With double-digit annual percentage increases in the cost of health insurance, more and more workers are likely to lack health insurance coverage (USA Today, January 23, 2004). The following sample data provide a comparison of workers with and without health insurance coverage for small, medium, and large companies. For the purposes of this study, small companies are companies that have fewer than 100 employees. Medium companies have 100 to 999 employees, and large companies have 1000 or more employees. Sample data are reported for 50 employees of small companies, 75 employees of medium companies, and 100 employees of large companies

Health Insurance

Size of Company

Yes

No

Total

Small

38

12

50

Medium

61

14

75

Large

90

10

100

Conduct a test of independence to determine whether employee health insurance coverage is independent of the size of the company. Use

= .05. Use Table 12.4.

Compute the value of the

2 test statistic (to 2 decimals).

The p value is

What is your conclusion?

The USA Today article indicated employees of small companies are more likely to lack health insurance coverage. Calculate the percentages of employees without health insurance based on company size (to the nearest whole number).

Small

%

Medium

%

Large

%

Based on the percentages calculated above, what can you conclude?

On January 1, 2020, Sarasota Company purchased 10% bonds having a maturity value of $380,000, for $410,343.38. The bonds provide the bondholders with a 8% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Sarasota Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category. Prepare the journal entry at the date of the bond purchase.Prepare a bond amortization schedule.Prepare the journal entry to record the interest revenue and the amortization at December 31, 2020.Prepare the journal entry to record the interest revenue and the amortization at December 31, 2021.

Remo Company and Angelo Inc. are separate companies that operate in the same industry. Following are variable costing income statements for the two companies showing their different cost structures: Remo Co. Angelo Inc. Sales revenue $ 275,000 $ 275,000 Less: Variable cost 200,000 125,000 Contribution margin $ 75,000 $ 150,000 Less: Fixed cost 35,000 110,000 Net operating income $ 40,000 $ 40,000 Required: Calculate the break-even sales revenue for each company. (Round your "Contribution Margin Ratio" percentage to 2 decimal places (i.e. .1524 = 15.24%) and final answers to 2 decimal places.)

Break-Even in Sales Revenue, Variable-Costing Ratio, Contribution Margin Ratio, Margin of Safety

Hammond Company runs a driving range and golf shop. The budgeted income statement for the coming year is as follows.

Required:

1. What is Hammond’s variable cost ratio? Enter your answer as a decimal value rounded to two decimal places.

What is the contribution margin ratio? Enter your answer as a decimal value rounded to two decimal places. (Express as a decimal-based amount rather than a whole percent.)

2. Suppose Hammond’s actual revenues are $200,000 greater than budgeted. By how much will before-tax profits increase? Calculate the answer without preparing a new income statement.
$

3. How much sales revenue must Hammond earn in order to break even? Round your answer to the nearest dollar.
$

What is the expected margin of safety? Round your answer to the nearest dollar.
$

4. How much sales revenue must Hammond generate to earn a before-tax profit of $130,000? Round your answer to the nearest dollar.
$

How much sales revenue must Hammond generate to earn an after-tax profit of $90,000? Round your answer to the nearest dollar.
$

Prepare a contribution margin income statement to verify the accuracy of your last answer. Round your answers to the nearest dollar.

Multiple-Product Break-even, Break-Even Sales Revenue

Cherry Blossom Products Inc. produces and sells yoga-training products: how-to DVDs and a basic equipment set (blocks, strap, and small pillows). Last year, Cherry Blossom Products sold 13,500 DVDs and 4,500 equipment sets. Information on the two products is as follows:

Total fixed cost is $77,270.

Suppose that in the coming year, the company plans to produce an extra-thick yoga mat for sale to health clubs. The company estimates that 9,000 mats can be sold at a price of $17 and a variable cost per unit of $11. Total fixed cost must be increased by $25,750 (making total fixed cost $103,020). Assume that anticipated sales of the other products, as well as their prices and variable costs, remain the same.

Part 1: Sales Mix Instructions and Part 2: Break-Even

1. What is the sales mix of DVDs, equipment sets, and yoga mats?
3:1:2

2. Compute the break-even quantity of each product.

3b. What is the overall contribution margin ratio? Use the contribution margin ratio to compute overall break-even sales revenue. (Note: Round the contribution margin ratio to the nearest whole percent; round the break-even sales revenue to the nearest dollar.)

4. Compute the margin of safety for the coming year in sales dollars.
$

Babcock and Marks (2010) reviewed survey data from 2003-2005, and obtained an average of u = 14 hours per week spent studying by full-time students at 4-year colleges in the United States. To determine whether this average has changed in the past 10 years, a researcher selected a sample of n = 64 of today’s college students and obtained an average of M = 12.5 hours. If the standard deviation for the distribution is σ = 4.8 hours per week, does this sample indicate a significant change in the number of hours spent studying? Use a two-tail test with alpha = .05. List, number, state, and clearly show all 4 steps of the hypothesis test. For step 2, state alpha and describe the critical regions of the test statistic distribution. Step 4 must also answer the question posed in the problem. Clearly show all calculations steps to get answers including formulas needed to solve this problem. Answers must be typed or word processed.

1. Suppose you collected data from 1986 to 2005 to estimate the following demand function:

Q_X = b₀ + b₁ P_X + b₂ P_R + b₃ M

Assume R is a substitute and X is a normal good. The estimation results are reported below:

            a   Conduct t tests to see if the coefficients are statistically significant at the 5% level of significance. Disregard the intercept. Use the p-values. A simple yes or no is not enough. Explain

            b.   Conduct an F- test to see if the equation, as a whole, is statistically significant at the 5%. Use the p-value. A simple yes or no is not enough. Explain.

c. Interpret the value of R-square.

Between 2002 and 2005, French wine exports to the United States dropped by nearly 18 percent. Some wine experts blamed part of the decline on what they perceived to be a drop in the quality of French wine. Others blamed a shift in U.S. tastes in favor of domestic wines, and others suggested U.S. residents’ unhappiness with the French government’s foreign policies.

Economists offered a different explanation. During 2003, the dollar depreciated by almost 20 percent relative to the euro. Even if the euro price of a bottle of French wine remained the same, U.S. residents would have seen its dollar price rise by nearly 20 percent. The effective increase in the U.S. price of French wines resulted in a decrease in the quantity of French wine demanded by U.S. residents. Thus, French wine exports to the United States decreased.

What do you predict will happen to French wine exports to the United States, other things being equal, if the dollar appreciates considerably in relation to the euro?

Case 5: Tim bought a house for $500,000 in 2005 in California. When his daughter Mary got married in August 2010, he gave the house to Mary as a wedding gift. The fair market value of the house was $400,000. Mary and her husband Jerry have lived in the house since then.

1. How much is the taxable gift?

2. If later Mary wants to divorce Jerry, they will split the house value 50/50. (True or False)If Mary and Jerry sell the house for $550,000 in April 2011:

3. What is the amount of capital gain (or capital loss)? Is the capital gain/loss long term or short term?If Mary and Jerry sell the house for $450,000 in April 2011:

4. What is the amount of capital gain (or capital loss)? Is the capital gain/loss long term or short term?If Mary and Jerry sell the house for $350,000 in April 2011:

5. What is the amount of capital gain (or capital loss)? Is the capital gain/loss long term or short term?