1. Suppose the base year is 2005, and the only goods in the economy are apples and bananas. In 2005 both apples and bananas cost $1, and 100 apples and 100 bananas are produced. In 2006, apples cost $20 and bananas cost $5, and 50 apples and 200 bananas are produced.

1. What is nominal GDP in 2005?                     
2. What is real GDP in 2005?                             
3. What is the GDP deflator in 2005?                

In 2006?              

In 2006?              

In 2006?              

4. Suppose the fixed basket of goods is 1 apple and 2 bananas.
5. What is the level of the CPI in 2005?                   In 2006?              
6. What is the CPI inflation rate from 2005 to 2006?               

2. What are the three effects that bias the measurement of CPI?

3. Which of the three effects listed in part c does each of the following illustrate?
   1. US households in 2010 spent a larger fraction of their income on televisions than they did in 1950.                                                                                         
   2. All televisions available in 2010 had higher resolution than any televisions available in 1950.                                                                                              
   3. In 1950, no US household had a plasma screen television, but in 2010 they are widely available.                                                                                          

4. Suppose the average television purchased in 1950 cost $200, and the average television purchased today costs $700.
   1. What is the percentage change in the average television price?

2. Taking into account the effects in part c, is this percentage increase likely an underestimate or overestimate of the true change in the cost of televisions?   

3. Why?                                                                                                        

5. Suppose CPI is as follows in each year:

Suppose in the year 2007 you are considering a job offer that pays $50,000 in 2007, plus a 10% (compounding) raise in each of the next three years.

1. What nominal salary will you make in each year?

2. What will your real salary be in each year, using a 2007 base year?

3. What will your real salary be in each year, using a 2009 base year?

4. In what year was your real salary highest?
5. Does your answer to 4 depend on the base year selected?                         
6. Suppose instead your contract gave you $50,000 in 2007, plus a cost of living adjustment equal to the percentage change in CPI. Compute the nominal wage in each year.

In what years is this contract better than the original one?        

Data show that men between the ages of 20 and 29 in a general population have a mean height of 69.3​ inches, with a standard deviation of

3.1 inches. A baseball analyst wonders whether the standard deviation of heights of​ major-league baseball players is less than

3.1 inches. The heights​ (in inches) of

20 randomly selected players are shown in the table.

Calculate the value of the test statistic.

A) x^2=

B) determine the P-value

Question 3: Pricing Multiple Product Versions (show all work)

Casey’s company produces two versions of a software program, “Advanced” and “Basic”.

There are 3 segments of customers, the Managers, Executives and Students, and the respective segment sizes are 2000, 1000 and 5000. The per-unit cost of producing the Advanced version is $20, while the per-unit cost of producing the Basic version is $10. The willingness to pay (WTP) for each version, by segment, is given as follows:

WTP (Managers) = $100 (Advanced) and $55 (Basic)

WTP (Executives) = $62 (Advanced ) and $45 (Basic)

WTP (Students) = $45 (Advanced ) and $30 (Basic)

If Casey sells only the Advanced version, what is the optimal price it should charge and the profits? (Answer: $45, Profit=$200K)

If Casey decides to sell both versions, what are the optimal prices it should charge for each version? What is the optimal profit of the company? Assume that customers will buy if consumer surplus is at least 0 and that they need at least $1 extra in consumer surplus to switch between product versions. (Answer: Basic @ $30, Advanced @ $74, Profit=$228K)

Arrasmith Corporation uses customers served as its measure of activity. During February, the company budgeted for 36,800 customers, but actually served 27,200 customers. The company uses the following revenue and cost formulas in its budgeting, where q is the number of customers served:

Revenue: $5.30q

Wages and salaries: $35,000 + $1.64q

Supplies: $1.04q

Insurance: $12,200

Miscellaneous expenses: $8,200 + $0.48q

The company reported the following actual results for February:

Required:

Prepare the company's flexible budget performance report for February. Label each variance as favorable (F) or unfavorable (U). (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

What three conceptual factors affect the decision as to when to recognize revenue.

What are the three revenue recognition alternatives?

Under what circumstances does a company recognize revenue prior to the completion of the earnings process?

Under what circumstances does a company use the percentage of completion method for long term contracts?

How may the departure from the principle of recognizing revenue only at the completion of the earnings process be justified when a company uses the percentage of completion method.

Describe input ad output measures used in the percentage of completion method. Give an example of each.

How does a company account for losses under the two methods of accounting for long term construction contracts?

How does a company classify the following accounts in its financial statements: Construction in Progress, Partial billings, Construction Revenue, and Construction Expense?

Describe the difference between the cost recovery method and the installment method of revenue recognition.

When a contract has multiple elements (multiple deliverables), how does GAAP determine if one of the elements should be considered a separate unit of accounting?

Distinguish between the initial franchise fee and continuing franchise fee. When is each recognized as revenue?

How is revenue recognized for real estate sales?

In a consignment, does consignee or consignor retain title to the property? When is revenue recognized by the consignor? The consignee?

An article in the October 11, 2006, issue of the Washington Post claimed that 15% of high school students used cursive writing on the essay portion of the SAT exam in the academic year 2005-2006 (Pressler, 2006). Suppose you take a random sample from those exams and see what proportion of the sample used cursive writing for the essay. Assume the sample size is 180 do the following:

• A -- Determine what π and N are.
• B -- Describe the sampling distribution.
• C -- Show that the CLT holds.
• D -- What does the CLT say about the sampling distribution?
• E -- What is the probability of obtaining a sample where more than half of the students wrote their essay in cursive?
• F -- What is the probability of obtaining a sample where between 10 and 25% wrote their essay in cursive?
• G -- What is the probability of obtaining a sample where less than 12% of the students wrote their essay in cursive?

kelly's blue book publishes data on new used cars. The following table contains the manufacturer's suggested retail price for four vehicles, model years 2006 and 2007. we are interested in the difference in price between the 2006 models and the 2007 models. Assume that the population of price differences is normally distributed.

use the mean of the differences, d=753.75, and the standard deviation of the differences, sd=986.1658

(a)Identify the null and alternative hypotheses to test whether 2007 models are on average more expensive.

(b) using level of significance a=0.05, find the test statistic and the critical value, and make your conclusion about the hypothesis test.

(c) construct and interpret a 95% confidence interval for us, the population mean difference in price.

1. The Statement of Cash Flows does not report the effects of

: Select one: a. Cash dividends paid. b. Common shares issued for cash to pay for assets or to pay debt. c. Common shares purchased for cancellation. d. Common shares issued as the result of a stock dividend

2.

Which of the following loss contingencies ordinarily will NOT be accrued as liabilities?

Select one:

a. Guarantees of indebtedness of others.

b. Pending lawsuits whose outcome is uncertain.

c. None of these will be accrued

d. Disputes over additional income taxes for prior years.

3. The January 1, 2006 status of long-term construction project No. 6 is as follows. Assume the completed contract method.
Costs incurred to date $20,000
Contract price $80,000
Estimated remaining cost to complete is $40,000
On December 31, 2006, the estimated remaining cost to complete was still $40,000, and $25,000 of cost had been incurred during 2006. What is the January 1, 2007 balance of Construction-in-Process?

Select one:

a. $45,000

b. $50,000

c. $30,000

d. $40,000

4. Which of the following is the most conservative (slowest to recognize) revenue recognition method?

Select one:

a. Instalment method of revenue recognition

b. Production method

c. Cost recovery method

d. Percentage of completion method

5.

Which of the following would be non-adjusting subsequent event(s)?

Select one:

a. Bankruptcy filing by the company's major customer, which accounted for 60% of the company's receivables at the balance sheet date.

b. An insured fire loss shortly after the company's year-end.

c. The company announces restructuring plans shortly before its year-end.

d. A sale of goods to a Company with good current ratio

A person’s muscle mass is expected to be associated with age. Some people also thought exercise time would be associated with the muscle mass. To explore the potential relationships between muscle mass and age, muscle mass and exercise time, a nutritionist randomly selected 20 women from a population of women with age ranging from 40 to 80 years old, and measured their muscle mass (a score without unit) and exercise time (hours per month)

What do the two regression parameters (b0 and b1) mean?