A researcher is interested in heart rates of university students. The researcher randomly selects 52 students from a class they are teaching and measures the students’ heart rates. The data obtained is in the file “Heart Rates.csv”.

1. What is the target population? What is the study population? What is an individual?

2. Is this an observational study or an experiment?

3. The tools you have learned for doing statistical inference require that certain assumptions be met. Check whether these assumptions are satisfied for this dataset.

4. A heart rate of 70 beats per minute (bpm) is considered typical. What type of statistical test is appropriate for this setting? Test the hypothesis that the average heart rate of students in this class is typical. Be sure to include all three steps.

5. Give a 95% confidence interval for the average heart rate of students in the class.

6. Imagine that we know the population standard deviation of heart rates in the class. What type of inference procedure would you use if you had this extra information? How would you expect the margin of error to change?

7. In part 4, you found a statistically significant difference between the mean heart rate of students in the class and a typical heat rate of 70 beats per minute. Based on your answer to part 5, does this difference appear to be practically significant?

Heart Rate Data

Two different forecasting techniques (F1 and F2) were used to forecast demand for cases of bottled water. Actual demand and the two sets of forecasts are as follows:

a. Compute MAD for each set of forecasts. Given your results, which forecast appears to be more accurate? (Round your answers to 2 decimal place.)

(Click to select)  F2  F1  None  appears to be more accurate.

b. Compute the MSE for each set of forecasts. Given your results, which forecast appears to be more accurate? (Round your answers to 2 decimal places.)

(Click to select)  F2  F1  None  appears to be more accurate.

c. In practice, either MAD or MSE would be employed to compute forecast errors. What factors might lead a manager to choose one rather than the other?

Either one might already be in use, familiar to users, and have past values for comparison. If    (Click to select)  tracking signals  control charts  are used, MSE would be natural; if  (Click to select)  control charts  tracking signals  are used, MAD would be more natural.

d. Compute MAPE for each data set. Which forecast appears to be more accurate? (Round your intermediate calculations to 2 decimal places and and final answers to 2 decimal places.)

(Click to select)  F2  F1  None  appears to be more accurate.

John Thompson, CEO of NewVenture, Inc., seeks to raise $5 million in equity for his early
stage venture in January 2016. NewVenture is a subscription-based software company that has
experienced 75% revenue growth over the last year. The company generated $2.5 million of
revenue in 2015, with an operating loss of ($450,000). Thompson projects that NewVenture
will achieve $30 million in revenue by 2020. Samantha Jones of Gorsuch Capital is considering
an investment in January 2016, offering pre-money valuation of $14.75 million.
a. What is the post-money valuation of NewVenture?
b. What share of the company will Samantha Jones require?
c. The company has 1,000,000 shares outstanding before the investment. How many new
shares should she purchase, and at what price per share?

Samantha Jones believes Thompson will have to grant generous stock options in addition to
the salaries projected in his business plan. From experience, she thinks management should
have the ability to own at least a 15% share of the company in the form of options by the end
of year 5.

f. What share of the company should Samantha insist on getting today if an option pool is
created after her investment? (in order to ensure that she will still maintain the same
ownership level noted above)
g. How many shares are allocated to Jones and the option pool in this case?

Alpha and Beta are divisions within the same company. The managers of both divisions are evaluated based on their own division’s return on investment (ROI). Assume the following information relative to the two divisions:

*Before any purchase discount.

Managers are free to decide if they will participate in any internal transfers. All transfer prices are negotiated.

Required:

1. Refer to case 1 shown above. Alpha Division can avoid $3 per unit in commissions on any sales to Beta Division.

a. What is the lowest acceptable transfer price from the perspective of the Alpha Division?

b. What is the highest acceptable transfer price from the perspective of the Beta Division?

c. What is the range of acceptable transfer prices (if any) between the two divisions? Will the managers probably agree to a transfer?

2. Refer to case 2 shown above. A study indicates that Alpha Division can avoid $3 per unit in shipping costs on any sales to Beta Division.

a. What is the lowest acceptable transfer price from the perspective of the Alpha Division?

b. What is the highest acceptable transfer price from the perspective of the Beta Division?

c. What is the range of acceptable transfer prices (if any) between the two divisions? Would you expect any disagreement between the two divisional managers over what the exact transfer price should be?

d. Assume Alpha Division offers to sell 66,000 units to Beta Division for $44 per unit and that Beta Division refuses this price. What will be the loss in potential profits for the company as a whole?

3. Refer to case 3 shown above. Assume that Beta Division is now receiving an 5% price discount from the outside supplier.

a. What is the lowest acceptable transfer price from the perspective of the Alpha Division?

b. What is the highest acceptable transfer price from the perspective of the Beta Division?

c. What is the range of acceptable transfer prices (if any) between the two divisions? Will the managers probably agree to a transfer?

d. Assume Beta Division offers to purchase 17,000 units from Alpha Division at $56.75 per unit. If Alpha Division accepts this price, would you expect its ROI to increase, decrease, or remain unchanged?

4. Refer to case 4 shown above. Assume that Beta Division wants Alpha Division to provide it with 62,000 units of a different product from the one Alpha Division is producing now. The new product would require $27 per unit in variable costs and would require that Alpha Division cut back production of its present product by 31,000 units annually. What is the lowest acceptable transfer price from Alpha Division’s perspective?

Neve Commercial Bank is the only bank in the town of​ York, Pennsylvania. On a typical​ Friday, an average of 8 customers per hour arrive at the bank to transact business. There is one teller at the​ bank, and the average time required to transact business is 3 minutes. It is assumed that service times may be described by the negative exponential distribution. A single line would be​ used, and the customer at the front of the line would go to the first available bank teller. If a single teller is​ used:

f) CEO Benjamin Neve is considering adding a second teller? (who would work at the same rate as the? first) to reduce the waiting time for customers. He assumes that this will cut the waiting time in half.

g) If a second teller is? added, the average time a customer spends in the queue? = ____ minutes?

h) If a second teller is? added, the average number of customers in the queue? =??____ customers.

I) If a second teller is? added, the average time a customer spends in the system? = _____minutes

j) If a second teller is? added, the average number of customers in the system? =?? customers?

Problem 21-18 Statement of cash flows; indirect method [LO21-4, 21-8]

The comparative balance sheets for 2018 and 2017 and the income statement for 2018 are given below for Arduous Company. Additional information from Arduous’s accounting records is provided also.

Additional information from the accounting records:

1. Investment revenue includes Arduous Company’s $23 million share of the net income of Demur Company, an equity method investee.
2. Treasury bills were sold during 2018 at a gain of $4 million. Arduous Company classifies its investments in Treasury bills as cash equivalents.
3. A machine originally costing $100 million that was one-half depreciated was rendered unusable by a flood. Most major components of the machine were unharmed and were sold for $20 million.
4. Temporary differences between pretax accounting income and taxable income caused the deferred income tax liability to increase by $18 million.
5. The preferred stock of Tory Corporation was purchased for $40 million as a long-term investment.
6. Land costing $61 million was acquired by issuing $31 million cash and a 14%, four-year, $30 million note payable to the seller.
7. The right to use a building was acquired with a 15-year lease agreement; present value of lease payments, $97 million. Annual lease payments of $8 million are paid at the beginning of each year starting January 1, 2018.
8. $75 million of bonds were retired at maturity.
9. In February, Arduous issued a stock dividend (10.0 million shares). The market price of the $5 par value common stock was $7.50 per share at that time.
10. In April, 1 million shares of common stock were repurchased as treasury stock at a cost of $24 million.

Required:
Prepare the statement of cash flows for Arduous Company using the indirect method. (Amounts to be deducted should be indicated with a minus sign. Do not round your intermediate calculations. Enter your answers in millions (i.e., 10,000,000 should be entered as 10.).)

ABC Ltd is a wholesaler of furniture which has been in operation for ten years. It buys furniture from five major manufacturers and sells them to a range of customers. The company currently has a customer base of over 500 customers most of which are credit customers. The receivables balance comprises customers owing up to $2,000,000 to smaller balances of about $10,000, all with many different due dates for payments and credit limits. The level of receivables is considerably higher than last year and there are concerns about the creditworthiness of some customers.

The company has only recently computerised its operations including its accounting system. Manual invoices, receipts and cheques have been replaced with computer-generated documents. The sub-ledgers are now maintained in the accounting software which have facilitated more timely generation of statements much to the delight of customers. The sales process is initiated by a Purchase Order from the customer which is used to raise a system generated Sales Invoice and Delivery Slip. A copy of the Delivery Slip is given to the Security at the gate for logging and check off to allow passage of goods through the gate; another copy of the Delivery Slip is given for the customer to sign and then returned to the Sales Dept. All information is stored on ABC Ltd’s computer systems. There is no backup of data off site. The client’s staff are helpful although they cannot confirm completeness of documentation for the system.

You are the audit senior in charge assigned for ABC Ltd’s audit and you are in the process of planning the current year’s audit. You are contemplating the changes in the client’s audit environment and the impact that these changes will have on the audit risk and the audit methodology. Your audit assistant is curious why it is necessary to plan the audit from one year to the next. Why not just copy the previous year’s workpapers?

(c) State the approach for auditing in a computerized environment which you are using to design tests for testing controls over processing of data. Explain the reason for your choice, highlighting the benefits and drawbacks. State any assumption made as to resource availability.

(d) Explain how the choice of approach in (c) above is likely to impact audit risk? Identify the audit risk component which is most likely to be affected.

3. (a) Your audit plan notes that you will be testing the system of internal controls for the ‘three Es’. Explain the ‘three Es’ and the impact these will have on the audit if positive and if negative.

(b) State the audit procedure you will be using for the following:
i) To test the control over completeness of sales
ii) To test the accuracy and existence of receivables balances

(c) List the set of management assertions for “Sales” and “Accounts Receivable” which you will be testing.

SaveMor Pharmacies
A common practice now is for large retail pharmacies to buy the customer base from smaller, independent pharmacies. The way this works is that the buyer requests to see the customer list along with the buying history. The buyer then makes an offer based on its projection of how many of the seller's customers will move their business to the buyer's pharmacy and on how many dollars of new business will come to the buyer as a result of the purchase. Once the deal is made, the buyer and seller usually send out a joint letter to the seller's customers explaining the transaction and informing them that their prescription files have been transferred to the purchasing company.
The problem is that there is no guarantee regarding what proportion of the existing customers will make the switch to the buying company. That is the issue facing Heidi Fendenand, an acquisitions manager for SaveMor Pharmacies. SaveMor has the opportunity to purchase the 6,780-person customer base from Hubbard Pharmacy in San Jose, California. Based on previous acquisitions, Heidi believes that if 70% or more of the customers will make the switch, then the deal is favorable to SaveMor. However, if 60% or less make the move to SaveMor, then the deal will be a bad one and she would recommend against it.
Quincy Kregthorpe, a research analyst who works for Heidi, has suggested that SaveMor take a new approach to this acquisition decision. He has suggested that SaveMor contact a random sample of 20 Hubbard customers telling them of the proposed sale and asking them if they will be willing to switch their business to SaveMor. Quincy has suggested that if 15 or more of the 20 customers indicate that they would make the switch, then SaveMor should go ahead with the purchase. Otherwise, it should decline the deal or negotiate a lower purchase price.
Heidi liked this idea and contacted Cal Hubbard, Hubbard's owner, to discuss the idea of surveying 20 randomly selected customers. Cal was agreeable as long as only these 20 customers would be told about the potential sale.
Before taking the next step, Heidi met with Quincy to discuss the plan one more time. She was concerned that the proposed sampling plan might have too high a probability of rejecting the purchase deal even if it was a positive one from SaveMor's viewpoint. On the other hand, she was concerned that the plan might also have a high probability of accepting the purchase deal when in fact it would be unfavorable to SaveMor. After discussing these concerns for over an hour, Quincy finally offered to perform an evaluation of the sampling plan.

Required Tasks:
1. (7 points) Using Minitab, compute the probability that the sampling plan will provide a result that suggests that SaveMor should reject the deal even if the true proportion of all customers who would switch is actually 0.70.
Provide Minitab output of probabilities here

2. (7 points) Compute the probability that the sampling plan will provide a result that suggests that SaveMor should accept the deal even if the true proportion of all customers who would switch is actually only 0.60.
Provide Minitab output of probabilities here

3. (6 points) Write a short report to Heidi outlining the sampling plan, the assumptions on which the evaluation of the sampling plan has been based, and the conclusions regarding the potential effectiveness of the sampling plan. The report should make a recommendation about whether Heidi should go through with using the sampling plan.
Provide your short, well-written and professional report here

An insurance company has the business objective of reducing the amount of time it takes to approve applications for life insurance. The approval process consists of underwriting, which includes a review of the application, a medical information bureau check, possible requests for additional medical information and medical exams, and a policy compilation stage in which policy pages are generated and sent for delivery. The ability to deliver the policies to customers in a timely manner is critical to the profitability of the service. During a period of one month, a random sampling of 27 approved policies is selected, and the total processing time, in days, is collected. These data are stored in the table called Insurance.

73 19 16 64 28 28 31 90 60 56 31 56 31 56 22 18 45 48 17 17 17 91 92 63 50 51 69 16 17

A.         In the past, the mean processing time was 45 days. At the 0.05 level of significance, is there evidence that the mean processing time has changed in 45 days?

B.         What assumption about the population distribution is needed to conduct the t-test?

C.         Construct a boxplot or a normal probability plot to evaluate the assumption made in (b).

D. Do you think that the assumption needed in order to conduct the t-test in(a) is valid? Explain.

Use Excel to solve part C