Skyline pizza is a famous restaurant operating a number of outlets. The restaurant uses a toll-free telephone number to book pizzas at any of its outlets. If the clerk is occupied on one line, incoming phone calls to the restaurant are answered automatically by an answering machine and asked to wait. As soon as the clerk is free, the party that has waited the longest is transferred and answered first. Calls come in at a rate of about 15 per hour. The clerk is capable of taking an order in an average of 3 minutes. Calls tend to follow a Poisson distribution, and service times tend to be exponential. The clerk is paid $20 per hour, but because of lost goodwill and sales, CWD loses about $50 per hour of customer time spent waiting for the clerk to take an order.

Part A Answer the following questions:

a. What is the probability that no customers are in the system (Po)? 2 marks

b. What is the average number of customers waiting for service ( Lq)? 3 marks

c. What is the average number of customers in the system (L)?-2 marks

d. What is the average time a customer waits for service(Wq)? 3 marks

e. What is the average time in the system (W) ?-3 marks

f. What is the probability that a customer will have to wait for service (Pw)?-2 marks

g What is the probability that there is exactly 2 customers in the system- 2 marks

h) What is the probability that there are more than 3 customers in the system-3 mark

Part B

Skyline is considering adding a second clerk to take calls. The store would pay that person the same $20 per hour.

Using appropriate formula for the multiple channel model, answer the following questions:

a. What is the probability that no customers are in the system (Po)? 3 marks

b. What is the average number of customers waiting for service (Lq)? 2 marks

c. What is the average number of customers in the system (L)? 3 mark

s d. What is the average time a customer waits for service (Wq)? 2 marks

e. What is the average time in the system (W)? 2 marks

f. What is the probability that a customer will have to wait for service (Pw)? 2 marks

g. What is the probability that there is exactly 2 customers in the system 2 marks

h. Should it hire another clerk? Explain by showing the cost savings - 4 marks

Researchers have developed statistical models based on financial ratios that predict whether a company will go bankrupt over the next 12 months. In a test of one such model, the model correctly predicted the bankruptcy of 85% of firms that did in fact fail, and it correctly predicted nonbankruptcy for 74% of firms that did not fail. Suppose that we expect 8% of the firms in a particular city to fail over the next year. Suppose that the model predicts bankruptcy for a firm that you own. What is the probability that your firm will fail within the next 12 months? SOLVE SHOWING PROBABILITY TREES

Your company has estimated its total cost to be TC = 54,000 + 2Q + 0.012Q²; its marginal cost is thus MC = 2 + 0.024Q, where Q is the quantity of units produced and TC is in dollars. Since your market is relatively competitive, your company is able to sell its output for $122.00 each (which thus yields MR = 122 and TR = 122Q).

a.   Produce a chart in Excel showing TC and TR with Q on the horizontal axis. Have Q go from 0 to 10,000 units (each row of your Q column can increase by a relatively large number so that your table isn’t huge). Produce a second chart showing MC and MR with Q again on the horizontal axis.

b.   What is the optimal level of output for your company to produce/sell? What is the marginal revenue from the last unit sold?

c.   What are the total revenue, total cost, and profit (net benefit/net revenue/etc.) from selling the optimal number of units?

d.   An eager intern at your company suggests that, since the company earns $122 revenue for each unit sold, then the company could make still more profit by selling more than the level chosen in part b; why would your company not want to produce and sell more output than the level you chose in part b?

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This week we're going to get inside the head of a customer (meaning all of you and me and everyone else), because this is what marketers need to do to get their message heard and to drive customers to do what they want. To do this, respond to the following questions:

In marketing, the customer has to come first . . . you can’t market to a potential customer unless you understand their wants, needs, desires, state of mind, interest, incomes and so much more. Why do you think it is important for a marketer to understand how a customer makes that final purchasing decision?

Indicate which of the following factors would most influence your decision, and then explain how a marketer could use this information to better market this new car to you:

Price

Color

Style

Status  

Question:
Explain what is meant by the yield curve and briefly outline three theories to explain unequal yields at different maturities and how it is most often sloped. Then briefly
explain why Australia’s yield curve “inverted” during the boom years of 2006-2007.

Enchanted Brides Ltd. sells complete bridal ensembles. The most expensive part of the ensemble is the wedding gown. Recognizing that some of its customers may not have enough immediate funds to purchase one of its gowns, the store provides a layaway plan. The customer selects a gown and the store agrees to hold the gown until it is paid for. The store sets up a monthy payment schedule for the customer, extending the payment time over six months to a year. The store charges an additional $35 layaway application fee and $100 in possible default charges. If all payments are made on schedule, the default charge reduces the final payment. If the customer defaults, the $100 is not refunded.

Question: Using the revenue recognition criteria, explain how the store should account for the monthly payments from the customer. Should the $35 storage fee be treated as revenue? Why or why not? Shoud the $100 default charge be treated as revenue? Why or why not? When should the store recognize the original cost of the wedding gown?

There have been several recent cases of a CEO or CFO resigning or being ousted for misrepresenting academic credentials. For instance, during February 2006, the CEO of RadioShack resigned by “mutual agreement” for inflating his educational background. During 2002, Veritas Software Corporation’s DFO resigned after claiming to have an MBA from Stanford University. On the other hand, Bausch & Lomb Inc.’s board refused the CEO’s offer to resign following a questionable claim to have an MBA.

Suppose you have been retained by the board of a company where the CEO has ‘overstated’ credentials. This company has a code of ethics and conduct which states that the employee should always do “the right thing.”

(a) What is the board of directors’ responsibility in such matters?

(b) What arguments would you make to ask the CEO to resign? What damage might be caused if the decision is made to retain the current CEO?

Romano Services provides room-cleaning arrangements for hotels. On April 1, Swanky Hotels & Resorts signed an agreement to outsource its room cleaning functions to Romano. The contract specifies the service fee to be $45,000 per month, and all payments are to be made shortly after the end of each quarter. It also specifies that Romano will receive an additional quarterly bonus of $6,000, if during that quarter, Swanky receives no more than five complaints from customers about room cleanliness. • On April 1, based on historical experience, Romano estimated that there is a 75% chance that it will earn the quarterly bonus. • On May 5, Romano learned that, during March, there were two complaints from customers related to room cleanliness. Based on this new information, Romano revised its estimate downward to 40% that it would earn the quarterly bonus. • On June 30, Swanky notified Romano that, for the quarter ended, there were four complaints associated with room cleanliness, so Romano would receive the bonus. Two days later, Romano received all payments due for all services rendered in the second quarter, including the bonus Romano estimates any variable consideration on the expected value of the consideration it expects to receive. 23. Prepare the required journal entry for Romano Services on April 30th. The entry includes: a. A debit to accounts receivable of $46,500 b. A debit to bonus receivable of $1,500 c. A credit to service revenue of $51,000 d. A credit to bonus receivable of $3,000 e. A debit to bonus receivable of $4,500 f. A debit to bonus receivable of $6,000 g. A credit to deferred revenue of $93,000 h. None of the above 24. Prepare the required journal entry for Romano Services on May 30th. The entry includes: a. A debit to accounts receivable of $45,800 b. A debit to bonus receivable of $1,500 c. A debit to bonus receivable of $800 d. A credit to service revenue of $15,400 e. A credit to bonus receivable of $100 f. A debit to bonus receivable of $100 g. A credit to deferred revenue of $45,800 h. None of the above 25. Prepare the required journal entry for Romano Services on June 30th. The entry includes: a. A debit to bonus receivable of $4,400 b. A debit to accounts receivable of $46,600 c. A debit to bonus receivable of $800 d. A credit to service revenue of $51,000 e. A credit to bonus receivable of $1,600 f. A debit to bonus receivable of $800 g. A credit to deferred revenue of $138,800 h. None of the above Romano Services provides room-cleaning arrangements for hotels. On April 1, Swanky Hotels & Resorts signed an agreement to outsource its room cleaning functions to Romano. The contract specifies the service fee to be $45,000 per month, and all payments are to be made shortly after the end of each quarter. It also specifies that Romano will receive an additional quarterly bonus of $6,000, if during that quarter, Swanky receives no more than five complaints from customers about room cleanliness. • On April 1, based on historical experience, Romano estimated that there is a 75% chance that it will earn the quarterly bonus. • On May 5, Romano learned that, during March, there were two complaints from customers related to room cleanliness. Based on this new information, Romano revised its estimate downward to 40% that it would earn the quarterly bonus. • On June 30, Swanky notified Romano that, for the quarter ended, there were four complaints associated with room cleanliness, so Romano would receive the bonus. Two days later, Romano received all payments due for all services rendered in the second quarter, including the bonus Romano estimates any variable consideration on the expected value of the consideration it expects to receive. 23. Prepare the required journal entry for Romano Services on April 30th. The entry includes: a. A debit to accounts receivable of $46,500 b. A debit to bonus receivable of $1,500 c. A credit to service revenue of $51,000 d. A credit to bonus receivable of $3,000 e. A debit to bonus receivable of $4,500 f. A debit to bonus receivable of $6,000 g. A credit to deferred revenue of $93,000 h. None of the above 24. Prepare the required journal entry for Romano Services on May 30th. The entry includes: a. A debit to accounts receivable of $45,800 b. A debit to bonus receivable of $1,500 c. A debit to bonus receivable of $800 d. A credit to service revenue of $15,400 e. A credit to bonus receivable of $100 f. A debit to bonus receivable of $100 g. A credit to deferred revenue of $45,800 h. None of the above 25. Prepare the required journal entry for Romano Services on June 30th. The entry includes: a. A debit to bonus receivable of $4,400 b. A debit to accounts receivable of $46,600 c. A debit to bonus receivable of $800 d. A credit to service revenue of $51,000 e. A credit to bonus receivable of $1,600 f. A debit to bonus receivable of $800 g. A credit to deferred revenue of $138,800 h. None of the above Romano Services provides room-cleaning arrangements for hotels. On April 1, Swanky Hotels & Resorts signed an agreement to outsource its room cleaning functions to Romano. The contract specifies the service fee to be $45,000 per month, and all payments are to be made shortly after the end of each quarter. It also specifies that Romano will receive an additional quarterly bonus of $6,000, if during that quarter, Swanky receives no more than five complaints from customers about room cleanliness. • On April 1, based on historical experience, Romano estimated that there is a 75% chance that it will earn the quarterly bonus. • On May 5, Romano learned that, during March, there were two complaints from customers related to room cleanliness. Based on this new information, Romano revised its estimate downward to 40% that it would earn the quarterly bonus. • On June 30, Swanky notified Romano that, for the quarter ended, there were four complaints associated with room cleanliness, so Romano would receive the bonus. Two days later, Romano received all payments due for all services rendered in the second quarter, including the bonus Romano estimates any variable consideration on the expected value of the consideration it expects to receive. 23. Prepare the required journal entry for Romano Services on April 30th. The entry includes: a. A debit to accounts receivable of $46,500 b. A debit to bonus receivable of $1,500 c. A credit to service revenue of $51,000 d. A credit to bonus receivable of $3,000 e. A debit to bonus receivable of $4,500 f. A debit to bonus receivable of $6,000 g. A credit to deferred revenue of $93,000 h. None of the above 24. Prepare the required journal entry for Romano Services on May 30th. The entry includes: a. A debit to accounts receivable of $45,800 b. A debit to bonus receivable of $1,500 c. A debit to bonus receivable of $800 d. A credit to service revenue of $15,400 e. A credit to bonus receivable of $100 f. A debit to bonus receivable of $100 g. A credit to deferred revenue of $45,800 h. None of the above 25. Prepare the required journal entry for Romano Services on June 30th. The entry includes: a. A debit to bonus receivable of $4,400 b. A debit to accounts receivable of $46,600 c. A debit to bonus receivable of $800 d. A credit to service revenue of $51,000 e. A credit to bonus receivable of $1,600 f. A debit to bonus receivable of $800 g. A credit to deferred revenue of $138,800 h. None of the above Romano Services provides room-cleaning arrangements for hotels. On April 1, Swanky Hotels & Resorts signed an agreement to outsource its room cleaning functions to Romano. The contract specifies the service fee to be $45,000 per month, and all payments are to be made shortly after the end of each quarter. It also specifies that Romano will receive an additional quarterly bonus of $6,000, if during that quarter, Swanky receives no more than five complaints from customers about room cleanliness. • On April 1, based on historical experience, Romano estimated that there is a 75% chance that it will earn the quarterly bonus. • On May 5, Romano learned that, during March, there were two complaints from customers related to room cleanliness. Based on this new information, Romano revised its estimate downward to 40% that it would earn the quarterly bonus. • On June 30, Swanky notified Romano that, for the quarter ended, there were four complaints associated with room cleanliness, so Romano would receive the bonus. Two days later, Romano received all payments due for all services rendered in the second quarter, including the bonus Romano estimates any variable consideration on the expected value of the consideration it expects to receive. 23. Prepare the required journal entry for Romano Services on April 30th. The entry includes: a. A debit to accounts receivable of $46,500 b. A debit to bonus receivable of $1,500 c. A credit to service revenue of $51,000 d. A credit to bonus receivable of $3,000 e. A debit to bonus receivable of $4,500 f. A debit to bonus receivable of $6,000 g. A credit to deferred revenue of $93,000 h. None of the above 24. Prepare the required journal entry for Romano Services on May 30th. The entry includes: a. A debit to accounts receivable of $45,800 b. A debit to bonus receivable of $1,500 c. A debit to bonus receivable of $800 d. A credit to service revenue of $15,400 e. A credit to bonus receivable of $100 f. A debit to bonus receivable of $100 g. A credit to deferred revenue of $45,800 h. None of the above 25. Prepare the required journal entry for Romano Services on June 30th. The entry includes: a. A debit to bonus receivable of $4,400 b. A debit to accounts receivable of $46,600 c. A debit to bonus receivable of $800 d. A credit to service revenue of $51,000 e. A credit to bonus receivable of $1,600 f. A debit to bonus receivable of $800 g. A credit to deferred revenue of $138,800 h. None of the above Romano Services provides room-cleaning arrangements for hotels. On April 1, Swanky Hotels & Resorts signed an agreement to outsource its room cleaning functions to Romano. The contract specifies the service fee to be $45,000 per month, and all payments are to be made shortly after the end of each quarter. It also specifies that Romano will receive an additional quarterly bonus of $6,000, if during that quarter, Swanky receives no more than five complaints from customers about room cleanliness. • On April 1, based on historical experience, Romano estimated that there is a 75% chance that it will earn the quarterly bonus. • On May 5, Romano learned that, during March, there were two complaints from customers related to room cleanliness. Based on this new information, Romano revised its estimate downward to 40% that it would earn the quarterly bonus. • On June 30, Swanky notified Romano that, for the quarter ended, there were four complaints associated with room cleanliness, so Romano would receive the bonus. Two days later, Romano received all payments due for all services rendered in the second quarter, including the bonus Romano estimates any variable consideration on the expected value of the consideration it expects to receive. 23. Prepare the required journal entry for Romano Services on April 30th. The entry includes: a. A debit to accounts receivable of $46,500 b. A debit to bonus receivable of $1,500 c. A credit to service revenue of $51,000 d. A credit to bonus receivable of $3,000 e. A debit to bonus receivable of $4,500 f. A debit to bonus receivable of $6,000 g. A credit to deferred revenue of $93,000 h. None of the above 24. Prepare the required journal entry for Romano Services on May 30th. The entry includes: a. A debit to accounts receivable of $45,800 b. A debit to bonus receivable of $1,500 c. A debit to bonus receivable of $800 d. A credit to service revenue of $15,400 e. A credit to bonus receivable of $100 f. A debit to bonus receivable of $100 g. A credit to deferred revenue of $45,800 h. None of the above 25. Prepare the required journal entry for Romano Services on June 30th. The entry includes: a. A debit to bonus receivable of $4,400 b. A debit to accounts receivable of $46,600 c. A debit to bonus receivable of $800 d. A credit to service revenue of $51,000 e. A credit to bonus receivable of $1,600 f. A debit to bonus receivable of $800 g. A credit to deferred revenue of $138,800 h. None of the above Romano Services provides room-cleaning arrangements for hotels. On April 1, Swanky Hotels & Resorts signed an agreement to outsource its room cleaning functions to Romano. The contract specifies the service fee to be $45,000 per month, and all payments are to be made shortly after the end of each quarter. It also specifies that Romano will receive an additional quarterly bonus of $6,000, if during that quarter, Swanky receives no more than five complaints from customers about room cleanliness. • On April 1, based on historical experience, Romano estimated that there is a 75% chance that it will earn the quarterly bonus. • On May 5, Romano learned that, during March, there were two complaints from customers related to room cleanliness. Based on this new information, Romano revised its estimate downward to 40% that it would earn the quarterly bonus. • On June 30, Swanky notified Romano that, for the quarter ended, there were four complaints associated with room cleanliness, so Romano would receive the bonus. Two days later, Romano received all payments due for all services rendered in the second quarter, including the bonus Romano estimates any variable consideration on the expected value of the consideration it expects to receive. Prepare the required journal entry for Romano Services on April 30th, May 30th, June 30th

The average weight of American adults increased by about 10 pounds in the 1990s. In November of 2004, it was reported that U.S. airlines spent $275 million more in fuel costs to transport this additional weight. Under what circumstances would this increased cost be an externality of obesity, and under what circumstances would it not be an externality?