The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers it uses in its budgeting and performance reports—the number of courses and the total number of students. For example, the school might run two courses in a month and have a total of 63 students enrolled in those two courses. Data concerning the company’s cost formulas appear below:

For example, administrative expenses should be $3,800 per month plus $40 per course plus $4 per student. The company’s sales should average $860 per student.

The company planned to run four courses with a total of 63 students; however, it actually ran four courses with a total of only 61 students. The actual operating results for September were as follows:

Required:

Prepare a flexible budget performance report that shows both revenue and spending variances and activity variances for September. (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.)

This mini-case takes us back to b-school grads Sally and Dave. You’ll perhaps recall that they’re thinking of buying a condo which will cost $100,000. In Chapter 4, Sally and Dave were planning to finance the condo purchase without borrowing. In this case we consider the case where they take out a mortgage to finance the investment.

The point of this case is to get you to think about the effect of financing on returns. It should also lead to a discussion of the relation between financing and risk.

Case facts

Here are the facts:

• Sally and Dave intend to take a 10-year mortgage for $50,000. The mortgage has interest rate of 8%, compounded annually. Repayment of the mortgage is in equal annual payments of interest and principal.
• Sally and Dave can rent out the condo for $2,000 per month. They’ll have to pay property taxes of $1,500 annually and they’re figuring on additional miscellaneous expenses of $1,000 per year.
• All the income from the condo has to be reported on their annual tax return. Currently Sally & Dave have a tax rate of 30%, and they think this rate will continue for the foreseeable future.
• The full cost of the condo can be depreciated over 25 years on a straight-line basis.
• To calculate the return from owning the condo, Sally and Dave assume that they will sell the condo at the end of 10 years for $100,000. Any gain over book value on the sale is, of course, taxable.

1. Use the template for this case to calculate Sally and Dave’s IRR on their equity investment. (Terminology: Since the cost of the condo is $100,000 and since they’re borrowing $50,000, the equity investment is $50,000.) Remember that for income tax purposes depreciation and interest on the mortgage are expenses, but that repayment of mortgage principal is not an expense. Use Excel’s IPMT and PPMT functions (see explanation below).
2. Suppose that Sally and Dave take a $50,000 mortgage with a 25-year term. They still plan to sell the apartment at the end of year 10. At this date they will repay the remaining mortgage principal with a 2% penalty for early repayment. Calculate the equity IRR.
3. How much is the mortgage interest payment in year 2
4. How much is the mortgage interest payment in year 3
5. How much is the total mortgage payment annually?
6. How much is the terminal value in year 10
7. How much is IRR?
8. If term is 25 years for mortgage how much is the IRR?

7.How do institutions (school, the legal system, the government, etc.) enforce class differences? Give at least one example of how an institution reinforces class inequality.

8.What role do you think race plays in intergenerational mobility? Do you expect to end up in a higher income class than your parents? Do you think this is true of white people in your generation?

9.Do you think the US can more accurately describe as a meritocracy or a caste society? What are the reasons you think so?

10.Do you think the COVID-19 crisis has confirmed Marx’s theory of class? What has the crisis exposed about the conflicting interests of workers and employers?

Brian just graduated from engineering school and landed a sweet job earning $59000 per year. He expects his salary to increase by 6.0% per year. At the end of each year he will invest 10% of his salary into an investment account that earns 6.9.% per year compounded annually. He hopes to retire in 45 years. If all goes according to his plan, how much money will be in his retirement account when he retires? $  

After working for almost a year Brian decides he would rather spend Christmas in Mexico then put money in his retirement account. Each year he finds something else he wants to do with his retirement money until 15 years have passed and he realizes he has zero savings. Sure enough his salary increased by exactly what he had predicted over 15 years. He vows to start putting 10% of his salary away each year from then on. If all goes according to plan how much will be in his account after 30 more years when he reaches the age he would like to retire?

Brian is sad when he realizes how far he has fallen behind in his retirement planning. He decides to buy a lottery ticket hoping that he can use the winnings to put him back on track for his original retirement prediction. How much does he need to win and invest at the end of his 15th year working in order to get back to where he would have been if he had followed his original plan?

Trout Swimming School uses a sales journal, purchases journal, cash receipts journal, cash payments journal and a general journal. The business also maintains subsidiary ledgers for accounts receivable and accounts payable, in addition to the related control accounts (ignore GST). The relevant account balances as of December 31, 2019 were as follows.

The accounts receivable and accounts payable subsidiary ledger balances were as follows.

.

The following transactions occurred during the first quarter of 2020.

Required

1. Enter the first quarter’s transactions in the appropriate journals. Refer to the provided Chart of Accounts for the appropriate account names.
2. Prepare a trial balance as at March 31, 2020.

Fifteen students from Poppy High School were accepted at Branch University. Of those students, six were offered academic scholarships and nine were not. Mrs. Bergen believes Branch University may be accepting students with lower ACT scores if they have an academic scholarship. The newly accepted student ACT scores are shown here.

Academic scholarship: 25, 24, 23, 21, 22, 20
No academic scholarship: 23, 25, 30, 32, 29, 26, 27, 29, 27

Part A: Do these data provide convincing evidence of a difference in ACT scores between students with and without an academic scholarship? Carry out an appropriate test at the α = 0.02 significance level. (5 points)

Part B: Create and interpret a 98% confidence interval for the difference in the ACT scores between students with and without an academic scholarship. (5 points)

The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers it uses in its budgeting and performance reports—the number of courses and the total number of students. For example, the school might run two courses in a month and have a total of 63 students enrolled in those two courses. Data concerning the company’s cost formulas appear below: Fixed Cost per Month Cost per Course Cost per Student Instructor wages $ 2,940 Classroom supplies $ 270 Utilities $ 1,220 $ 55 Campus rent $ 4,800 Insurance $ 2,000 Administrative expenses $ 3,600 $ 42 $ 5 For example, administrative expenses should be $3,600 per month plus $42 per course plus $5 per student. The company’s sales should average $850 per student. The company planned to run four courses with a total of 63 students; however, it actually ran four courses with a total of only 57 students. The actual operating results for September appear below: Actual Revenue $ 50,650 Instructor wages $ 11,040 Classroom supplies $ 16,860 Utilities $ 1,850 Campus rent $ 4,800 Insurance $ 2,140 Administrative expenses $ 3,509 Required: Prepare a flexible budget performance report that shows both revenue and spending variances and activity variances for September. (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.)

Brian just graduated from engineering school and landed a sweet job earning $63000 per year. He expects his salary to increase by 4.1% per year. At the end of each year he will invest 10% of his salary into an investment account that earns 6.7.% per year compounded annually. He hopes to retire in 45 years. If all goes according to his plan, how much money will be in his retirement account when he retires? $  

After working for almost a year Brian decides he would rather spend Christmas in Mexico then put money in his retirement account. Each year he finds something else he wants to do with his retirement money until 15 years have passed and he realizes he has zero savings. Sure enough his salary increased by exactly what he had predicted over 15 years. He vows to start putting 10% of his salary away each year from then on. If all goes according to plan how much will be in his account after 30 more years when he reaches the age he would like to retire? $  

Brian is sad when he realizes how far he has fallen behind in his retirement planning. He decides to buy a lottery ticket hoping that he can use the winnings to put him back on track for his original retirement prediction. How much does he need to win and invest at the end of his 15th year working in order to get back to where he would have been if he had followed his original plan? $