30.21 31.42

Please review the Sports and Entertainment Law: The Bounty Program and the New Orleans Saints portion of your textbook. Why do you think everyone was so willing to go along with the bounty program? As a penalty, the Saints lost their head coach (Sean Payton) for one year, and Greg Williams was suspended indefinitely. Various other coaches were suspended, and the Saints paid a $500,000 fine. What are the flaws in thinking processes when we make decisions to go ahead with the bounty program? In your answers, you should also discuss the different ethical theories and standards being applied and how the ethical dilemmas should be resolved.