Woof Company manufactures toys for dogs. Last year, Woof earned operating income of $310,500 after income taxes. Capital employed equaled $3.7 million. Woof is 30% equity and 70% 10-year bonds paying 6.25 percent interest. Woof’s marginal tax rate is 25 percent. The company is considered a fairly risky investment and probably commands a 12-point premium above the 2.5 percent rate on long-term Treasury bonds. The owner of the company would like to improve EVA. Compute EVA under each of the following independent scenarios the owner is considering.

PART A

Assume no changes are made. Calculate EVA using the original data.

PART B

A different type of plastic will be used in the production of dog toys. This should not affect costs but will begin to affect the market assessment of Woof Company, bringing the premium above long-term Treasury bills to 11 percent the first year. Calculate revised EVA for the first year.

QUESTION 1

Valencia Manufacturing Company manufactures and sells musical gadgets. The business earned Operating Income of $220,000 in 2018, when selling price per unit was $200, and the president of Valencia is under pressure to increase operating income in 2019. Data for variable cost per unit and total fixed costs were as follows:

Required:

(a)Using the equation method, calculate the number of units sold in 2018.

(b) Given the sales units calculated in Part (a), prepare a contribution margin income statement for the year ended December 31, 2018, detailing the composition of total fixed costs and clearly showing contribution and net income.                                                                          

(c) Calculate Valencia’s break-even point in units and in sales dollars.             

(d) Calculate the margin of safety in units and in sales dollars.                          

QUESTION 1 (Part 2)

Valencia Manufacturing Company manufactures and sells musical gadgets. The business earned Operating Income of $220,000 in 2018, when selling price per unit was $200, and the president of Valencia is under pressure to increase operating income in 2019. Data for variable cost per unit and total fixed costs were as follows:

(e) The management of Valencia Manufacturing Company is desirous of increasing operating income by 20% in 2019. They expect per unit data and total fixed costs to remain the same in 2018. Determine the number of units that must be sold to earn this target operating profit. Is this a realistic goal?                                                                                                               

(f) Assume that as a result of reorganizing the production process, Valencia Manufacturing Company was able to reduce direct material cost per unit by $5 due to a change in the quality of raw material used in the production process but the expected sales of 6,000 units would decrease by 5% and total fixed costs are expected to increase by $94,000. What must the new selling price per unit be if the company wishes to meet the target operating profit for 2019?  

(g)You have just begun your summer internship at Valencia Manufacturing. To expand sales, the business is considering paying a commission to its sales team. You have been asked to compute 1) the new break-even sales figure, and 2) the operating profit if sales increase by 10% under the new sales commission plan. She is confident that you can handle the task, because you learned CVP analysis in your accounting class.

You collected your data, performed your analysis and submitted a memo to your manager, who was very pleased with the work done. Your report indicated that the new sales commission plan would result in a significant increase in operating income but only a small increase in break-even sales.

A few days after, you realized that you made an error in the CVP analysis, as the sales personnel’s $88,000 monthly salaries were inadvertently left out and you therefore did not include this fixed marketing cost in your computations. You are not sure what to do, as you are afraid that Valencia might not offer you permanent employment after the internship.

How would your error affect breakeven sales and operating income under the proposed sales commission plan? After considering all factors, should you inform your manager or simply keep quiet?                                                                                                                        

Each year, the Chapman University Survey of American Fears asks a random sample of Americans whether they are afraid of various issues. One question on the survey asks about air pollution. The table below reports the number of individuals surveyed in 2018 who responded that they were either afraid or not afraid of air pollution, by political affiliation.

We’d like to know if, in the American population in 2018, fear of air pollution depends on a person’s political affiliation.

1) Set-up the corresponding null and alternative hypotheses. The appropriate alternativehypothesis is

Group of answer choices

H_a: Republicans are more likely than Democrats to fear air pollution in the US

H_a: There is some association between political affiliation and fear of air pollution in this population

Ha: Republicans and Democrats are not equally likely to fear air pollution in the US

H_a: Democrats are more likely than Republicans to fear air pollution in the US

Ha: Republicans and Democrats are equally likely to fear air pollution in the US

H_a: There is no association between political affiliation and fear of air pollution in this population

2) Which inference procedure should be used?

A - two sample t procedure for two means

B - ANOVA for several means

C - chi-square for two-way tables

D - z procedure for a proportion

E - one sample or matched-pairs t procedure for a mean

F - chi-square for goodness of fit

3) The value of the corresponding test statistic is:

4) What are the conditions for this inference procedure?

A - Normal data AND large enough expected counts.

B - Random selection without repeated measures AND large enough expected counts.

C - Independent random samples AND normal data AND large enough total sample size.

D - Independent random samples AND normal data or large enough total sample size.

E - Independent random samples AND normal data or large enough total sample size AND similar sample standard deviations.

F - One random sample AND normal data AND large enough sample size.

G - One random sample AND normal data or large enough sample size.

H - One random sample AND large enough counts of successes and failures in the sample.

I - Independent random samples AND normal data AND large enough total sample size AND similar sample standard deviations.

J - One random sample AND large enough expected counts.

5) Assuming for now that the conditions for inference are met, conclude in context based on this hypothesis test.

(Be sure to be very specific and to site your computed P-value).

1. Suppose individuals A and B have the same money income and tastes and face the same set of prices of all goods except access to a free National Park. (They will be 2 points on the same demand curve; find the equation to the line and the X and Y intercepts.) Individual A lives farther away than individual B and has higher travel costs. Their annual use is summarized as:

How much consumer surplus does each individual receive per year from the park usage? What are the total social benefits (as measured by the sum of the consumer surplus measures) from the park?

2. A worker, who is typical in all respects, works for a wage of $50,000 per year in a perfectly safe occupation. Another typical worker does a job requiring exactly the same skills as the first worker, but in a risky occupation with a known death probability of 1 in 10,000 per year, and receives a wage of $60,000 per year. What value of a human life for workers with these characteristics should a cost-benefit analyst use?  

3. Manufacturers in an urban environment are currently producing 25,000 widgets per year. Their gross revenue is $300 per widget with variable costs of $125 per widget. Air quality in the city has fallen to a level of 20 points measured on a 0-100 scale. Three proposals could improve the air quality. Option I involves annual direct costs of $100,000 which raises the air quality index to 32; option 2 costs $130,000 per year and raises the index to 42; option 3 costs $150,000 per year and raises the index to 50. Also producers are required to reduce their widget output by: 5% under option 1, 10% under option 2, and 15% under option 3.

a. Which option has the lowest total opportunity cost?

b. Which option has the lowest cost per unit of air quality improvement?

c. Why might neither of these be the most efficient?

1. Chase Manhattan has purchased a 7 million one-year Canadian dollar loan that pays 8.5% interest annually. The spot rate of U.S. dollars for Canadian dollars is 0.70. It has funded this loan by accepting a Euro-denominated deposit for the equivalent amount and maturity at an annual rate of 7%. The current spot rate of U.S. dollars for Euros is 1.25. Note: Banks earn interest on loans and pay interest on deposits.
   1. What is the loan amount in dollars?

2. What is the deposit amount in Euros?

3. What is the interest income earned in US dollars on this one-year transaction if the spot rate of U.S. dollars for Canadian dollars and U.S. dollars for Euros at the end of the year are 0.67 and 1.30, respectively?

4. What is the interest expense in dollars?

Moon Star Company obtained two notes receivable during the year of 2019. The details of the notes are as follows:

October 3, 2019          Sold goods for $24,000 on account to a customer (Sun Company) and received 8% note. The note was due on October 18, 2019.

December 5, 2019      Received 13% note for $15,000 to replace account receivable from a customer (Strong Company). The note was due on January 5, 2020.

1. Compute maturity value of the note receivable received on October 3 (Show supporting calculations.)
2. Journalize the collection of the note which was due on October 18, 2019.
3. Journalize the adjusting entry at December 31, 2019 to record accrued interest.
4. Compute total interest revenue earned on the note receivable received on December 5, 2019 (Show supporting calculations.)
5. Journalize the collection of the note which was due on January 5, 2020.

During 2017, Fresh Express Company sold 2,530 units of its product on September 20 and 3,150 units on December 22, all at a price of $93 per unit. Incurring operating expenses of $17 per unit sold, it began the year with and made successive purchases of the product as follows:

Required:
Prepare a comparative income statement for the company, showing in adjacent columns the profits earned from the sale of the product, assuming the company uses a perpetual inventory system and prices its ending inventory on the basis of (a) FIFO and (b) Moving weighted average:

Question 3)The final grades in Math class of 80 students at State University are recorded in the accompanying table.

A.The given data set is in ascending order. If class interval size is 3 for the constructed 14 classes, find “m”.(Note: This section is not related with section B)

B.Construct a frequency table with 8 classes and find its frequencies.

i)Find median class

ii)Sketch the ogive curves by using either the cumulative frequency or the cumulative relative frequency.

iii)Using the ogive curve find the following probabilities:

P(x<76.5)=

P(x>88.5)=

P(x>84)=

P(x<90)=

P(74<x<92)=

P(x=78)=

iv)Find interquartile range (IQR)

v)Sketch box and whisker plot.

vi)Comment on skewness.

vii)The standard deviation and mean of another math class of 49 students from Technology University is 10.3 and 88.6, respectively. Compare the Math class in State University with Math class in Technology University, which one is more consistent? In other words which Math class has less spread of values around its mean? Show your work and explain why?Note: You can find the necessary parameters for the State University either from raw data given or from the frequency table you constructed.

Calculate the Gini Coefficient. Use Excel.

The small country of Alpha has 10 citizens. The citizens and their earned incomes are listed below:

Citizen       Earned Income

Zak              $ 5,000

Erika           $10,000

Bill               $5,000

Juan            $ 20,000

Harry           $ 20, 000

Jose            $ 50,000

Emily           $ 50,000

Kai               $ 5,000

Robert         $ 5,000

Kathleen      $ 5,000

From the data, graph the Lorenz Curve and calculate the Gini Coefficient.