Candle-Line is an online retailer that does frequent A/B testing. The process of running a test is as follows: The first step is designing the test; this involves the web design team. The test then waits for its turn to be run. Next, the test is run and data is collected. Once the test is completed, the data must wait for an available statistician. When a statistician is available, she performs the analysis and generates a report. Tests originate in two ways. They may arise from outside the web design team (an “external” test) or from the web design team (an “internal” test). Internal tests do not require the Design phase and go immediately to Wait to Run. 10% of tests are internal. Design for an external test takes on average 4 days. On average, a test (whether internal or external) spends 2 days in Wait to Run. The length of the experiment varies: 20% of tests run for 14 days while the remaining run for 7 days. On average, there are 84 tests running. At the end of the experiment, 20% of tests are deemed redundant and thus are abandoned without any processing. The remaining tests wait for a statistician; there are on average 16 tests waiting for a statistician. Doing the analysis and generating the report takes 2 days on average.

a) On average, how many reports per day are the statisticians generating?

On average the statisticians generate ___________ reports per day.

b) What is the average flow time for a test (regardless of whether it is internal or external and whether its data is abandoned or analyzed)?

The average flow time is ___________ days.

c) Designing an external test costs $100. Candle-Line spends $50 dollar/day for each test that is running. Generating a report cost $500. What is their weekly spending on A/B testing (assume 7 days per week)?

Their weekly spending on A/B testing is $__________________ per week.

You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president has asked that you review the company’s costing system and “do what you can to help us get better control of our manufacturing overhead costs.” You find that the company has never used a flexible budget, and you suggest that preparing such a budget would be an excellent first step in overhead planning and control. After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for March:

During March, the company worked 23,000 machine-hours and produced 17,000 units. The company had originally planned to work 25,000 machine-hours during March.

Calculate the activity variances for March. (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.)

Calculate the spending variances for March. (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.)

7. Problems and Applications Q7

Two towns, each with three members, are deciding whether to put on a fireworks display to celebrate the New Year. Fireworks cost $300. In each town, some people enjoy fireworks more than others.

In the town of Bayport, each of the residents values the public good as follows:

The total benefit of the fireworks display to the town of Bayport is ($ ).

Therefore, fireworks (would/would not) pass the cost-benefit analysis in the town of Bayport.

The mayor of Bayport proposes to decide by majority rule and, if the fireworks referendum passes, to split the cost equally among all residents.

Who would vote in favor of the fireworks referendum? Check all that apply.

Darnell

Eleanor

Jacques

The vote (would/would not) yield the same answer as the cost-benefit analysis.

In the town of River Heights, each of the residents values the public good as follows:

The total benefit of the fireworks display to the town of River Heights is ($ ).

Therefore, fireworks (would/would not)   pass the cost-benefit analysis in the town of River Heights.

The mayor of River Heights also proposes to decide by majority rule and, if the fireworks referendum passes, to split the cost equally among all residents.

Who would vote in favor of the fireworks referendum? Check all that apply.

Kyoko

Musashi

Rina

The vote (would/would not) yield the same answer as the cost-benefit analysis.

Which of the following statements is correct about the provision of public goods? Check all that apply.

Majority rule is the most efficient way to determine the amount of public goods a society should produce.

It is hard for the government to decide the appropriate amount of public goods to produce because people have differing preferences regarding such goods.

The government always provides the exact types of public goods that everyone in the society wants.

Netflix experienced some membership turbulence in 2016 as a price increase was phased in for its US subscribers. •In May 2014, Netflix announced that the price of itsstandard subscription service would increase from $8 to $9. However, established customers were allowed to stay at the $7.99 price for two years. In 2015, Netflix increased the standard price to $9.99. •As a result of the pricing plan and the deferred price increase, in May, 2016, the standard pricing plan for long time customers of Netflix increased from $7.99per month to $9.99per month.Netflix began notifying customers in April that the price increase would become effective in the second quarter.Previously Netflix was trying to implement price increases more slowly after a 2011 increase led to negative publicity and a customer backlash. In that case, Netflix separated its streaming and DVD services, and charged separately for both services.However, regardless of the implementationof theprice increase, the higher monthly prices seem to have impacted the growth of membership among US subscribers. In the two quarters before the price increase, Netflix added net membership of 1.6 million and 2.2 million members. By contrast, the number of members added in Q2 was only 160,000, and in Q3 only 400,000. The Q2 growth in US subscribers was the lowest since Netflix began reporting those numbers in 2012.

US Streaming (millions) Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016

Revenue 1026 1064 1106 1161 1208 1304

Contribution Profit 340 344 379 413 414 475

Contribution Margin    33.1% 32.3% 34.3% 35.6% 34.3% 36.4%

Paid Memberships 41.1 42.1 43.4 45.7 46.0 46.5

Total Memberships 42.3 43.2 44.7 47.0 47.1 47.5

Net Additions 0.90 0.88 1.56 2.23 0.16 0.40

Monthly Revenue per

Paid Member $8.33 $ 8.43 $ 8.49 $ 8.47 $ 8.75 $ 9.40

Percentage Chg.Rev 3.7% 3.9% 5.0% 4.0% 7.9%

Percentage Chg. Memberships 2.5% 3.2% 5.3% 0.6% 0.9%

According to a MarketWatch article1on the price increase:Netflix said Monday that customers who learned in April that the price was about to increase had begun canceling their subscriptions, leading to unexpected “churn.” Netflix did not flat-out say inits letter to investorsthat the price increase led to higher churn among subscribers, however, instead saying it coincided with “press coverage” of the rate hike and that subscribers misunderstood “the news as an impending new price increase rather than the completion of two years of grandfathering.”The stock market reacted to news of Netflix price increase as well. The stock closed at $102.23 as of March 31, 2016. After the release of second quarter earnings in July, the stock price had fallen to $85.84 per share, a decline of 16%. This decline wiped out almost $7 billion of shareholder value during this period. Most of this decline was immediately following the release of the second quarter numbers.With competition increasing in for streaming services, especially with the growth of Amazon Prime Video and Hulu, the decline in membership growth could be a troubling sign.After review of the information above, consider your role as a consultant, and begin to develop a method of explaining what the situation is about. Offer convincing evidence of deep thought, and address the following;

1. Calculate the the price difference from the first quarter to the end of the third quarter. (2 consecutive quarters). You may use the List Price, however this does not reflect the impact over a specific period prior to the increase. Alternatively, you could use the Monthly Revenue Per member and calculate the difference from this provided data.

2. Calculate the change in membership. Estimate the loss in membership from the price increase. Consider the average growth over the four quarters –growth projected (average number of subscribers), and consider the real data of number of subscribers added. How many subscribers have they lost?

3.Anticipate the impact of the price increase to revenue, and marginal cost.Based on the elasticity of demand, and your review of the data, will you advise Netflixto institute another price increase in the next 3 years to support expanded programing?

Quagmire Inc. has prepared the following sales budget for the quarter of April, May and June:

All of the sales are on credit.
Quagmire collects from customers as follows:

40% of sales in the month of sale
25% in the month following the sale, and
35% in the second month following the sale.

Quagmire expects cost of goods sold to be 60% of sales.
They keep 10% of next months expected cost of goods sold in ending inventory. Below are budgeted purchases of inventory.
All purchases are paid for in the SAME month as the purchase.

Below is the budget for variable and fixed selling and administrative expenses.
Selling and admin expenses are paid in the month AFTER they are incurred.
Fixed expenses include depreciation of 13500 each month.

Quagmire has $185000 of cash on hand at he beginning of May.

Prepare a cash budget for May and June. (Use excel so that multiple attempts are easier.)

1. Compute the beginning balance in cash for June.  

2. Compute the ending balance in cash for June.  

INFO 564 Homework Assignment 5 (100 pts)

This work must be done completely in EXCEL. Answer each question on a separate tab. Label each tab appropriately. You can copy and paste the data given into an Excel worksheet.

South Shore Construction builds permanent docks and seawalls along the southern shore of Long Island, New York. The following data show quarterly sales revenues (in $’000s) for the past 5 years.

Question 1 (5 pts)

Plot this data with quarters from years 1-5 on the horizontal axis. What components do you see in this time series?

Question 2 (20 pts)

Ignore any trend or seasonality in the data.

1. Suppose the company uses moving averages to make forecasts. Make forecasts all the way through Q4 Year 5. Assume the company uses (i) 3-quarterly moving averages and (ii) 4-quarterly moving averages.
2. Compare the two sets of forecasts from (a) on the basis of Mean Absolute Percent Deviation. Which is more accurate – 3 quarterly moving average or 4 quarterly moving average?
3. On a line chart plot the time series along with the forecasts from the method you select in (b).

Question 3 (20 pts)

Ignore any trend or seasonality in the data.

1. Suppose the company uses weighted moving averages to make forecasts. Make forecasts all the way through Q4 Year 5. Assume the company uses (i) 3-quarterly moving averages with weights 0.6, 0.3, and 0.1 and (ii) 4-quarterly moving averages with weights 0.4, 0.3, 0.2, and 0.1. In both cases the most weight is given to the most recent quarter and the least to the oldest quarter in the moving average.
2. Compare the two sets of forecasts from (a) on the basis of Mean Absolute Percent Deviation. Which is more accurate – 3 quarterly weighted moving average or 4 quarterly weighted moving average?
3. On a line chart plot the time series along with the forecasts from the method you select in (b).

Question 4 (20 pts)

Again ignore any trend or seasonality in the data.

1. Suppose the company uses exponential smoothing to make forecasts. What are the forecasts for periods Q2 Year 1 through Q4 Year 5 assuming (i) alpha = 0.3 and (ii) alpha = 0.7? In both cases assume that the forecast for Q1 Year 1 was 25 units.
2. Compare the two sets of forecasts from (a) on the basis of Mean Absolute Percent Deviation. Which is more accurate – alpha of 0.3 or alpha of 0.7?
3. On a line chart plot the time series along with the forecasts from the method you select in (b)

Question 5 (20 pts)

Now make adjustments for trend and seasonality.

1. Quantify the trend in the time series. What does the trend equation tell you?
2. Quantify the seasonality in the time series by calculating seasonality indexes. What do these indexes tell you?
3. Using the trend and the seasonality information from (a) and (b) make forecasts from Q1 Year 1 through Q4 Year 5.
4. Calculate the Mean Absolute Percent Deviation for the forecasts in (c).
5. On a line chart plot the time series along with the forecasts from (c).

Question 6 (15 pts)

Using the most accurate method of all of the above,

1. Make forecasts for the four quarters of Year 6.
2. Plot these forecasts on the same line chart as the time series.
3. Summarize in a few lines your findings from your answers to Q1 through Q6b. I really need answer to question 4 and 5 please. Thank you.

Chataqua Can Company manufactures metal cans used in the food-processing industry. A case of cans sells for $30. The variable costs of production for one case of cans are as follows:

Variable selling and administrative costs amount to $0.90 per case. Budgeted fixed manufacturing overhead is $588,000 per year, and fixed selling and administrative cost is $42,500 per year. The following data pertain to the company’s first three years of operation.

Actual costs were the same as the budgeted costs.

Required:

1. Prepare operating income statements for Chataqua Can Company for its first three years of operations using:

1. Absorption costing.

2. Variable costing.

2. Reconcile Chataqua Can Company’s operating income reported under absorption and variable costing for each of its first three years of operation. Use the shortcut method.

3. Suppose that during Chataqua’s fourth year of operation actual production equals planned production, actual costs are as expected, and the company ends the year with no inventory on hand.

1. What will be the difference between absorption-costing income and variable-costing income in year 4?

2. What will be the relationship between total operating income for the four-year period as reported under absorption and variable costing?

Chataqua Can Company manufactures metal cans used in the food-processing industry. A case of cans sells for $25. The variable costs of production for one case of cans are as follows:

Variable selling and administrative costs amount to $0.60 per case. Budgeted fixed manufacturing overhead is $300,000 per year, and fixed selling and administrative cost is $38,000 per year. The following data pertain to the company’s first three years of operation.

Actual costs were the same as the budgeted costs.

Required:

1. Prepare operating income statements for Chataqua Can Company for its first three years of operations using:

1. Absorption costing.

2. Variable costing.

2. Reconcile Chataqua Can Company’s operating income reported under absorption and variable costing for each of its first three years of operation. Use the shortcut method.

3. Suppose that during Chataqua’s fourth year of operation actual production equals planned production, actual costs are as expected, and the company ends the year with no inventory on hand.

1. What will be the difference between absorption-costing income and variable-costing income in year 4?

2. What will be the relationship between total operating income for the four-year period as reported under absorption and variable costing?

Absorption and Variable Costing Income Statements

During the first month of operations ended July 31, YoSan Inc. manufactured 9,200 flat panel televisions, of which 8,600 were sold. Operating data for the month are summarized as follows:

Required:

1. Prepare an income statement based on the absorption costing concept.

Feedback

1. Sales - (cost of goods manufactured - ending inventory*) = Gross profit; gross profit - selling and administrative expenses = income from operations
*(Manufactured Units - Sold units) x (total manufacturing costs/manufactured units)

Learning Objective 1 and Learning Objective 2.

2. Prepare an income statement based on the variable costing concept.

Case Study:
Trump De Tomato Ltd (TDT) is a company in aquacultural industry specialised in farming of aquatic
organisms. TDT is considering opening a new farm in Sandy Bay. This project would involve the purchase
of 13 hectares land at a price of $1,000,000 (Note that: The land is not subject to depreciation for accounting
and tax purposes). In addition to that, the company will need to purchase eight special equiments which cost
$125,000 each. The equipments are expected to be in use for 5 years and after that, they will be scrapped
without any residual value. Each year, each of these equipments will incur $5,000 maintenance cost. It is
assumed that the farm will first be used at the beginning of the next financial year: 1 July 2022.
Before starting this new operation, TDT will need to redevelop and renovate the warehouse at the farm. This
is expected to cost $200,000. Assume that TDT is not able to claim any annual tax deduction for the capital
expenditure to the renovation of the building until the business is sold.
Revenue projections from the farm for the next five years are as follows:
Year 1 Year 2 Year 3 Year 4 Year 5
Beginning 1/7/2022 1/7/2023 1/7/2024 1/7/2025 1/7/2026
Ending 30/6/2023 30/6/2024 30/6/2025 30/6/2026 30/6/2027
Production quantity (tons) 120 140 170 185 185
Price (per tons) $9,000 $9,150 $9,250 $9,300 $9,350
Operating variable costs associated with the new business including material costs and labour costs.
Estimated material costs per ton in year 1 is $2,000 and this cost will increase by 3.5% every year. The farm
will require about 6 workers working for 8 hours a day, 200 days per year. The pay rate is flat at $20/ hour
including superannuation. Annual operating fixed costs associated with production (excluding depreciation)
are $100,000. Existing administrative costs are $550,000 per annum. As a result of the new operation, these
administrative costs will increase by 30%. The company is subject to a tax rate of 30% on its profits.
Meanwhile, TDT Ltd is currently financed by 60% of equity and 40% of debt. Company’s bond is traded at
a price of $980. The bond has 10 year term, 8% coupon rate paid semi-annually and face value of $1,000. In
addition, company’s equity has a beta of 1.2 while the risk-free rate in the market is 3% and market portfolio
return is estimated to be 12%.
P. De Potato, the company CFO would like you to help him examine the viability of the project for the next
five years, taking into account the projections of sales and operations costs prepared by company’s
accountants.

quesstion 1: Using sensitivity analysis, recalculate NPV using the scenario of a. A decrease in project sales by 10% annually. b. An increase of the sale price by 5% annually c. An increase of material costs change from 3.5% to 8% Briefly comment on your results.