Note On Lead User Research describes how the potential of alternative uses of research can be determined methodically. Lead Users are defined as consumer groups who lead with respect to cutting edge applications of important markets and technical trends. Stages of a Lead User study are discussed which include project planning, trends/needs identification, preliminary concept generation, and final concept generation.

Questions

What are the characteristics of Lead Users?

What are the three types of Lead Users?

What resource commitments are required for the level of innovation that will support the alternative market?

How can Stage II: Trends/Needs Identification be conducted in a quantitative and scientific fashion?

Why is ‘Testing the Concepts’ not a stage of the Lead User Study?

"The rules of engagement for running a company that is people-based like Starbucks, and so many other companies: you just can not [sic] continue to leave your people behind and only focus on shareholder value," CEO Howard Schultz told CNN's Poppy Harlow (Wallace, 2014).

• Identify 3 practices, policies, or organizational design assumptions from the Kauffman report and directly correlate them to any current initiative of Starbucks.
• Explain how each practice, policy, or organizational design element has enhanced the development of an entrepreneurial/leadership/innovation-oriented mindset for Starbucks and its employees.
• Feel free to offer suggestions for different approaches that Starbucks may want to consider in the future.

Two inventors, recently organized as Innovation, Inc., consult you regarding a planned new product.They have estimates of the costs of materials, labor, overhead, and other expenses for 2016 but need to know how much to charge for each unit to earn a profit in 2016 equal to 15% of their estimated total long-term investment of $560,000 (ignore income taxes).

Their plans indicate that each unit of the new product requires the following:

Major items of production overhead would be annual rent of $65,044 for a factory building, $40,124 rent for machinery, and $30,380 of indirect material. Other production overhead is estimated to be $326,592. Selling expenses are an estimated 30% of total sales, and non-factory administrative expenses are 20% of total sales.

The consensus at Innovation is that during 2016 10,000 units of product should be produced for selling and another 2,000 units should be produced for the next year's beginning inventory. Also, an extra 3,000 pounds of material will be purchased as beginning inventory for the next year. Because of the nature of the manufacturing process, all units started must be completed, so work in process inventories are negligible.

Required
a. Incorporate the above data into a schedule of estimated total manufacturing costs and compute the unit production cost for 2016.

Do not use negative signs with any of your answers.

b. Prepare an estimated income statement that would provide the target amount of profit for 2016.

c. What unit sales price should Innovation charge for the new product?

$Answer

Innovation Delivery Express Ltd (IDEL) leases trucks which it uses to deliver goods throughout Australia. IDEL has not yet adopted AASB 16 Leases. It classifies its leases as operating leases under AASB 117, which means it does not recognise lease assets and associated liabilities. The draft financial statements for the year ended 31 December apply AASB 117 and contain the following items:

All items are in $M
Truck Rent expense                       300
Profit before interest and tax           300
Interest expense                             100
Profit before tax                              200             

Total liabilities                                600
Total assets                                 1200

The accountant for IDEL is considering adopting AASB 16 Leases in the 2019 financial statements. She has estimated that the Truck rental expense would be replaced by depreciation expense of $160M and interest expense would increase by $170M. Also, IDEL would recognise a right of use asset of $800M and lease liability of $800M in its financial statements at the end of 2019.

The management of IDEL receive a bonus equal to 1% of before tax profit, provided a performance hurdle of 15% before tax return on investment is achieved.

The liabilities reported by IDEL include debentures payable with a debt covenant that restricts leverage to a maximum of 60% of total assets.

Required

Please label your responses.

a) Using information presented in the draft financial statements, calculate the following items BEFORE the application of AASB 16:

i) the interest coverage (EBIT/Interest expense)

ii) the before tax return on investment (profit before tax/total assets at the end of the year)

iii) the leverage ratio (total liabilities/total assets)

b) The amount of profit before tax and interest for 2019 of IDEL adopts AASB 16. (1 mark)

c) Calculate the following items if IDEL adopts AASB 16 in its 2019 financial statements:

i) the interest coverage (EBIT/Interest expense)

ii) the before tax return on investment (profit before tax/total assets at the end of the year)

iii) the leverage ratio (total liabilities/total assets)

d) According to agency theory, would the management of IDEL prefer to adopt AASB 16 Leases in its 2019 financial statements. Give reasons for your answer, drawing on the facts of the case and your analyses in parts a), b) and c) to support your answer. (8 marks

Analyzing and Interpreting Tax Footnote

Under Armour, Inc. reports total tax expense on its income statement for year ended December 31, 2010 of $40,442 and cash paid for taxes of $38,773.
The tax footnote in the company's 10-K filing, reports the following deferred tax information.
Deferred tax assets and liabilities consisted of the following (in thousands):

(a) Did Under Armour's deferred tax assets increase or decrease during the most recent fiscal year?
Under Armour's deferred tax assets Answerdecreasedincreased by $Answer

0.00 points out of 1.00

(thousands).
Which of the following best summarizes our interpretation of an increase in a company's deferred tax assets for the most recent year?

Deferred tax assets increased during the year, which means that the company reported more as a tax expense on its income statement than it paid in taxes.

Deferred tax assets generally arise when tax deductions are less than tax expense reported in the income statement. Because deferred tax assets increased, we can concluded that tax deductions were greater than expense.

Deferred tax assets increased during the year, which means that the company's taxable income was less than in the prior year.

Deferred tax assets increased during the year, which means that the company paid more taxes than it reported as the tax expense on its income statement.

(b) Did Under Armour's deferred tax liabilities increase or decrease during the most recent fiscal year?
Under Armour's deferred tax liabilities Answerdecreasedincreased by $Answer

0.00 points out of 1.00

(thousands).
Which of the following statements best describes the reason for the change in deferred tax liabilities during the most recent year?

The deferred tax liabilities increased during the recent year because they paid down their tax liability.

The deferred tax liabilities decreased during the recent year possibly because the company is now depreciating its fixed assets more for GAAP purposes than it is for tax purposes.

The deferred tax liabilities decreased during the recent year as a result of the reduction in its effective tax rate.

The deferred tax liabilities decreased during the recent year because the company's taxable income was less than in prior year.

(c) The company recorded a valuation allowance during the year. This allowance relates to foreign net operating tax losses. Which of the following statements appears to be false regarding the foreign net operating tax losses and the valuation allowance.

The company's tax returns have reported losses in foreign jurisdictions. As of the end of 2010, there were insufficient profits and the tax losses could not be used in the current period.

As of December 31, 2010, the company believed some of the deferred tax assets associated with foreign tax loss carryforwards would expire unused. Therefore, a valuation allowance was recorded against the company's net deferred tax assets.

An increase to a valuation allowance will decrease current year income.

An increase to a valuation allowance will increase current year income.

What proportion of the foreign net operating losses does the company believe will likely expire unused? (Round your answer to the nearest whole number)
Answer

0.00 points out of 1.00

%

(d) Explain how the valuation allowance affected 2010 net income.

Under Amour's valuation allowance account increased during the year, which means net income increased.

Under Amour's valuation allowance account decreased during the year, which means net income increased.

Under Amour's valuation allowance account increased during the year, which means net income decreased.

Under Amour's valuation allowance account decreased during the year, which means net income decreased.

(e) Use the financial statement effects template to record Under Armour's income tax expense for the current fiscal year along with the changes in both deferred tax assets and liabilities. Assume that income taxes payable increased by $11,431 thousand.

Use negative signs with your answers, when appropriate.

Exercise 10-22

The following transactions occurred during 2017. Assume that depreciation of 10% per year is charged on all machinery and 5% per year on buildings, on a straight-line basis, with no estimated salvage value. Depreciation is charged for a full year on all fixed assets acquired during the year, and no depreciation is charged on fixed assets disposed of during the year.

Prepare general journal entries for the transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

• 10.7 When people make estimates, they are influenced by anchors to their estimates. A study was conducted in which students were asked to estimate the number of calories in a cheeseburger. One group was asked to do this after thinking about a calorie-laden cheesecake. A second group was asked to do this after thinking about an organic fruit salad. The mean number of calories estimated in a cheeseburger was 780 for the group that thought about the cheesecake and 1,041 for the group that thought about the organic fruit salad. (Data extracted from “Drilling Down, Sizing Up a Cheeseburger's Caloric Heft,” The New York Times, October 4, 2010, p. B2.) Suppose that the study was based on a sample of 20 people who thought about the cheesecake first and 20 people who thought about the organic fruit salad first, and the standard deviation of the number of calories in the cheeseburger was 128 for the people who thought about the cheesecake first and 140 for the people who thought about the organic fruit salad first.

• a. State the null and alternative hypotheses if you want to determine whether the mean estimated number of calories in the cheeseburger is lower for the people who thought about the cheesecake first than for the people who thought about the organic fruit salad first.

• b. In the context of this study, what is the meaning of the Type I error?

• c. In the context of this study, what is the meaning of the Type II error?

• d. At the 0.01 level of significance, is there evidence that the mean estimated number of calories in the cheeseburger is lower for the people who thought about the cheesecake first than for the people who thought about the organic fruit salad first?

• 10.7 When people make estimates, they are influenced by anchors to their estimates. A study was conducted in which students were asked to estimate the number of calories in a cheeseburger. One group was asked to do this after thinking about a calorie-laden cheesecake. A second group was asked to do this after thinking about an organic fruit salad. The mean number of calories estimated in a cheeseburger was 780 for the group that thought about the cheesecake and 1,041 for the group that thought about the organic fruit salad. (Data extracted from “Drilling Down, Sizing Up a Cheeseburger's Caloric Heft,” The New York Times, October 4, 2010, p. B2.) Suppose that the study was based on a sample of 20 people who thought about the cheesecake first and 20 people who thought about the organic fruit salad first, and the standard deviation of the number of calories in the cheeseburger was 128 for the people who thought about the cheesecake first and 140 for the people who thought about the organic fruit salad first.

• a. State the null and alternative hypotheses if you want to determine whether the mean estimated number of calories in the cheeseburger is lower for the people who thought about the cheesecake first than for the people who thought about the organic fruit salad first.

• b. In the context of this study, what is the meaning of the Type I error?

• c. In the context of this study, what is the meaning of the Type II error?

• d. At the 0.01 level of significance, is there evidence that the mean estimated number of calories in the cheeseburger is lower for the people who thought about the cheesecake first than for the people who thought about the organic fruit salad first?

SHOW EXCEL FUNCTIONS USED TO ANSWER.

Crane Company issues $5040000, 7%, 5-year bonds dated January 1, 2020 on January 1, 2020. The bonds pay interest semiannually on June 30 and December 31. The bonds are issued to yield 6%. What are the proceeds from the bond issue?