There are 750,000 residents in a city. Based on a government poll, they fall within three groups regarding their willingness to pay for the construction of a park.

- 200,000 of the residents are not willing to pay for the park at all,

- 250,000 residents are willing to pay $12,

- 300,000 are willing to pay $100.

The cost of the park will be $15 million. Should it be built? Why or why not?

Would this answer change if the only way to pay for it is to divide the cost equally across each of the 750,000 residents? Why or why not?

SUBJECT: AUDIT & ASSURANCE

Forecast Financial Statements

On your second day at AA’s head office, you have been given the forecast financial statements for the full year to 30 June 2020, as well as the previous two years’ audited results.

Aussie Airlines: Consolidated Income Statement (Selected) Year Ended 30th June
Currency AUD Millions (figures are rounded)

Aussie Airlines: Consolidated Balance Sheet (Selected) As at 30th June
Currency AUD Millions (figures are rounded)

QUESTION: After discovering that Aussie Airlines is a going concern, select one material account from AA’s Balance Sheet and one material account from the Income Statement and prepare a brief plan for auditing each account. Give particular attention to the following:

1. An assessment of the audit risk for the account, given the information in this case study and your assumptions.

2. The relevant/significant audit assertions for this account.

3. Name two controls that you would expect management to implement for this account. How would you test these controls.

4. Describe two substantive testing procedures that you would perform in relation to this account to address the relevant/significant assertions.

1. In general, the marginal cost curve is U-shaped as you learned in lectures and the textbook. However, exception exists. Please provide one particular industry as an example to illustrate that MC is not U-shaped. Explain briefly the shape of MC in the industry. 2. Engineers at a national research laboratory built a prototype automobile that could be driven 180 miles on a single gallon of gasoline. They estimated that in mass production the car would cost $40,000 per unit to build. The engineers argued that Congress should force U.S. automakers to build this energy-efficient car. In your opinion, is energy efficiency the same thing as economic efficiency? Please explain your opinion and state whether you support it or not.

A fire insurance company thought that the mean distance from a home to the nearest fire department in a suburb of Chicago was at least 4.7 miles. It set its fire insurance rates accordingly. Members of the community set out to show that the mean distance was less than 4.7 miles. This, they thought, would convince the insurance company to lower its rates. They randomly identified 64 homes and measured the distance to the nearest fire department from each. The resulting sample mean was 4.4. If σ = 2.4 miles, does the sample show sufficient evidence to support the community's claim at the α = 0.05 level of significance?

A.) Conduct a hypothesis test using the classical approach.

B.) Conduct a hypothesis test using the p-value approach.

1. You live 20 miles away from your job, where you work five days per week (except for a two-week vacation every year). Your car gets 35 miles per gallon, on average.
   1. If the average price per gallon of gas is $2.50, how much should you budget for gas for your commute in your annual budget?
   2. You are considering a new job that is 30 miles from where you live. How much more will your commute cost you each year?
   3. If you take the new job and the price of gas rises to $3.00 per gallon, how much more will your commute cost you each year?

A fire insurance company thought that the mean distance from a home to the nearest fire department in a suburb of Chicago was at least 4.7 miles. It set its fire insurance rates accordingly. Members of the community set out to show that the mean distance was less than 4.7 miles. This, they thought, would convince the insurance company to lower its rates. They randomly identified 64 homes and measured the distance to the nearest fire department from each. The resulting sample mean was 4.4. If σ = 2.4 miles, does the sample show sufficient evidence to support the community's claim at the α = 0.05 level of significance?

A.) Conduct a hypothesis test using the classical approach.

B.) Conduct a hypothesis test using the p-value approach.

Continental Railroad decided to use the high-low method and operating data from the past six months to estimate the fixed and variable components of transportation costs. The activity base used by Continental Railroad is a measure of railroad operating activity, termed "gross-ton miles," which is the total number of tons multiplied by the miles moved.

Determine the variable cost per gross-ton mile and the total fixed cost.

Stan Moneymaker has been shopping for a new car. He is interested in a certain? 4-cylinder sedan that averages

29 miles per gallon. But the sales person tried to persuade Stan that the? 6-cylinder model of the same automobile only costs $2,500 more and is really a? "more sporty and? responsive" vehicle. Stan is impressed with the zip of the?6-cylinder car and reasons that ?$2,500 is not too much to pay for the extra power. How much extra is Stan really paying if the? 6-cylinder car averages 20 miles per? gallon? Assume that Stan will drive either automobile 103,000

?miles, gasoline will average ?$3.17 per? gallon, and maintenance is roughly the same for both cars. State other assumptions you think are appropriate.

a) Identify the claim: state the null and alternative hypotheses. b) Determine the test: left-tailed, right-tailed, or two-tailed. c) Identify the degree of freedom and determine the critical value. d) Graph your bell-shaped curve and label the critical value. e) Find your standardized test statistic ? and label it on your graph. f) Decide whether to reject or fail to reject the null hypothesis. g) Interpret your result.

A trucking firm suspects that the mean life of a certain tire it uses is less than 35,000 miles. To check the claim, the firm randomly selects and tests 18 of these tires and gets a mean lifetime of 34,350 miles with a standard deviation of 1200 miles. At α = 0.05, test the trucking firm's claim.