A car company advertises that their Super Spiffy Sedan averages 29 mpg (miles per gallon). You randomly select a sample of Super Spiffies from local dealerships and test their gas mileage under similar conditions.

You get the following MPG scores:

33 27 32 34 34 28 27 31

Note: SSx = 63.50

Using alpha =.01, conduct the 8 steps to hypothesis testing to determine whether the actual gas mileage for these cars differs significantly from 29mpg.

A car company advertises that thir Super Spiffy Sedan averages 29mpg (miles per gallon). You randomly select a sample of Super Spiffies from local car dealerships and test their gas mileage under similar conditions.

You get the following MPG scores:

33 27 32 34 34 28 27 31

Note: SSx = 63.50

Using alpha =.01, conduct the 8 steps to hypothesis testing to determine whether the actual gas mileage for these cars differs significantly from 29mpg.

Manufacturer          
A   B   C   D
25   23   25   27
23   21   25   26
21   23   25   27
23   24   21   26
To test whether the mean time needed to mix a batch of material is the same for machines produced by 4 manufacturers, the Jacobs Chemical Company obtained the following data on the time (in minutes) needed to mix the material.

What is the p value?

Does the data provide strong evidence evidence against Ho or weak evidence?

Are the mixing machine considered all equal?

12. A CPA examines a sample of copies of December and January sales invoices for the initials of the person who verified the quantitative data and the consistency between prices on purchase order and invoice. This is an example of a:

A) Substantive test with respect to the completeness of revenue.

B) Cutoff test.

C) Tests of internal control.

D) Statistical test.

13. Which of the following revenue related transactions is not linked to the accounts indicated?

A) Recognize revenues too early--accounts receivable and revenue.

B) Understate allowance for doubtful accounts--Bad debt expense, allowance for doubtful accounts.

C) Don't write off uncollectible receivables—accounts receivable, sales discounts.

D) Don't record discounts given to customers--Cash, sales discounts, accounts receivable.

14. Which of the following is necessary if the auditor can plan to observe inventory at interim dates rather than the end of fiscal year?

A) Perpetual inventory records are maintained.

B) Complete recounts are performed by independent teams.

C) Unit cost records are integrated with production-accounting records.

D) The company adopted a sophisticated Peachtree-based accounting system.

15. Effective internal control for purchases generally can be achieved in a well-planned organizational structure with a separate purchasing department that has:

A) The ability to prepare payment vouchers based on the information on a vendor's invoice.

B) The responsibility of reviewing purchase orders issued by user departments.

C) The authority to make purchases of materials and services.

D) A direct reporting responsibility to controller of the organization.

Mastery Problem: Target Income and Margin of Safety

Target Income and Margin of Safety

At the break-even point, sales and costs are exactly equal. However, the goal of most companies is to make a profit. When a company decides that it wants to earn more than the break-even point of income, it must define the amount it thinks it will realistically make. By modifying the break-even equation, the sales required to earn a target or desired amount of profit may be computed.

Complete the following:
If a company makes $3 off of each unit it sells and has a target operating income of $1,200, then it must sell  units. Similarly, if a company has a target operating income of $75,000 and knows that total expenses for the period will be $75,000, how much revenue must it earn to reach its target operating income? $

Units sold or revenue earned above and beyond the break-even point contributes to the margin of safety for a company. Margin of safety is a crude measure of risk, in that it serves as the padding between profit and the break-even point.

Complete the following:
Expressed in terms of units, if a company hits its break-even point in units (say, 100 units) and actually sells 400 units, then the margin of safety is  units. Similarly, if the break-even point in sales revenue is $200,000, and it actually has sales revenue of $400,000, then its margin of safety is $.

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APPLY THE CONCEPTS: Target income (number of units sold)

Suppose a business has pricing and cost information as follows::

For the upcoming period, the company wishes to generate operating income of $900. Given the cost and pricing structure for the company’s product, how many units must the company sell to attain its target income?

Remember that the basic equation for calculating operating income is as follows:

Step 1: Replace the operating income in the equation with your company’s target income, and insert your cost and pricing information into the equation, as well:

Step 2: Rearrange the equation to isolate units to one side of the equation:

Number of Units to Earn Target Income =  units

Step 3: Create a contribution margin income statement to check your previous work. Enter all amounts as positive numbers.

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APPLY THE CONCEPTS: Target income (sales revenue)

Another useful method for figuring out the type of performance your company will need to reach a target income is by using sales revenue. Rather than using the number of units, this method uses total sales revenue. In companies for which the total set of goods produced and sold is more varied, this would be the preferred method, as opposed to a business in which only one product is sold. Assume a company has pricing and cost information as follows:

For the upcoming period, the company wishes to generate operating income of $75,000. Given the cost and pricing structure for the company’s product, how much sales revenue must it generate to attain its target income?

Step 1: Calculate the contribution margin ratio:

The contribution margin ratio is the contribution margin in proportion to the selling price on a per-unit basis.

Note: The contribution margin ratio is calculated to one decimal place.)

Step 2: Calculate the sales revenue required to attain the target income:

Step 3: Create a contribution margin income statement, to check your previous work. Enter all amounts as positive numbers.

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APPLY THE CONCEPTS: Margin of Safety
Margin of safety can allow you to see how much padding there is for your company between profit and loss. If this number is great, it may indicate that your company is performing very well. If this number is small, it may be worth looking into possible remediation. Consider the following pricing and cost information:

For the upcoming period, the company projects that it will sell 2,000 units. Considering that the company has a unit break-even point of 1,400 units, what is the margin of safety in terms of both units and sales revenue? Round your answers to two decimal places, if necessary.

Discuss three (3) of the levels of risk assessment as they could be applied to your company. For example, Home Depot:

       1.    Operational risk assessment: Home Depot faces the risk that their employees are not adequately trained to meet the needs of its customers.

       2.    Supply chain risk assessment: Home Depot faces the risk that the quality of the products offered by any supplier declines.

       3.    Customer risk assessment: Home Depot faces the risk of another housing downturn that places financial stress on homebuilders and lowers overall sales.

In a study of environmental lead exposure and IQ, the data was collected from 148 children in Boston, Massachusetts. Their IQ scores at age of 10 approximately follow a normal distribution with mean of 115.9 and standard deviation of 14.2.Suppose one child had an IQ of 74. The researchers would like to know whether an IQ of 74 is an outlier or not.

Calculate the lower fence for the IQ data, which is the lower limit value that the IQ score can be without being considered an outlier. Keep a precision level of two decimal places for the lower fence.

Then, calculate the probability of obtaining an IQ score value of 74 or less. Keep a precision level of four decimal places for the probability.

probability of IQ score less than the lower fence:

The relationship between "strength" and "fineness" of cotton fibers was the subject of a study that produced the following data. (Give your answers correct to two decimal places.) x, Strength 76 69 71 76 83 72 78 74 80 82 y, Fineness 4.3 4.5 4.7 4.0 3.9 4.0 5.0 4.7 4.1 4.5 (a) Draw a scatter diagram. (Do this on paper. Your instructor may ask you to turn in this work.) (b) Find the 95% confidence interval for the mean measurement of fineness for fibers with a strength of 74. Lower Limit Upper Limit (c) Find the 98% prediction interval for an individual measurement of fineness for fibers with a strength of 74. Lower Limit Upper Limit

The relationship between "strength" and "fineness" of cotton fibers was the subject of a study that produced the following data. (Give your answers correct to two decimal places.)

(a) Draw a scatter diagram. (Do this on paper. Your instructor may ask you to turn in this work.)

(b) Find the 95% confidence interval for the mean measurement of fineness for fibers with a strength of 74.

(c) Find the 95% prediction interval for an individual measurement of fineness for fibers with a strength of 74.

The table below gives the average high temperatures in January and July for 12 random cities in a region with 192 192 cities. Write a 99 99​% confidence interval for the mean temperature difference between summer and winter in the region.

Mean High Temperatures ​( degrees °​F)

City A B C D E F G H I J K L

July 73 71 78 74 91 88 71 87 74 65 74 85

Jan. 35 37 40 37 56 53 39 45 46 43 19 36

The confidence interval is left parenthesis nothing comma nothing right parenthesis . , . ​(Round to one decimal place as​ needed.)