Are America's top chief executive officers (CEOs) really worth all that money? One way to answer this question is to look at row B, the annual company percentage increase in revenue, versus row A, the CEO's annual percentage salary increase in that same company. Suppose that a random sample of companies yielded the following data:

B: Percent increase for company 37 7 12 7 21 18 17 10

A: Percent increase for CEO 28 10 9 3 26 16 20 7

Do these data indicate that the population mean percentage increase in corporate revenue (row B) is different from the population mean percentage increase in CEO salary? Assume that the distribution of differences is approximately normal, mound-shaped and symmetric. Use a 1% level of significance. Find (or estimate) the P-value.

Select one answer:

a. 0.02 < P-value < 0.05

b. 0.01 < P-value < 0.02

c. 0.25 < P-value < 0.50

d. P-value = 0.05

e. P-value = 0.25

Consider the following stock price and shares outstanding information.

1. Compute the beginning and ending values for a price-weighted index and a market-value-weighted index. Assume a base value of 100 and Year 1 as the base period. Do not round intermediate calculations. Round your answers to two decimal places.

             PWI_{Year 1}:

             PWI_{Year 2}:

             VWI_{Year 1}:

             VWI_{Year 2}:

2. Compute the percentage change in the value of each index during the year. Do not round intermediate calculations. Round your answers to two decimal places.

   Percentage change in PWI:   %

   Percentage change in VWI:   %

3. Compute the percentage change for an unweighted index assuming $1,000 is invested in each stock. Do not round intermediate calculations. Round your answer to two decimal places.

     %

Schrader Cellars uses the FIFO method in its two department process costing system: Fermenting (grape sorting is part of the fermentation process) and Packaging. Direct materials (grapes) are added at the beginning of the fermenting process and at the end of the packaging process (bottles). Conversion costs are added evenly throughout each process. Data from the month of March for the Fermenting Department are below:

Beginning work in process inventory:

            Units in beginning work in process inventory            3,000 gallons

            Materials costs                                                            $122,000

            Conversion costs                                                         $7,000

            Percentage complete with respect to materials           100%

            Percentage complete with respect to conversion        50%

Units started into production during the month                      5,000 gallons

Materials costs added during the month                                 $250,000

Conversion costs added during the month                             $30,000

Ending work in process inventory:

            Units in ending work in process                                 2,000 gallons

            Percentage complete with respect to materials           100%

            Percentage complete with respect to conversion        75%

REQUIRED:

1. Prepare a FIFO production report for the Fermentation Department for Schrader Cellars for the month ended December 31, 2018.

Can you please form a balance sheet and income statement with the information:

Start-up costs for the business will require a large amount of expenses. First a section of land will need to be purchased. This area is expected to be 500ft2. This is a sufficient quantity of space to build the warehouse where will growing will be undertaken. The warehouse will be 300ft2. This size means there will be enough room for all business activities such as growing, organizing and distribution to occur. The block of land will be purchased in the rural Hamilton area, ten minutes’ drive from the CBD. The projected cost of the land along is $500,000. The cost to build the warehouse will be a further $1M, this will include the cost of erecting the building and all other expense’s related to its construction. The combined $1.5M will be funded through bank loans and government funding, which will cover approximately $100,000

Once the land and warehouse is built, operations will begin and other expenses will need to be accounted for. Electricity, internet and telephone will be the greatest expense worth $3000 per month. This is mainly due to the high usage of UV lighting throughout the plant to grow the cannabis. Staff wages will account for $500,000, $50,000 annually and ten staff employed. Operating expenses will be $10,000 yearly, this is for advertising and marketing. Depreciation of all machinery assets is calculated by 10% p.a straight-line method. These machines will cost $500,000 to purchase and used assist the growth cycle of the cannabis. Cost of goods sold per year will equal $275,000, this is mainly the seeds which are imported for growth. Revenue is projected to be $1.5M annually.

Overall, the start-up costs for the business will be $2M. To pay for this, $100,000 will be funded by the government and the remaining sum of $1.9M will be loaned from a bank over 10 years. Interest is 5% and loan repayments per year will be $190,000 add interest.

Assets of the company are land, valued at $500,000. Warehouse, valued at $1,000,000. Machinery, valued at $500,000 deprecated using straight line method at 5%.

Accounts receivable is $50,000.

Accounts payable is $125,000.

Canyon Buff Corp. has developed a new construction chemical that greatly improves the durability and weatherability of cement-based materials. After spending $500,000 on the research of the potential market for the new chemical, Canyon Buff is considering a project that requires an initial investment of $9,000,000 in manufacturing equipment.

• The equipment must be purchased before the chemical production can begin. For tax purposes, the equipment is subject to a 5-year straight-line depreciation schedule, with a projected zero salvage value. For simplicity, however, we will continue to assume that the asset can actually be used out into the indefinite future (i.e., the actual useful life is effectively infinite).

• Canyon Buff anticipates that the sales will be $30,000,000 in the first year (Year 1). They expect that sales will initially grow at an annual rate of 6% until the end of sixth year. After that, the sales will grow at the estimated 2% annual rate of inflation in perpetuity.

• The cost of goods sold is estimated to be 72% of sales.

• The accounting department also estimates that at introduction in Year 0, the new product's required initial net working capital will be $6,000,000. In future years accounts receivable are expected to be 15% of the next year sales, inventory is expected to be 20% of the next year’s cost of goods sold and accounts payable are expected to be 15% of the next year’s cost of goods sold.

• The selling, general and administrative expense is estimated to be $6,000,000 per year, but $1 million of this amount is the overhead expense that will be incurred even if the project is not accepted.

• The market research to support the product was completed last month at a cost of $500,000 to be paid by the end of next year.

• The annual interest expense tied to the project is $1,000,000

• Canyon Buff has a cost of capital of 20% and faces a marginal tax rate of 30% and an average tax rate is 20%.

QUESTION:

Calculate six-year projections for free cash flows. Remember to include cash flows from the income statement and depreciation, changes in net working capital, and capital expenditures or dispositions.

Canyon Buff Corp. has developed a new construction chemical that greatly improves the durability and weatherability of cement-based materials. After spending $500,000 on the research of the potential market for the new chemical, Canyon Buff is considering a project that requires an initial investment of $9,000,000 in manufacturing equipment.

• The equipment must be purchased before the chemical production can begin. For tax purposes, the equipment is subject to a 5-year straight-line depreciation schedule, with a projected zero salvage value. For simplicity, however, we will continue to assume that the asset can actually be used out into the indefinite future (i.e., the actual useful life is effectively infinite).

• Canyon Buff anticipates that the sales will be $30,000,000 in the first year (Year 1). They expect that sales will initially grow at an annual rate of 6% until the end of sixth year. After that, the sales will grow at the estimated 2% annual rate of inflation in perpetuity.

• The cost of goods sold is estimated to be 72% of sales.

• The accounting department also estimates that at introduction in Year 0, the new product's required initial net working capital will be $6,000,000. In future years accounts receivable are expected to be 15% of the next year sales, inventory is expected to be 20% of the next year’s cost of goods sold and accounts payable are expected to be 15% of the next year’s cost of goods sold.

• The selling, general and administrative expense is estimated to be $6,000,000 per year, but $1 million of this amount is the overhead expense that will be incurred even if the project is not accepted.

• The market research to support the product was completed last month at a cost of $500,000 to be paid by the end of next year.

• The annual interest expense tied to the project is $1,000,000

• Canyon Buff has a cost of capital of 20% and faces a marginal tax rate of 30% and an average tax rate is 20%.

QUESTION:

Use Excel to construct six-year pro forma income statements and calculate the incremental unlevered net income for the first six years.

Question:

In Case 1, when calculating incremental unlevered net income, should we include all the expenses mentioned in the case? If not, what expenses should we exclude and why?

Case 1:

Chem Tough Corp. has developed a new construction chemical that greatly improves the durability and weatherability of cement-based materials. After spending $500,000 on the research of the potential market for the new chemical, Chem Tough is considering a project that requires an initial investment of $9,000,000 in manufacturing equipment.

 The equipment must be purchased before the chemical production can begin. For tax purposes, the equipment is subject to a 5-year straight-line depreciation schedule, with a projected zero salvage value. For simplicity, however, we will continue to assume that the asset can actually be used out into the indefinite future (i.e., the actual useful life is effectively infinite).

 Chem Tough anticipates that the sales will be $30,000,000 in the first year (Year 1). They expect that sales will initially grow at an annual rate of 6% until the end of sixth year. After that, the sales will grow at the estimated 2% annual rate of inflation in perpetuity.

 The cost of goods sold is estimated to be 72% of sales.

 The accounting department also estimates that at introduction in Year 0, the new product's required initial net working capital will be $6,000,000. In future years accounts receivable are expected to be 15% of the next year sales, inventory is expected to be 20% of the next year’s cost of goods sold and accounts payable are expected to be 15% of the next year’s cost of goods sold.

 The selling, general and administrative expense is estimated to be $6,000,000 per year, but $1 million of this amount is the overhead expense that will be incurred even if the project is not accepted.

 The market research to support the product was completed last month at a cost of $500,000 to be paid by the end of next year.

 The annual interest expense tied to the project is $1,000,000.

 Chem Tough has a cost of capital of 20% and faces a marginal tax rate of 30% and an average tax rate is 20%.

Problem 17-3A Applying activity-based costing LO P1, P3, A1, A2, C3

[The following information applies to the questions displayed below.]

Craft Pro Machining produces machine tools for the construction industry. The following details about overhead costs were taken from its company records.

Additional information on the drivers for its production activities follows.

Problem 17-3A Parts 2, 3 & 4

2, 3 & 4. Compute the activity overhead rates using ABC. Combine the grinding and polishing activities into a single cost pool. Determine overhead costs to assign to the following jobs using ABC. What is the overhead cost per unit for Job 3175? What is the overhead cost per unit for Job 4286? (Round your activity rate and average overhead cost per unit to 2 decimal places. Round "overhead assigned" to the nearest whole dollar.)
                                               

                                       Overhead Cost----Activity Drivers-----Activity Rate---Activity Driver incurred----------Overhead assigned------Activity Driver incurred------Overhead Assigned

Grinding and Polishing---------------------------/--------------/Machine Hours-------------/--------------------------------/-------------------------------------/------------------------------------/------------------------------------l

Product Modification-----------------------------/---------------/Engineering Hours--------/--------------------------------/-------------------------------------/------------------------------------/-------------------------------------l

Providing Power----------------------------------/----------------/Direct Labor Hours--------/-------------------------------/--------------------------------------/------------------------------------/-------------------------------------l

System Calibration-----------------------------/---------------/batches-------------------------/-------------------------------/--------------------------------------/-------------------------------------/------------------------------------l

Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. The company has two manufacturing departments--Molding and Fabrication. It started, completed, and sold only two jobs during March—Job P and Job Q. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March):

Sweeten Company had no underapplied or overapplied manufacturing overhead costs during the month.

Required:

For questions 1-8, assume that Sweeten Company uses a plantwide predetermined overhead rate with machine-hours as the allocation base. For questions 9-15, assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments.

1. What was the company’s plantwide predetermined overhead rate?

2. How much manufacturing overhead was applied to Job P and how

3. What was the total manufacturing cost assigned to Job P?

4. If Job P included 20 units, what was its unit product cost?

5. What was the total manufacturing cost assigned to Job Q?

6. If Job Q included 30 units, what was its unit product cost?

7. Assume that Sweeten Company used cost-plus pricing (and a markup percentage of 80% of total manufacturing cost) to establish selling prices for all of its jobs. What selling price would the company have established for Jobs P and Q? What are the selling prices for both jobs when stated on a per unit basis assuming 20 units were produced for Job P and 30 units were produced for Job Q?

8. What was Sweeten Company’s cost of goods sold for March?

9. What were the company’s predetermined overhead rates in the Molding Department and the Fabrication Department?

10. How much manufacturing overhead was applied from the Molding Department to Job P and how much was applied to Job Q?

11. How much manufacturing overhead was applied from the Fabrication Department to Job P and how much was applied to Job Q?

12. If Job P included 20 units, what was its unit product cost?

13. If Job Q included 30 units, what was its unit product cost?

14. Assume that Sweeten Company used cost-plus pricing (and a markup percentage of 80% of total manufacturing cost) to establish selling prices for all of its jobs. What selling price would the company have established for Jobs P and Q? What are the selling prices for both jobs when stated on a per unit basis assuming 20 units were produced for Job P and 30 units were produced for Job Q?

15. What was Sweeten Company’s cost of goods sold for March?

Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. The company has two manufacturing departments--Molding and Fabrication. It started, completed, and sold only two jobs during March—Job P and Job Q. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March): Molding Fabrication Total Estimated total machine-hours used 2,500 1,500 4,000 Estimated total fixed manufacturing overhead $ 12,500 $ 16,500 $ 29,000 Estimated variable manufacturing overhead per machine-hour $ 2.40 $ 3.20 ________________________________________ Job P Job Q Direct materials $ 23,000 $ 13,000 Direct labor cost $ 29,000 $ 11,500 Actual machine-hours used: Molding 2,700 1,800 Fabrication 1,600 1,900 Total 4,300 3,700 ________________________________________ Sweeten Company had no underapplied or overapplied manufacturing overhead costs during the month. Required: For questions 1-8, assume that Sweeten Company uses a plantwide predetermined overhead rate with machine-hours as the allocation base. For questions 9-15, assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments. 1. What was the company’s plantwide predetermined overhead rate? 2. How much manufacturing overhead was applied to Job P and how 3. What was the total manufacturing cost assigned to Job P? 4. If Job P included 20 units, what was its unit product cost? 5. What was the total manufacturing cost assigned to Job Q? 6. If Job Q included 30 units, what was its unit product cost? 7. Assume that Sweeten Company used cost-plus pricing (and a markup percentage of 80% of total manufacturing cost) to establish selling prices for all of its jobs. What selling price would the company have established for Jobs P and Q? What are the selling prices for both jobs when stated on a per unit basis assuming 20 units were produced for Job P and 30 units were produced for Job Q? 8. What was Sweeten Company’s cost of goods sold for March? 9. What were the company’s predetermined overhead rates in the Molding Department and the Fabrication Department? 10. How much manufacturing overhead was applied from the Molding Department to Job P and how much was applied to Job Q? 11. How much manufacturing overhead was applied from the Fabrication Department to Job P and how much was applied to Job Q? 12. If Job P included 20 units, what was its unit product cost? 13. If Job Q included 30 units, what was its unit product cost? 14. Assume that Sweeten Company used cost-plus pricing (and a markup percentage of 80% of total manufacturing cost) to establish selling prices for all of its jobs. What selling price would the company have established for Jobs P and Q? What are the selling prices for both jobs when stated on a per unit basis assuming 20 units were produced for Job P and 30 units were produced for Job Q? 15. What was Sweeten Company’s cost of goods sold for March?