1. v) Why efficiency is a commonly used as an objective for public policy (more than equity). (Hint: think about which type of policies will be easier to pass in the congress?) vi) One hundred people are distributed in two beaches. In Beach A, there are 98 people (A = 98), while in Beach B only 2 (B = 2). Is this allocation efficient? Is equalitarian? (assume that people are more happy if the beach is less crowded). vii) Answer to the same questions with (A = 100, B = 0) and with (A = 50, B = 50). viii) Find an allocation that is NOT Pareto efficient an NOT equalitarian (Hint: you might need more than one beach).

fter-Tax Target Income: Profit Analysis

X-Cee-Ski Company recently expanded its manufacturing capacity, which will allow it to produce up to 21,000 pairs of cross-country skis of the mountaineering model or the touring model. The Sales Department assures management that it can sell between 9,000 and 14,000 pairs of either product this year. Because the models are very similar, X-Cee-Ski will produce only one of the two models.

The following information was compiled by the Accounting Department:

Fixed costs will total $320,000 if the mountaineering model is produced but will be only $220,000 if the touring model is produced. X-Cee-Ski is subject to a 40 percent income tax rate.

Required:

1. If X-Cee-Ski Company desires an after-tax net income of $48,000, how many pairs of touring model skis will the company have to sell?
pairs of touring skis

2. Suppose that X-Cee-Ski Company decided to produce only one model of skis. What is the total sales revenue at which X-Cee-Ski Company would make the same profit or loss regardless of the ski model it decided to produce?
$

3. If the Sales Department could guarantee the annual sale of 12,000 pairs of either model, which model would the company produce? (CMA adapted)
Mountaineering model

After-Tax Target Income: Profit Analysis

X-Cee-Ski Company recently expanded its manufacturing capacity, which will allow it to produce up to 21,000 pairs of cross-country skis of the mountaineering model or the touring model. The Sales Department assures management that it can sell between 9,000 and 14,000 pairs of either product this year. Because the models are very similar, X-Cee-Ski will produce only one of the two models.

The following information was compiled by the Accounting Department:

Fixed costs will total $320,000 if the mountaineering model is produced but will be only $220,000 if the touring model is produced. X-Cee-Ski is subject to a 40 percent income tax rate.

Required:

1. If X-Cee-Ski Company desires an after-tax net income of $48,000, how many pairs of touring model skis will the company have to sell?
pairs of touring skis

2. Suppose that X-Cee-Ski Company decided to produce only one model of skis. What is the total sales revenue at which X-Cee-Ski Company would make the same profit or loss regardless of the ski model it decided to produce?
$

3. If the Sales Department could guarantee the annual sale of 12,000 pairs of either model, which model would the company produce? (CMA adapted)
Mountaineering model

Suppose you buy one SPX call option with a strike of 2135 and write one SPX call option with a strike of 2195. What are the payoffs at maturity to this position for S&P 500 Index levels of 2050, 2100, 2150, 2200, and 2250? (A negative value should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required.)

Index level          Long call payoff Short call payoff              Total payoff

2050                                      

2100                                      

2150                                      

2200                                      

2250                                      

2.

Suppose you buy 25 February 100 call option contracts. Hendreeks stock is selling for $105.50 per share on the expiration date. How much is your options investment worth? What if the stock price is $101.40 on the expiration date? (Do not round intermediate calculations.)

Northwoods Backpackers

Bob and Carol Packer operate a successful outdoor wear store in Vermont called Northwoods Backpackers. They stock mostly cold-weather outdoor items such as hiking and backpacking clothes, gear, and accessories. They established an excellent reputation throughout New England for quality products and service. Eventually, Bob and Carol noticed that more and more of their sales were from customers who did not live in the immediate vicinity but were calling in orders on the telephone. As a result, the Packers decided to distribute a catalog and establish a phone-order service. The order department consisted of five operators working eight hours per day from 10:00 A.M. to 6:00 P.M., Monday through Friday. For a few years the mail-order service was only moderately successful; the Packers just about broke even on their investment. However, during the holiday season of the third year of the catalog order service, they were overwhelmed with phone orders. Although they made a substantial profit, they were concerned about the large number of lost sales they estimated they incurred. Based on information provided by the telephone company regarding call volume and complaints from customers, the Packers estimated they lost sales of approximately $100,000. Also they felt they had lost a substantial number of old and potentially new customers because of the poor service of the catalog order department.

Prior to the next holiday season, the Packers explored several alternatives for improving the catalog order service. The current system includes the five original operators with computer terminals who work eight-hour days, five days per week. The Packers have hired a consultant to study this system, and she reported that the time for an operator to take a customer order is exponentially distributed with a mean of 3.6 minutes. Calls are expected to arrive at the telephone center during the six-week holiday season according to a Poisson distribution with a mean rate of 175 calls per hour. When all operators are busy, callers are put on hold, listening to music until an operator can answer. Waiting calls are answered on a first-in, first-out basis. Based on her experience with other catalog telephone order operations and data from Northwoods Backpackers, the consultant has determined that if Northwoods Backpackers can reduce customer call waiting time to approximately one-half minute or less, the company will save $135,000 in lost sales during the coming holiday season.

Therefore, the Packers have adopted this level of call service as their goal. However, in addition to simply avoiding lost sales, the Packers believe it is important to reduce waiting time to maintain their reputation for good customer service. Thus, they would like about 70 percent of their callers to receive immediate service.

The Packers can maintain the same number of workstations/computer terminals they currently have and increase their service to sixteen hours per day with two operator shifts running from 8:00 A.M. to midnight. The Packers believe when customers become aware of their extended hours the calls will spread out uniformly, resulting in a new call average arrival rate of 87.5 calls per hour (still Poisson distributed). This schedule change would cost Northwoods Backpackers approximately $11,500 for the six-week holiday season.

Another alternative for reducing customer waiting times is to offer weekend service. However, the Packers believe that if they do offer weekend service, it must coincide with whatever service they offer during the week. In other words, if they have phone order service eight hours per day during the week, they must have the same service during the weekend; the same is true with sixteen-hours-per-day service. They feel that if weekend hours differ from weekday hours it will confuse customers. If eight-hour service is offered seven days per week, the new call arrival rate will be reduced to 125 calls per hour at a cost of $3,600. If Northwoods offers sixteen-hour service, the mean call arrival rate will be reduced to 62.5 calls hour, at a cost of $7,300.

Still another possibility is to add more operator stations. Each station includes a desk, an operator, a phone, and a computer terminal. An additional station that is in operation five days per week, eight hours per day, will cost $2,900 for the holiday season. For a sixteen-hour day the cost per new station is $4,700. For seven-day service the cost of an additional station for eight-hour per-day service is $3,800; for sixteen-hour-per-day service the cost is $6,300.

The facility Northwoods Backpackers uses to house its operators can accommodate a maximum of ten stations. Additional operators in excess of ten would require the Packers to lease, remodel, and wire a new facility, which is a capital expenditure they do not want to undertake this holiday season. Alternatively, the Packers do not want to reduce their current number of operator stations.

Determine what order service configuration the Packers should use to achieve their goals, and explain your recommendation.
Use Excel/ Excel Qm to solve this question

Bob and Carol Packer operate a successful outdoor wear store in Vermont called Northwoods Backpackers. They stock mostly cold-weather outdoor items such as hiking and backpacking clothes, gear, and accessories. They established an excellent reputation throughout New England for quality products and service. Eventually, Bob and Carol noticed that more and more of their sales were from customers who did not live in the immediate vicinity but were calling in orders on the telephone. As a result, the Packers decided to distribute a catalog and establish a phone-order service. The order department consisted of five operators working eight hours per day from 10:00 A.M. to 6:00 P.M., Monday through Friday. For a few years the mail-order service was only moderately successful; the Packers just about broke even on their investment. However, during the holiday season of the third year of the catalog order service, they were overwhelmed with phone orders. Although they made a substantial profit, they were concerned about the large number of lost sales they estimated they incurred. Based on information provided by the telephone company regarding call volume and complaints from customers, the Packers estimated they lost sales of approximately $100,000. Also they felt they had lost a substantial number of old and potentially new customers because of the poor service of the catalog order department.

Prior to the next holiday season, the Packers explored several alternatives for improving the catalog order service. The current system includes the five original operators with computer terminals who work eight-hour days, five days per week. The Packers have hired a consultant to study this system, and she reported that the time for an operator to take a customer order is exponentially distributed with a mean of 3.6 minutes. Calls are expected to arrive at the telephone center during the six-week holiday season according to a Poisson distribution with a mean rate of 175 calls per hour. When all operators are busy, callers are put on hold, listening to music until an operator can answer. Waiting calls are answered on a first-in, first-out basis. Based on her experience with other catalog telephone order operations and data from Northwoods Backpackers, the consultant has determined that if Northwoods Backpackers can reduce customer call waiting time to approximately one-half minute or less, the company will save $135,000 in lost sales during the coming holiday season.

Therefore, the Packers have adopted this level of call service as their goal. However, in addition to simply avoiding lost sales, the Packers believe it is important to reduce waiting time to maintain their reputation for good customer service. Thus, they would like about 70 percent of their callers to receive immediate service.

The Packers can maintain the same number of workstations/computer terminals they currently have and increase their service to sixteen hours per day with two operator shifts running from 8:00 A.M. to midnight. The Packers believe when customers become aware of their extended hours the calls will spread out uniformly, resulting in a new call average arrival rate of 87.5 calls per hour (still Poisson distributed). This schedule change would cost Northwoods Backpackers approximately $11,500 for the six-week holiday season.

Another alternative for reducing customer waiting times is to offer weekend service. However, the Packers believe that if they do offer weekend service, it must coincide with whatever service they offer during the week. In other words, if they have phone order service eight hours per day during the week, they must have the same service during the weekend; the same is true with sixteen-hours-per-day service. They feel that if weekend hours differ from weekday hours it will confuse customers. If eight-hour service is offered seven days per week, the new call arrival rate will be reduced to 125 calls per hour at a cost of $3,600. If Northwoods offers sixteen-hour service, the mean call arrival rate will be reduced to 62.5 calls hour, at a cost of $7,300.

Still another possibility is to add more operator stations. Each station includes a desk, an operator, a phone, and a computer terminal. An additional station that is in operation five days per week, eight hours per day, will cost $2,900 for the holiday season. For a sixteen-hour day the cost per new station is $4,700. For seven-day service the cost of an additional station for eight-hour per-day service is $3,800; for sixteen-hour-per-day service the cost is $6,300.

The facility Northwoods Backpackers uses to house its operators can accommodate a maximum of ten stations. Additional operators in excess of ten would require the Packers to lease, remodel, and wire a new facility, which is a capital expenditure they do not want to undertake this holiday season. Alternatively, the Packers do not want to reduce their current number of operator stations.

Determine what order service configuration the Packers should use to achieve their goals, and explain your recommendation.

The catering manager of LaVista​ Hotel, Lisa​ Ferguson, is disturbed by the amount of silverware she is losing every week. Last Friday​ night, when her crew tried to set up for a banquet for 500​ people, they did not have enough knives. She decides she needs to order some more​silverware, but wants to take advantage of any quantity discounts her vendor will offer.

follows≻For

a small order

​(2 comma 0002,000

pieces or​ less) her vendor quotes a price of

​$1.801.80​/piece.

follows≻If

she orders

2 comma 0012,001

to

5 comma 0005,000

​pieces, the price drops to

​$1.601.60​/piece.

follows≻5 comma 0015,001

to

10 comma 00010,000

pieces brings the price to

​$1.401.40​/piece,

and

follows≻10 comma 00110,001

and above reduces the price to

​$1.251.25​/piece.

​Lisa's order costs are

​$200200

per​ order, her annual holding costs are

55​%,

and the annual demand is

44 comma 90044,900

pieces. For the best option​ (the best option is the price level that results in an EOQ within the acceptable​ range):

a. what is the optimum ordering quantity? (round to the nearest whole number)

b.what is the annual holding cost? (round to two decimal places)

c. what is the annual ordering cost? ( round to two decimal places)

d. what are the annual costs of the silverware itself with an optimal order quantity? (round to the nearest whole number)

e. what is the total annual cost, including ordering, holding, and purchasing the silverware? (round to two decimal places)

Required information [The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $130 and $90, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 102,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Alpha Beta Direct materials $ 25 $ 10 Direct labor 22 21 Variable manufacturing overhead 17 7 Traceable fixed manufacturing overhead 18 20 Variable selling expenses 14 10 Common fixed expenses 17 12 Total cost per unit $ 113 $ 80 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars.

8. Assume that Cane normally produces and sells 62,000 Betas and 82,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 17,000 units. What is the financial advantage (disadvantage) of discontinuing the Beta product line?

9. Assume that Cane expects to produce and sell 82,000 Alphas during the current year. A supplier has offered to manufacture and deliver 82,000 Alphas to Cane for a price of $88 per unit. What is the financial advantage (disadvantage) of buying 82,000 units from the supplier instead of making those units?

10. Assume that Cane expects to produce and sell 52,000 Alphas during the current year. A supplier has offered to manufacture and deliver 52,000 Alphas to Cane for a price of $88 per unit. What is the financial advantage (disadvantage) of buying 52,000 units from the supplier instead of making those units?

12. What contribution margin per pound of raw material is earned by each of the two products? (Round your answers to 2 decimal places.)

Research question: Do patients given a new drug experience greater weight loss over the course of 8 weeks than patients given a placebo?

Researchers have developed a new drug to support weight loss in adults. They have designed an experiment in which patients will be randomly assigned to either the treatment or control group. The amount of weight lost by each patient over the course of 8 weeks will be recorded.

If they find that their new drug does contribute to weight loss, they will mass produce it and sell it across the country. If there is not evidence that their new drug contributes to weight loss, they will abandon this project, which they have been working on for years and spent nearly a million dollars developing.

A. State the null and alternative hypotheses that should be used to address the given research question.

What does a Type I error mean in this situation? What are the consequences of making a Type I error in this specific scenario?

What does a Type II error mean in this situation? What are the consequences of making a Type II error in this specific scenario?  

In this scenario, is a Type I or Type II error more serious? Or, are they equally serious? Explain your reasoning.

If you were working with this research team, what alpha level would you use? Explain your reasoning.

B.

A sample consisting of 30 patients was randomly split between the treatment and control groups. After weight loss data were collected, the research team conducted a randomization test for the difference in two means. In the samples, the treatment group lost an average of 7.2 pounds and the control group lost an average of 4.4 pounds. The pooled standard deviation was 2.59 pounds. A p value of 0.0038 was computed using StatKey.

Using the alpha level you selected in part A, are the results statistically significant? Explain why or why not. [5 points]

Compute Cohen’s d. Remember to show all work using the equation editor. [10 points]

Are the results practically significant. Explain why or why not. [5 points]

A Asset Valuation = Price

B Wealth Accumulation

C Funding – Lump sum funds lump sum

D Funding – Lump sum funds ordinary level annuity

E Funding – Lump sum funds delayed level annuity

F Funding – Ordinary level annuity funds lump sum

G Funding – Ordinary level annuity funds delayed level annuity

H Classify the problem as one of the above types.

Classify the problem as one of the above types.

1. You earn 8% per year on your investments, how much do you have to invest today to “Fund” a payment of $1,000 due in 4 years?

2.  How much would you have to invest today to fund three equal payments in periods 1, 2 and 3 of $100 each if the interest rate is 3%?

3. How much would you have to invest today to fund three payments of $200 each in periods 3, 4 and 5 if the interest rate is 6%?

4. Your child is planning attend summer camp for three months, starting 7 months from now. The cost for camp is $1,000 per month, each month, for the three months she will attend.

If your investments earn 5% APR (compounded monthly), how much must you invest today such that your investment will  grow to just cover the cost of the camp?

5. You need $15,000 in 9 months to settle an overdue tax liability. If your investments earn 6% APR (compounded monthly), how much do you have to invest each month, starting next month, for 4 months, such that your investment will grow to just cover your property tax bill?

6. You’ve had a great year at your job and to reward you, your boss offers you one of two choices:

-A lump sum bonus today of $5,000

- An increase in your monthly salary of $700 for the next 12 months.

If your investments earn 3% APR, compounded monthly, which alternative is worth more (as of today)?

7. You would like to retire 30 years from now. You expect that your retirement will last of 40 years. You want to be able to withdraw $5,000 per month from your retirement account during your retirement.

How much must you invest, starting next month, for the next 30 years to exactly fund your retirement if your investments earn 5% APR, compounded monthly?