Marvin’s Milk Farm produces milk and sells it in a perfectly competitive market at $3 per bottle. The following table shows Marvin's weekly total and marginal product schedules, using labor and capital. Assume that labor and capital may be used independently; that is, one is not needed for the other factor to be productive. Therefore, the total amount of milk that Marvin's produces is obtained by adding together the amount of milk produced by labor and the amount of milk produced by capital. The table also shows total revenue and marginal revenue products (MRP) of labor and capital. Finally, assume that Marvin's Milk Farm is a factor price taker in the labor and capital in markets. Labor costs $36 per week, and capital costs $72 per week.

If Marvin’s Milk Farm wants to produce 70 bottles of milk per week, the least-cost combination of labor and capital is (1, 2, 3, or 4 units) of labor and (1, 2, 3, or 4 units) of capital.

The profit-maximizing combination of resources is (1, 2, 3, or 4 units) of labor and (1, 2, 3, or 4 units) of capital.

The profit-maximizing combination contains (the same amounts of labor and capital as, fewer units of labor and capital than, or more units of labor and capital than) the least-cost combination to produce 70 bottles of milk.

No essays or confusing explanations, please. Just answers.

The financial statement fraud case I decided to select was the Tesco accounting scandal, which took place in 2014. After analyzing the case and reading the chapter I realized that this cases involves 3 of the 5 earnings management techniques: revenue recognition, big-bath charges, and creative accounting.

            The primary technique used to report misleading results was the acceleration of future revenues into the current period in order to meet the earning expectations. This is an example of the “revenue recognition” type of earnings management because they “accelerate the recording of revenues to help meet analysts’ earnings projections” (Mintz & Morris, 2017). They overstated the profits/revenue “for the past six months by £250m” (Ruddick, 2014). The secondary technique used by Tesco was big bath. For years they had not written off or written down assets that lost value and so when they finally came clean on the revenue recognition abuses, they also adjusted assets to proper valuations and anticipated future expenses in one big bath write off called “restructuring.” The “playing with the timing of events” to accelerate revenues and expenses in order to make prior periods more attractive and concentrate all the bad news into one quarter that can pass and be forgotten is a form of creative accounting. Firms prefer to have all the bad news at once, say their apologies and then set up for better performance later. So, they “came clean” (due to whistleblower) and then decided to adjust assets and set up liabilities for the upcoming periods so that all the bad news would occur all at once and future periods would look good (and investors could settle back down and be happy again).

Question:

Based on the earnings management technique that you have identified, if you were an investigator conducting an audit of the company and if that was your hypothesis of what is occurring, what kinds of audit tests do you think you'd want to incorporate into your audit plan and what would you be looking for as confirmation that you are correct in your thinking?

5) In a perfectly competitive market the demand curve facing the INDIVIDUAL firm is:

6) Any profit maximizing firm will maximize its economic profit or minimize its economic loss where:

7) In monopolistic competition:

8) In an oligopoly

9) In the kinked demand curve model of an oligopoly:

10) In monopolistic competition:

Multiple-Step Income Statement

Instructions

Amount Descriptions

Income Statement

Instructions

Use the following information:

Required:

Amount Descriptions

Income Statement

Prepare a multiple-step income statement, including the revenue section and the cost of goods sold section, for Aeito’s Plumbing Supplies for the year ended December 31, 20--.

Income Statement Instructions

Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well as offering take-out and free home delivery services. The pizzeria’s owner has determined that the shop has two major cost drivers—the number of pizzas sold and the number of deliveries made.

The pizzeria’s cost formulas appear below:

In November, the pizzeria budgeted for 2,010 pizzas at an average selling price of $14 per pizza and for 210 deliveries.

Data concerning the pizzeria’s actual results in November were as follows:

Required:

1. Complete the flexible budget performance report that shows both revenue and spending variances and activity variances for the pizzeria for November. (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.)

Part A

Each of the following accounts from The Furst Company has a normal balance as of December 31, 2016, the end of Furst’s first year of operations.

Cash $100                      Common stock                                  $500

Accounts receivable                        300                        Dividends 100

Inventory 250                        Sales revenue 800

Property, plant, and equip 750                        Selling expenses                               300

Accounts payable 150 Administrative expenses 50

Notes payable 400

Directions:

Prepare a trial balance for Furst Company as of December 31, 2016.

Part B

Lampe Distributors was formed to serve as a distributor of fine furnishings imported from overseas manufacturers. Assume the following trial balance was prepared as of December 31, 2016, at the end of Lampe’s first year of operations.

LAMPE DISTRIBUTORS

Unadjusted Trial Balance

December 31, 2016

Debit                     Credit

Cash                                                      $23,000

Accounts receivable 4,500

Buildings 72,000

Equipment 20,500

Inventory 38,000

Accounts payable $5,500

Notes payable                                                                  47,750

Common stock 42,000

Dividends 6,000

Sales revenue 280,250

Wage expense 100,000

Selling expenses 31,000

Rent expense 23,000

Administrative expenses 15,750

Tax expense 23,000

Totals $356,750             $375,500

It is apparent that there is an error somewhere in the company’s accounts since the sum of the debit

account balances ($356,750) does not equal the sum of the credit account balances ($375,500). After

further research, we learn the following:

1. A cash purchase of $20,000 in inventory, occurring near year-end, was not recorded.

2. By mistake, $5,000 that should have been recorded as Accounts Payable was recorded as Notes

Payable.

3. A credit of $26,000 was accidentally recorded in the Wage Expense account rather than in Sales

Revenue.

4. A sale on account of $18,750 was correctly recorded as Sales Revenue, but the other side of the

entry was mistakenly never recorded.

Directions:

a. Which of the four errors, if any, is the reason that the trial balance is not in balance?

b. Which of the errors, if any, must be corrected?

c. Prepare a corrected trial balance.

Below are 4 adjusting journal entries (AJEs) that another firm, Wolverine, failed to make at year end. For each entry NOT MADE indicate the effect that each omitted AJE would have on the Wolverine’s financial statements for the year ended December 31, 2018. Use O for overstated, U for understated, and NE for no effect. Organize your answer in tabular form, using the column headings shown below and provided in the worksheet titled “Part A, Question B.”

Example 0: At year end, employees earned $4,000 in wages which will be paid on the next payroll date in January 2019. The adjusting journal entry would have been:

Compensation Expense (+E, -NI, -R/E, -SE) 4,000 Salaries Payable (+L)

4,000
If that adjustment was not made expenses and liabilities would be understated by $4,000. If

expenses are understated, then Net Income and Stockholders’ Equity will be overstated.

Income Statement Balance Sheet

Adjusting Revenue - Expense = Net Income Assets = Liabilities + Stockholders’ Equity entry
Example 0 NE U O NE U O

AJE #1: At year end, Wolverine failed to make the below journal entry to record depreciation of $1,000.

Depreciation Expense 1,000
Accumulated Depreciation 1,000

AJE #2: At year end, Wolverine failed to make a journal entry to record that Wolverine performed $3,000 in services that had been paid for in advance by the customer.

Unearned Revenue 3,000
Service Revenue 3,000

AJE #3: At year end, Wolverine failed to make a journal entry to record that Wolverine had some debt that had accrued interest of $800.

Interest Expense 800
Interest Payable 800

AJE #4: At year end, Wolverine failed to make a journal entry to recognize that a tenant owed Wolverine rent for the month of December. The rent is due to Wolverine in January of 2019.

Rent Receivable 800 Rent Revenue

800

1.

You manage a local tex-mex restaurant called “Garage Taco Bar.” You have recently switched all of your business to takeout due to the pandemic and you want to make sure you are still making enough money to stay open. The owner says that to keep everything running you need to be making more than $3,000 per day in takeout orders. Looking back on your records you take a random sample of 8 days and determine the following sample statistics. Assume the daily revenue is approximately normal.

Garage Taco Bar daily revenue: x1=$3,103, s1=$154

You decide you should run a hypothesis test to determine if you should stay open.

a. Define the hypotheses for this test. Is this a one-tailed or two-tailed test? If one-tailed, is it upper- or lower-tailed?

b. Give a rejection region for this test based on an α=0.05 significance level.

c. Solve for the test statistic and interpret the results of the test.

2. One of your workers has a friend at a competing restaurant “Dos Rios,” and they tell you that they have also thought about closing. You find that Dos Rios has also randomly sampled days to estimate their daily revenue. Your worker’s friend gives you the following statistics based on 10 randomly sampled days. Assume the distribution is approximately normally distributed, and that the true variance is equal to that of “Garage”.

Dos Rios daily revenue: x2= $2,791 S2= $151

You go to the owner with this information, and they tell you that knowing this, “Garage Taco Bar” should stay open if they are making significantly more money per day than Dos Rios.

You decide you need to run a new hypothesis test.

a. Define the parameter of interest in this test, and calculate the point estimate.

b. Find a rejection region for this test based an α=0.05 significance level and calculate the test statistic.

c. Interpret the results of the test.