Boyle Company makes fine jewelry that it sells to department stores throughout the United States. Boyle is trying to decide which of the two bracelets to manufacture. Cost data pertaining to the two choices follow: Bracelet A Bracelet B Cost of materials per unit $ 10 $ 20 Cost of labor per unit 15 15 Advertising cost per year 5,000 3,000 Annual depreciation on existing equipment 5,000 4,000 Required Identify the fixed costs and determine the amount of fixed cost for each product. Identify the variable costs and determine the amount of variable cost per unit for each product. Identify the avoidable costs and determine the amount of avoidable cost for each product.

United States Motors Inc. (USMI) manufactures automobiles and light trucks and distributes them for sale to consumers through franchised retail outlets. As part of the franchise agreement, dealerships must provide monthly financial statements following the USMI accounting procedures manual. USMI has developed the following financial profile of an average dealership that sells 3,100 new vehicles annually:

USMI is considering a major expansion of its dealership network. The vice president of marketing has asked Jack Snyder, corporate controller, to develop some measure of the risk associated with the addition of these franchises. Jack estimates that 90% of the mixed costs shown are variable for purposes of this analysis. He also suggests performing regression analyses on the various components of the mixed costs to more definitively determine their variability.

Required:

1. Calculate the composite dealership profit if 4,400 units are sold.

3. The regression equation that Jack Snyder developed to project annual sales of a dealership has an R-squared of 60% and a standard error of the estimate of $9,300,000. If the projected annual sales for a dealership total $58,900,000, determine the approximate 95% confidence interval for Jack’s prediction of sales. (Hint: The 95% confidence interval uses 2 standard errors in determining the interval.)

Lionel Corporation manufactures pharmaceutical products sold through a network of sales agents in the United States and Canada. The agents are currently paid an 18% commission on sales; that percentage was used when Lionel prepared the following budgeted income statement for the fiscal year ending June 30, 2019:

Since the completion of the income statement, Lionel has learned that its sales agents are requiring a 5% increase in their commission rate (to 23%) for the upcoming year. As a result, Lionel’s president has decided to investigate the possibility of hiring its own sales staff in place of the network of sales agents and has asked Alan Chen, Lionel’s controller, to gather information on the costs associated with this change.

Alan estimates that Lionel must hire eight salespeople to cover the current market area, at an average annual payroll cost for each employee of $80,000, including fringe benefits expense. Travel and entertainment expenses is expected to total $760,000 for the year, and the annual cost of hiring a sales manager and sales secretary will be $230,000. In addition to their salaries, the eight salespeople will each earn commissions at the rate of 10% of sales. The president believes that Lionel also should increase its advertising budget by $660,000 if the eight salespeople are hired.

Required

1. Determine Lionel’s breakeven point (operating profit = 0) in sales dollars for the fiscal year ending June 30, 2019, if the company hires its own sales force and increases its advertising costs. Prove this by constructing a contribution income statement.

2. If Lionel continues to sell through its network of sales agents and pays the higher commission rate, determine the estimated volume in sales dollars that would be required to generate the operating profit as projected in the budgeted income statement.

QUESTION 1

Download the variable ‘real GDP’ for the United States from the St. Louis Fred data base and save it in Excel (the last four digits of the FRED code are DPCA). Create a second column and take the natural logarithm of the variable. What is the value of ln(RGDP) in year 2012? Next, plot both series. Which graph appears to grow steeper in latter (i.e. last 40) years?

(*hint: Due to the scale difference between the two graphs, you will likely want to right click and “Format Data Series” and select secondary axis so that one of the data series will have Y- axis values on the right side of the graph.)

QUESTION 2

1. Download the variable ‘real GDP’ for the United States from the St. Louis Fred data base and save it in Excel (the last four digits of the FRED code are DPCA). Create a second column and take the natural logarithm of the variable. Plot both series. Which graph appears to grow steeper in latter (i.e. last 40) years?

   (*hint: Due to the scale difference between the two graphs, you will likely want to right click and “Format Data Series” and select secondary axis so that one of the data series will have Y-axis values on the right side of the graph.)

   		a.RGDP
   		b.ln(RGDP)

The Federal Deposit Insurance Corporation is a United States government corporation providing deposit insurance to depositors in U.S. commercial banks and savings institutions. The FDIC was created by the 1933 Banking Act, enacted during the Great Depression to restore trust in the American banking system. The FDIC recently conducted a survey and found that 45% of all financial consumers were very satisfied with their primary financial institution. If this figure still holds true today, suppose 28 financial consumers are sampled randomly. If X is a binomial random variable representing the number of financial consumers who were very satisfied with their primary financial institution, what is the probability that exactly 20 of the 28 are very satisfied with the primary financial institution? (Report your answer to 4 decimal places, using conventional rounding rules.)

1. Shorelake Tours Inc., operates a large number of tours throughout the United States. A study has indicated that some of the tours are not profitable, and consideration is being given to dropping these tours in order to improve the company's overall operating performance. One such tour is a two-day Battlefields of the Native American and Francophone Wars bus tour. An income statement from one of these tours is given below:
   

Dropping this tour would not affect the number of buses in the company's fleet or the number of bus drivers on the company's payroll. Buses do not wear out through use; rather, they eventually become obsolete. Bus drivers are paid fixed annual salaries; tour guides are paid for each tour conducted. The "Bus maintenance and preparation" cost above is an allocation of the salaries of mechanics and other service personnel who are responsible for keeping the company's fleet of buses in good operating condition. There would be no change in the number of mechanics and other service personnel as a result of dropping this tour. The liability insurance depends upon the number of buses in the company's fleet and not upon how much they are used.

Required:

How much is the financial advantage (disadvantage) if this tour is discontinued?

The company's tour director has been criticized because only about 50% of the seats on the company's tours are being filled as compared to an average of 60% for the industry. The tour director has explained that the company's average seat occupancy could be improved considerably by eliminating some of the tours, but that doing so would reduce profits. Do you agree with the tour director's conclusion? Why?

Patient portals and other Internet-based applications are often used in health care in the United States. These systems rely upon the commercial use of an Internet connection. Some areas cannot afford Internet or may have a cultural or religious objection to significant use of Internet applications as resources for the population being served. Discuss how this may affect the health care organization that is required to update processes in order to meet regulatory requirements?

1. Assume that the mosquito population across the southeast United States begins carrying the Zika virus. South Carolina legislators are concerned about the impact on pregnant women. A screening test (Test X) is required for all women of child-bearing age during annual appointments with their Ob/Gyn. The projected population to be screened in year 2020 is 100,000. State legislators want to know how many people will potentially need specialized medical care due to a positive test.

You have the 2018 testing data from Brazil that tells you the sensitivity of test X is 80.0% and the specificity is 99.5%. The estimated prevalence of Zika virus is 1.5 per 10,000 women of child-bearing age. Answer the following questions legislators may present at a hearing.

NOTE: For this and the next problem, write the terminology related to the question when it is not provided (e.g., if you are calculating a sensitivity, explicitly state that this is the sensitivity). Please show all your work.

1. Set-up the 2×2 table with the data given above. (9 points)

1. Because of a job change, Ben Hardesty has just relocated to the southeastern United States. He sold his furniture before he moved, so he's now shopping for new furnishings. At a local furniture store, he's found an assortment of couches, chairs, tables, and beds that he thinks would look great in his new two-bedroom apartment; the total cost for everything is $3,000. Because of moving costs, Ben is a bit short of cash right now, so he's decided to take out an installment loan for $3,000 to pay for the furniture. The furniture store offers to lend him the money for 36 months at an add-on interest rate of 7 percent. The credit union at Ben's firm also offers to lend him the money - they'll give him the loan at an interest rate of 11.5 percent simple, but only for a term of 24 months.

1. Compute the monthly payments for the loan from the furniture store. Round the answer to the nearest cent.   (1)

2. Compute the monthly payments for the loan from the credit union. Round the answer to the nearest cent.  (1)

3. Determine the APR for the loan from the furniture store. Do not round intermediate calculations. Round the answer to 2 decimal places.   (1)

d. Determine the APR for the loan from the credit union. Do not round intermediate calculations. Round the answer to 2 decimal places. (1)