You have been hired as a project management consultant to assist the Acme Company in evaluating two different project proposals they are considering. Proposal A calls for the construction of a new plant which will require three years to complete and will have much greater capacity than the old plant. Because the plant will have to be built on the current site, the old plant will have to be razed. Proposal B involves the renovation of this plant. This renovation will require two years to complete, but the plant can remain in operation in a reduced capacity during this upgrade. Once the renovation is complete revenue will be increased by 25% per year, however annual maintenance will be 50% higher than Proposal A.

Proposal B: Renovate Existing Plant

        Year1   Year2 Year3 Year4 Year5   Year6 Year7 Year8 Year9 Year10

Revenue 100   100   350     350    350     350    350   350    350    350

Expense 500   500   75      75     75      75     75    75     75      75

Questions:

a.   What is the profit associated with the project carried out in Proposal A? Proposal B?

b.   When does payback occur on the project carried out in Proposal A? Proposal B?

c.   What is the present value of revenue for the project carried out in Proposal A? Proposal B? (In computing present value, do not discount the value for the first year being examined.) (Assume i = 0.10)

d.   What is the present value of expense for the project carried out in Proposal A? Proposal B? (In computing present value, do not discount the value for the first year being examined.) (Assume i = 0.10)

e.   What is net present value for the project described in Proposal A? Proposal B? (In computing present value, do not discount the value for the first year being examined.) (Assume i = 0.10)

f.    What is the internal rate of return for the project described in Proposal A? Proposal B?

g.   Which project would you recommend? Why? What are the merits? What are the risks?

Lydo Cinema Chain based in Melbourne, owns three cinemas in the suburbs of Camberwell, South Yarra and Ringwood. It has prepared budgets for the coming year based upon a ticket price of $20. Particulars Camberwell South Yarra Ringwood Budgeted revenue from ticket sales 1,500,000 1,250,000 750,000 Costs: Film license 510,000 390,000 380,000 Wages and salaries 295,000 265,000 175,000 Overheads 495,000 395,000 345,000 Total costs 1,300,000 1,050,000 900,000 Included in the overhead figures are the Head Office fixed costs that amount to $750,000, these have been allocated to each cinema based on budgeted ticket receipts. All other costs are variable. The top management is concerned about the Ringwood cinema and the fact that it is showing a budgeted loss and is considering closing the cinema and selling the site to a Property Developer. Required: (a) Prepare marginal costing income statements to show contributions for each cinema and contribution and profit for the overall chain based on the original budget. (b) Prepare marginal costing income statements to show contributions for each cinema and contribution and profit for the overall chain assuming Ringwood cinema is closed. (c) Based on your calculations in requirement (b) above, do you think that Ringwood cinema should be closed? Justify your answer with appropriate explanation. (d) What is the contribution per ticket sale at each cinema? (e) What is the margin of safety in revenue for the chain at the budgeted level of activity if the Ringwood cinema is kept open? (f) What is the margin of safety in revenue for the chain at the budgeted level of activity if the Ringwood cinema is closed? (g) If the Ringwood cinema is kept open, management would like to increase its profitability. One suggestion is that ticket sales at Ringwood cinema can be increased by 60% by an advertising campaign directed at Ringwood that will add $20,000 to the chain's fixed costs. Do you think that the advertising campaign should be undertaken to improve the cinema's profitability? Give reasons for your decision.

Santana Rey, owner of Business Solutions, decides to prepare a statement of cash flows for her business using the following financial data.
  

Required:
Prepare a statement of cash flows for Business Solutions using the indirect method for the three months ended March 31, 2020. Owner Santana Rey contributed $30,000 to the business in exchange for additional stock in the first quarter of 2020 and has received $4,300 in cash dividends. (Amounts to be deducted should be indicated with a minus sign.)

Elatrip Company provides package tours for customers. The following transactions were completed by the company during September 2019.

Sept 1   Shareholders invested $ 500,000 into the business in exchange for ordinary shares.

Sept 2   Purchased $600 worth of office supplies for cash.

Sept 4   Purchased furniture from Damro Company for $5,000 and issued a 90 day, 8% promissory note.

Sept 7   Purchased equipment for $800 and postponed payment until September 28.

Sept 11 Earned revenue of $4,000, of which $3,000 is collected in cash and the balance is due on September 18.

Sept 13 Purchased a commuter van for $100,000. Elatrip paid $60,000 in cash and signed a 6 month, 7% promissory note for the balance due.

Sept 15 Company received $2,000 cash in advance for the service to be rendered on October 5.

Sept 16 Paid $6,000 rent for 2 months. (October and November 2017)

Sept 18 Collected the balance due from September 11.

Sept 20 Performed services for $ 5,000 and received a one month, 9% promissory note from customer.

Sept 25 Incurred $1,000 for repair and maintenance cost and the company issued a check for the amount.

Sept 27 A $800 bill was received for electricity and water expense for the month. The entire amount is due on October 1.

Sept 28 Company paid the balance due from September 7.

Sept 30 Paid $2,000 for employees’ salaries.

The company uses the following chart of accounts: No. 101 Cash, No. 112 Accounts Receivable, No. 113 Notes receivable, No. 124 Office supplies, 136 Prepaid rent, No.140 Furniture, No 145 Equipment, No 156 Commuter van, No 201 Accounts payable, No 211 Notes payable, No 220 Unearned service revenue, No 311 Share capital- ordinary, No 400 Service revenue, No 726 Repair and maintenance expense, No 735 Utilities expense, No 738 Salaries expense.

1)JOURNALIZE

Welfare effects of a tariff in a small country

Suppose Burundi is open to free trade in the world market for maize. Because of Burundi’s small size, the demand for and supply of maize in Burundi do not affect the world price. The following graph shows the domestic maize market in Burundi. The world price of maize is PWPW = $350 per ton.

On the following graph, use the green triangle (triangle symbols) to shade the area representing consumer surplus (CS) when the economy is at the free-trade equilibrium. Then, use the purple triangle (diamond symbols) to shade the area representing producer surplus (PS).

CSPS020406080100120140160180200440430420410400390380370360350340PRICE (Dollars per ton)QUANTITY (Tons of maize)Domestic DemandDomestic SupplyPW

If Burundi allows international trade in the market for maize, it will importtons of maize.

Now suppose the Burundian government decides to impose a tariff of $30 on each imported ton of maize. After the tariff, the price Burundian consumers pay for a ton of maize is, and Burundi will importtons of maize.

Show the effects of the $30 tariff on the following graph.

Use the black line (plus symbol) to indicate the world price plus the tariff. Then, use the green points (triangle symbols) to show the consumer surplus with the tariff and the purple triangle (diamond symbols) to show the producer surplus with the tariff. Lastly, use the orange quadrilateral (square symbols) to shade the area representing government revenue received from the tariff and the tan points (rectangle symbols) to shade the areas representing deadweight loss (DWL) caused by the tariff.

World Price Plus TariffCSPSGovernment RevenueDWL020406080100120140160180200440430420410400390380370360350340PRICE (Dollars per ton)QUANTITY (Tons of maize)Domestic DemandDomestic SupplyPW

Complete the following table to summarize your results from the previous two graphs.

Based on your analysis, as a result of the tariff, Burundi’s consumer surplus by, producer surplus by, and the government collectsin revenue. Therefore, the net welfare effect is a

A pharmaceutical company operates retail pharmacies in 10 eastern states.​ Recently, the​ company's internal audit department selected a random sample of​ n=

300300

prescriptions issued throughout the system. The objective of the sampling was to estimate the average dollar value of all prescriptions issued by the company. The data collected were

x overbarxequals=​$14.5714.57

and

sequals=4.504.50.

Complete parts a and b below.

a. The​ 90% confidence interval estimate for the true average sales value for prescriptions issued by the company is from  

​$14.1414.14   

to    

​$14.9914.99.

​(Round to the nearest​ cent- 2 decimal places. Use ascending​ order.)

You are asked to interpret the meaning of this confidence interval by choosing the correct answer​ below:

A.

The company believes with​ 90% confidence that the true mean prescription amount is between these two amounts.

Your answer is correct.

B.

The company believes with​ 90% confidence that the sample mean prescription amount is between these two amounts.

C.

There is a 0.90 probability that the true mean prescription amount is between these two values.

D.

The company believes that the true mean prescription amount falls between these two values​ 90% of the time.

b. One of its retail outlets recently reported that it had monthly revenue of

​$7 comma 5047,504

from

526526

prescriptions. Are such results to be​ expected? Should that retail outlet be​ audited?

​(Round to the nearest cent as​ needed.)

When the population mean is at the upper limit of the​ 90% confidence interval computed in part​ a, the upper limit of the​ 90% confidence interval for the expected total monthly revenue for

526526

prescriptions would be

​$7,889.307,889.30.

When the population mean is at the lower limit of the​ 90% confidence interval computed in part​ a, the lower limit of the​ 90% confidence interval for the expected total monthly revenue for

526526

prescriptions would be

​$7,438.347,438.34.

Since this outlet reported sales of

​$7 comma 5047,504

from

526526

​prescriptions, there is

no

reason to believe that this is out of line. The retail outlet

should not

be audited.

Cute Name Beverages, Ltd (CNB) is looking into expanding production into Premium Red wine. The grapes will be sourced from local vineyards, so the main capital outlays for the new product will be a new bottling machine and a dozen large oak barrels. After 10 years, CNB expects that tastes will have moved on and production will cease. As consultants, your firm has been engaged by CNB to help analyse the potential new product. Your team has collected the following facts and grouped them into four areas: Revenue, Costs, Bottling Machine and Oak Barrels.

1. Revenue

• Based on market research, CNB projects annual sales at 3,500 cases per year for 10 years.

• Each case will be sold for $180.

• If the new Premium Red is launched, CNB projects that net revenue from their existing Premium Rose line

  will decrease by $15,000 per year.

2. Costs

• Variable costs of production are $45 per case for the projected 3,500 cases sold per year.

• Fixed costs are $50,000 per year

• If CNB launches the Premium Red, they will increase their box order with CustomBoxCo, reducing their per-

  unit box cost on other product lines. This is estimated to save $5,000 per year.

• CNB paid $3,000 for the market research report that estimated annual sales at 3,500 cases per year.

3. Bottling Machine

• The new Bottling Machine will cost $735,000.

• ATO regulations require depreciation over 15 years using the straight-line method.

• At the end of 10 years, the estimated value of the Bottling Machine is $250,000.

4. Oak Barrels

• The total cost of the required French Oak barrels is $300,000.

• ATO regulations require depreciation over 20 years using the straight-line method.

• At the end of 10 years, the estimated value of the Oak Barrels is $100,000.

What is the annual depreciation for the Bottling Machine?

What is the net after-tax cash flow from the sale of the Bottling Machine in year 10?

The following incomplete balance sheet for the Sanderson Manufacturing Company was prepared by the company’s controller. As accounting manager for Sanderson, you are attempting to reconstruct and revise the balance sheet.

Additional information ($ in 000s):

1. Certain records that included the account balances for the patent and shareholders’ equity items were lost. However, the controller told you that a complete, preliminary balance sheet prepared before the records were lost showed a debt to equity ratio of 1.4. That is, total liabilities are 140% of total shareholders’ equity. Retained earnings at the beginning of the year was $5,800. Net income for 2021 was $2,000 and $400 in cash dividends were declared and paid to shareholders.
2. Management intends to sell the investments in the next six months.
3. Interest on both the notes and the bonds is payable annually.
4. The notes payable are due in annual installments of $1,450 each.
5. Deferred revenue will be recognized as revenue equally over the next two fiscal years.
6. The common stock represents 400,000 shares of no par stock authorized, 340,000 shares issued and outstanding.
   

Required:
Prepare a complete, corrected, classified balance sheet. (Amounts to be deducted should be indicated by a minus sign.)

11) The type of advertising that enhances a company`s image rather than

promotes a particular product is called ____.

a. Institutional advertising

b. Product advertising

c. Earned advertising

d. Owned advertising

12)

The type of advertising that can be used in all of the product life cycle is

called ____.

a. Institutional advertising

b. Product advertising

c. Earned advertising

d. Owned advertising

13)

The last step in advertising campaign is ____.

a. Define advertising objectives

b. Make creative decisions

c. Make media decisions

d. Evaluate the campaign

14)

In setting advertising objectives, we should define ____.

a. Target audience

b. Desired percentage change

c. Time frame for change

d. All of the above

15)

In terms of United Airline crisis management, UA should ____.

a. respond quickly

b. respond truthfully

c. have a communication plan in place

d. All of the above

16)

During Black Friday, Mike paid $599 for a laptop originally priced at $999, he

believed the laptop is of good quality because the original price is high, this

example showed the ____effect of price.

a. Sacrifice

b. Information

c. Values

d. Needs

17)

The pricing objective used by some firm in which the firm just follow the

competitor`s price is called ____ pricing.

a. Profit oriented

b. Sales oriented

c. Status quo

d. None of the above

18)

The pricing objective used by some firm in which the firm tries to maximize

the market share is called ____ pricing.

a. Profit oriented

b. Sales oriented

c. Status quo

d. None of the above

19)

Equilibrium price is achieved when ____

a. Demand=Supply

b. Demand>Supply

c. Demand<Supply

d. None of the above

20)

The break-even point is achieved when

a. Total revenue=Total cost

b. Total revenue>Total cost

c. Total revenue<Total cost

d. None of the above