Question 3.4 Conduct a sensitivity analysis and use margin of safety to give Crooked Creek wine advice about two different proposed labour costing methods. Crooked Creek Wines operates a cellar door venue in which customers can sample and purchase wines. The average revenue per day is $750, variable cost per day is $250 and annual fixed costs for the cellar door operations is $95,000. Assume 290 operating days. Calculate the margin of safety in units and dollars and the margin of safety percentage based on the information above. If Crooked Creek Wines considers changing the labour costs for cellar door operations to include a commission for all wine sales of 2.5%, this would reduce the fixed costs to $90,000. Calculate the degree of operating leverage at 290 operating days under the two options – the present cost structure and the commission.

a) Calculate the degree of operating leverage at 290 operating days under the two options – the present cost structure and the commission.

b) Write a short summary of your analysis and include any recommendations to the management of Crooked Creek Wines

Hickory Company manufactures two products—14,000 units of Product Y and 6,000 units of Product Z. The company uses a plantwide overhead rate based on direct labor-hours. It is considering implementing an activity-based costing (ABC) system that allocates all of its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products Y and Z:

To celebrate their Queen’s 90^th birthday, the country of Wonderland has decided to bake the world’s largest cake. The main ingredient of the cake will be flour. It has been estimated that the cake will use 50,000 tons of flour, which represents 20% of the current supply of flour. The current price of flour is $4000 per ton. Previous study has shown the elasticity of supply, ε_s, for flour to be 0.3 and the elasticity of demand, ε_d to be -1.2.

a. Assuming linear demand curves, what is the percentage change in the price of flour you would anticipate as a result of this project? What do you expect to be the change in quantity supplied as well as the change in quantity demanded by private consumers? What is the opportunity cost of flour that you would use in a cost-benefit analysis of this project?

[Hint: Es = (ΔQs/ΔP)(P/Qs) and Ed =(ΔQd/ΔP)(P/Qd) where Qs is current supply and P is current price.

Note that the amount of flour demanded by the project Qp = ΔQs – ΔQd]

b. Sketch the supply and demand for flour and show the opportunity cost on your sketch.

1. Use the following information to work Problems (1) through (4):

You work for a lab that is considering leasing diagnostic equipment. The cost of the equipment is $6,300,000, and it would be depreciated straight-line to zero over four years. The equipment will be completely valueless in four years. You can lease it for $1,875,000 per year for four years.

1. Assume that the tax rate is 35 percent. You can borrow at 8 percent before taxes. Should you lease or buy?
2. What would the lease payment have to be for you to be indifferent about the lease?   
3. Assume that your company does not anticipate paying taxes for the next several years (you can not use the tax shield from leasing payment or asset depreciation; the cost of debt is the same as pretax cost). What are the cash flows from leasing in this case? Should you lease or buy?
4. Rework Problem 1 assuming that the scanner will be depreciated as three-year property under MACRS.

Cieslinski Corporation is conducting a time-driven activity-based costing study in its Tech Support Department. The company has provided the following data to aid in that study: Cieslinski Corporation Tech Support Department Data Inputs Resource Data: Number of employees 12 Average salary per employee $ 43,200 Weeks of employment per year 50 Minutes available per week (40 hours × 60 minutes) 2,400 Practical capacity percentage 80 % Activity Data: Routing Calls Resolving Problems Preparing Change Orders Minutes per unit of the activity 20 26 46 Cost Object Data: Customer G Customer H Customer I Number of calls routed 27 23 7 Number of problems resolved 16 9 9 Number of change orders prepared 0 1 0 On the Customer Cost Analysis report in time-driven activity-based costing, the total cost assigned to Customer I would be closest to: Multiple Choice $168.30 $105.30 $63.00 $0.00

Scenario 3 A company manufacturing computer chips finds that 8% of all chips manufactured are defective. Management is concerned that employee inattention is partially responsible for the high defect rate. In an effort to decrease the percentage of defective chips, management decides to offer incentives to employees who have lower defect rates on their shifts. The incentive program is instituted for one month. If successful, the company will continue with the incentive program. Questions 11 to 16 pertain to Scenario 3. Question 11 (1 point) Saved What is the company's null and alternative hypotheses? Question 11 options: a) Ho: p = .08 HA: p = .92 b) Ho: p = .08 HA: p < .08 c) Ho: p > .92 HA: p < ..08 d) Ho: p < .92 HA: p = .08 Question 12 (1 point) Saved Which of the following would describe a Type I error? Question 12 options: a) Deciding that the percentage of defective chips has increased b) Deciding that the percentage of defective chips has not changed c) Deciding that the percentage of defective chips has not decreased when in fact it has d) Deciding that the percentage of defective chips has decreased when it has not Question 13 (1 point) Saved Which of the following would describe a Type II error? Question 13 options: a) Deciding that the percentage of defective chips has increased b) Deciding that the percentage of defective chips has not changed c) Deciding that the percentage of defective chips has not decreased when in fact it has d) Deciding that the percentage of defective chips has decreased when it has not Question 14 (1 point) Saved Based on the data they collected during the trial program, management found that a 95% confidence interval for the percentage of defective chips was (5.0%, 7.0%). What conclusion should management reach about the new incentive program? Question 14 options: a) The data is inconclusive and does not provide any convincing evidence b) The data provides convincing evidence that the incentive program lowers the defect rate c) The data provides convincing evidence that the incentive program was not effective and did not change the defect rate d) The data provides convincing evidence that the incentive program actually increases the defect rate Question 15 (1 point) Saved What level of significance did management use when they found that a 95% confidence interval for the percentage of defective chips was (5.0%, 7.0%)? Question 15 options: a) 5% b) 95% c) 2.5% d) 97.5% Question 16 (1 point) Saved Management decided to extend the incentive program so that the decision can be made on three months of data instead. Will the power of the program increase, decrease, or remain the same? Question 16 options: a) The power would increase because of the larger sample size b) The power would decrease because of the larger sample size c) The power would increase because of the large population d) The power would remain the same since the population does not change

Crystal Displays Inc. recently began production of a new product, flat panel displays, which required the investment of $1,400,000 in assets. The costs of producing and selling 5,000 units of flat panel displays are estimated as follows:

Crystal Displays Inc. is currently considering establishing a selling price for flat panel displays. The president of Crystal Displays has decided to use the cost-plus approach to product pricing and has indicated that the displays must earn a 11% rate of return on invested assets.

I NEED THE DIFFERENTIAL ANALYSIS DONE PLEASE!!! IF YOU DO ANY PART OF THIS AT ALL PLEASE DO THE DIFFERENCIAL ANALYSIS!!

6. A. Prepare a differential analysis of the proposed sale to Maple Leaf Visual Inc. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter “0”. A colon (:) will automatically appear if required.

Question not attempted.

Score: 0/53

THIS!!! THANK YOU.

Fishwick Enterprises has 207,500 shares outstanding, half of which are owned by Jennifer Fishwick and half by her cousin. The two cousins have decided to sell 105,000 shares in an IPO. Half of these shares would be issued by the company to raise new cash, and half would be shares that are currently held by Jennifer Fishwick. Suppose that the shares are sold at an issue price of $50 but rise to $80 by the end of the first day’s trading. Suppose also that investors would have been prepared to buy the issue at $80.

a. What percentage of the company will Jennifer own after the issue? (Round your answer to the nearest whole percentage.)

b. What will her holding be worth at the end of the first day’s trading?

c. Suppose the issue had been priced at $80. How many shares would the company have needed to sell to raise the same gross proceeds from the IPO?

d. What in this case would be Jennifer’s wealth (cash plus the value of her remaining holding)? (Enter your answer in millions rounded to 1 decimal place.)

e. What is the cost of underpricing to Jennifer in dollars? (Enter your answer in millions rounded to 1 decimal place.)

Pietro Frozen Foods, Inc., produces frozen pizzas. For next year, Pietro predicts that 52,900 units will be produced, with the following total costs:

Next year, Pietro expects to purchase $121,000 of direct materials. Projected beginning and ending inventories for direct materials and work in process are as follows:

Next year, Pietro expects to produce 52,900 units and sell 52,200 units at a price of $15.00 each. Beginning inventory of finished goods is $41,500, and ending inventory of finished goods is expected to be $33,000. Total selling expense is projected at $28,500, and total administrative expense is projected at $116,000.

Required:

1. Prepare an income statement in good form. Round the percent to four decimal places before converting to a percentage. For example, .88349 would be rounded to .8835 and entered as 88.35.

2. What if the cost of goods sold percentage for the past few years was 52.04 percent? Management's reaction might be:

Fishwick Enterprises has 207,500 shares outstanding, half of which are owned by Jennifer Fishwick and half by her cousin. The two cousins have decided to sell 105,000 shares in an IPO. Half of these shares would be issued by the company to raise new cash, and half would be shares that are currently held by Jennifer Fishwick. Suppose that the shares are sold at an issue price of $50 but rise to $80 by the end of the first day’s trading. Suppose also that investors would have been prepared to buy the issue at $80.

a. What percentage of the company will Jennifer own after the issue? (Round your answer to the nearest whole percentage.)

b. What will her holding be worth at the end of the first day’s trading?

c. Suppose the issue had been priced at $80. How many shares would the company have needed to sell to raise the same gross proceeds from the IPO?

d. What in this case would be Jennifer’s wealth (cash plus the value of her remaining holding)? (Enter your answer in millions rounded to 1 decimal place.)

e. What is the cost of underpricing to Jennifer in dollars? (Enter your answer in millions rounded to 1 decimal place.)