High Country, Inc., produces and sells many recreational products. The company has just opened a new plant to produce a folding camp cot that will be marketed throughout the United States. The following cost and revenue data relate to May, the first month of the plant’s operation:

Management is anxious to assess the profitability of the new camp cot during the month of May.

Required:

1. Assume that the company uses absorption costing.

a. Calculate the unit product cost.

b. Prepare an income statement for May.

2. Assume that the company uses variable costing.

a. Calculate the unit product cost.

b. Prepare a contribution format income statement for May.

You are working on your second project as an equity research intern at a bulge investment bank. Your focus is in retail space, especially in the health and fitness sector. Currently, you are gathering information on a fast-growing chain fitness company called LuluYoga. You are interested in calculating the free cash flow of the firm. LuluYoga offers yoga classes in several major cities in the United States. Two major revenue resources are selling workout gear and membership passes for class access. Assume at the beginning of year 2016, LuluYoga has zero inventory. In year 2016, LuluYoga purchased 10,000 yoga mats at a price of $10 each. The company sells 6,000 mats at a price of $15 in year 2016 and sells the remaining at a price of $20 in year 2017. In year 2016, LuluYoga sells 1,000 membership passes for $2,000 each. 80% of the classes purchased were used in 2016 and the rest are used in 2017.The yoga master’s compensation to teach classes are $300K in year 2016 and $200K in year 2017. LuluYoga pays corporate tax of 35%.

Q1. What is the change of NOWC in year 2016?

In the basic Solow model, an economy in a steady state has an economic growth rate equal to

a. The depreciation rate b. The savings rate c. The marginal product of capital d. Zero

2. Long time lags in the implementation of monetary policy a. Reduce the ability of the Fed to manage the economy b. Enhance the ability of the Fed to manage the economy c. Reduce the monetary base d. Increase the monetary base

3. An important principle of classical economics is that a. Workers and firms have rational expectations b. Wage and price stickiness explains business cycles c. The market tends towards instability and high unemployment d. The short-run is more important than the long-run

4. An economy’s capital stock rises when a. Immigration is high b. Interest rates are high c. The savings rate is low d. Investment exceeds depreciation

5. Overall, for the last century, real GDP in the United States has grown a. More rapidly than population growth b. More slowly than population growth c. At the same rate as population growth d. At a negative rate

2. Are you an optimist? The General Social Survey asked 1373 men and 993 women in the United States whether they agreed that they were generally optimistic about the future. The results are presented in the flowing table.

1. Compute the value of the chi square statistics.

2. Can you conclude that the gender and the option on optimism are independent? using the α=0.05 level of significance

1. Type Artificial hips: Artificial hip joints consist of a ball and socket. As the joint wears, the ball (head) becomes rough. Investigators performed wear tests on metal on metal artificial hip joints. Joints with several different diameters were tested. The following table presents measurements of head roughness (in nanometers).

1. Construct an ANOVA table

2. Can you conclude that mean roughness varies with diameter? Use the α=0.01 level of significance?

Santa's Christmas Tree Farm, a private company reporting under ASPE, grows pine, fir, and spruce trees. The company cuts and sells the trees for cash during the Christmas season. Most of the trees are exported to the United States. The remaining trees are sold to local tree lot operators.

It normally takes about 12 years for a tree to grow to a good size. The average selling price for a mature tree is $48. The owner of Santa's Christmas Tree Farm believes that the company should recognize revenue at the rate of $4 a year ($48/12 years) for each tree that it cuts. The biggest cost of this business is the cost of fertilizing, pruning, and maintaining the trees over the 12-year period. These costs average $40 a tree and the owner believes they should also be spread over the 12-year period.

Do you agree with the proposed revenue recognition policy for Santa's Christmas Tree Farm? Explain why or why not. Use the revenue recognition criteria to explain your argument for when the revenue should be recognized for this tree-farming business. Also, explain how the costs of fertilizing, pruning, and maintaining the trees should be recorded.

Read the following case. Apply your knowledge of the five components of the 2013 COSO IC framework as well as risk, internal controls, and any other Chapter 6 [Parts 1 & 2] topics to speculate in detail what various employees of Volkswagen could have done to prevent this internal control disaster from happening.

In an effort to circumvent various state and national clean air standards, automobile manufacturer Volkswagen installed software on a variety of automobiles equipped with diesel engines that was designed to detect when the vehicle was undergoing an emissions drive cycle test. When the software detected a set of parameters consistent with emissions testing, it would switch into a low-emissions operating mode. In total, more than 11 million Audi, Porsche, and Volkswagen diesel vehicles worldwide were equipped with the "cheater" software. When discovered by the U.S. Environmental Protection Agency and the California Air Resources Board in 2014, Volkswagen admitted to the wrongdoing. To date, Volkswagen has agreed to spend up to $22 billion in the United States to settle claims from consumers, regulators, and dealers. In January 2017, six Volkswagen executes were arrested for their part in the scandal.

Assume that Seminole, Inc., considers issuing a Singapore dollar?denominated bond at Its present coupon rate of 7.1 percent, even though it has no incoming cash flows to cover the bond payments. It is attracted to the low financing rate, since U. S. dollar-denominated bonds issued in the United States would have a coupon rate of 12 percent. Assume that either type of bond would have a four­?year maturity and could be issued at par value. Seminole needs to borrow $10 million. Therefore, it will either issue U. S. dollar denominated bonds with a par value of $10 million or bonds denominated in Singapore dollars with a par value of S$20 million. The spot rate of the Singapore dollar is $.50. Seminole has forecasted the Singapore dollar’s value at the end of each of the next four years, when coupon payments are to be paid:

                        End of Year                 Exchange Rate of Singapore Dollar

                                 1                                       $.52

                                 2                                        .56

                                 3                                        .58

                                 4                                        .53

Determine the expected annual cost of financing with Singapore dollars. Should Seminole, Inc., issue bonds denominated in U.S. dollars or Singapore dollars? Explain.

On May 14, 2020, the spot rate for Australian Dollars was 0.7306 USD/ 1 AUD.  The 180-day (6 month) forward rate quoted in the market was for 0.7340 USD/1 AUD and the risk-free rate on 180-day securities was 2.90 percent APR for United States LIBOR and 1.96 percent APR for Australian LIBOR.  (LIBOR rates are widely used as a reference rate for financial instruments.)  Assume that the US is the home country.

1. Are the quotes for AUD above relative to the USD direct or indirect quotations? Circle one:     direct or indirect
2. Is the USD expected to appreciate or depreciate relative to the AUD given the forward rate quoted above?   Circle one:     appreciate or depreciate
3. What is the implied forward rate if interest rate parity holds in this case?  Does interest rate parity hold here?  Use 4 decimal places for accuracy.   Implied forward rate ________
4. Which country’s risk free security offers the highest expected $ profit for a US investor, or are the $ profits the same?  Determine the $ profit for both investments using a beginning amount of 1,000 USD.   US LIBOR $ profit                             ________     Australian LIBOR $ profit                ________

ROULETTE is a casino game where a numbered wheel spins and a steel ball falls into a location marked by one particular colored number. In the United States there are 18 locations colored red, 18 locations colored black and 2 locations colored green. The red and black locations are numbered 1-36 and the green locations are labeled "0" and "00" as shown in the picture to the right. The wheel therefore has 38 locations in total. Note that the odd and even values are not evenly distributed within each color. For any particular wager a player makes, an expected profit can be calculated from: Expected profit = (Prob. of winning) x (winning payout amount) - wager

(c) Another potential wager is to "bet on odd" which has the same payout as betting on black, but wins only when the ball lands in a location with an odd number of either color. If the ball lands on an even numbered location or a green space you lose your wager and the payout would be $0. What is the expected profit from placing two bets on a single spin - $17 on black and $19 on odd? (round to closest penny)