Type II Diabetes is a costly and potentially debilitating disease. The total costs incurred over a lifetime by a person with Type 2 diabetes were recently estimated to be $85,000 – from treating the disease directly, and complications like nerve damage, amputations, and stroke. Consider a simplified model of the market for health insurance, where diabetes is the only future health risk people face. Assume that there are 1,000 people classified as “normal weight” and 1,000 people classified as “overweight.” Normal weight people face a 20% chance of developing Type II diabetes in their lifetime, and overweight people a 30% chance. Assume an individual can expect to earn $2,000,000 over the course of their lifetime. Additionally, assume individuals spend all their money on consumption, and u(c)=c. Ignore any intertemporal considerations of interest rates, inflation or discount factors, i.e. r=0. Suppose insurance companies may measure the weight of an individual prior to offering them an insurance contract, and price their contract based on the result. Assume the only costs the insurance company faces are payments for medical costs if a person develops diabetes, that insurance companies are risk-neutral, and that the market for providing insurance is perfectly competitive. What prices for insurance contracts will be offered? p(normal weight)= ?? p(overweight)= ?? What will be the consumer and producer surplus in this market? CS= ?? PS= ??

(I have already calculated myself how much people are willing to pay for insurance so please answer the questions I have stated here)

A Ltd specialises in the distribution of pharmaceutical products. It buys from pharmaceutical companies and re-sells to each of the three different distribution channels: (i) General supermarket chains, (ii) Drug store chains, and (iii) Individual chemist shops. The company plans to use activity-based costing for analysing the profitability of its distribution channels. The following data relates to the quarter ending March 2020. Particulars General supermarket chains Drug store chains Individual chemist shops Average sales per delivery $96,500 $32,450 $6,225 Average cost of goods sold per delivery $94,650, $31,800, $5,950 Number of deliveries 960 ,2,470, 8,570 Number of orders 1,000, 2,650, 9,500 Average number of cartons shipped per delivery 250 75 12 Average number of hours of shelf stocking per delivery 2, 0.5, 0.1 The following information is available in respect of operating costs (other than cost of goods sold) for the quarter ending March 2020. Activity areas Cost Cost driver Customer purchase order processing $591,750 Purchase orders by customers Customer store delivery $960,000 Number of deliveries Cartons dispatched to customer stores $792,135 Number of cartons dispatched to customer stores Shelf stocking at customer location $80,240 Hours of shelf stocking Required: (a) Calculate the activity cost driver rates for each of the activity areas. (b) Prepare an income statement showing details of each distribution channel for the quarter ending March 2020 using activity-based costing.

Pharma Save Ltd specialises in the distribution of pharmaceutical products. It buys from pharmaceutical companies and re-sells to each of the three different distribution channels: (i) General supermarket chains, (ii) Drug store chains, and (iii) Individual chemist shops. The company plans to use activity-based costing for analysing the profitability of its distribution channels. The following data relates to the quarter ending March 2020.

The following information is available in respect of operating costs (other than cost of goods sold) for the quarter ending March 2020.

Required:

1. Calculate the activity cost driver rates for each of the activity areas.

2. Prepare an income statement showing details of each distribution channel for the quarter ending March 2020 using activity-based costing.

Do you agree or disagree with the selected aspects for an organization? Explain

The three key aspects that a company must consider when developing a successful loyalty and reward program complete satisfaction of the customer needs, give the customer ultimate pleasure in buying the services or products with their loyalty program; in addition, if the consumer spends more genuinely they get more back on their loyalty or reward program, which they will want to focus on the same loyalty program that offers them savings. Customers frown upon any changes to their loyalty program that is not totally benefiting the consumer. “Loyalty program managers are frequently asked to find ways to tighten down budgets within their programs; it is also the case that senior executives do not always have data demonstrating the importance of their program as it contributes to return on investment or ROI. Consequently, programs are often cut or changed in ways that may negatively influence consumers”. Many customers just love their reward program with their vendors; furthermore, it makes the customer spend more with the vendor as well. For instance, I truly love Steven Madden shoes, they have a rewards program that is amazingly great; moreover, you get points for just signing up for the rewards program. All companies are gearing for customers to have a death do us apart relationship with their services or products based on their loyalty program.

     When developing any time of advertising strategy to lure consumers to buy their product or services; consequently, you will have a deal with cost or decrease in the value of the company in order to maintain the loyalty or reward program. For example, “Restaurant chain Chart House program, the Aloha Club, offered free around the world trips to any member who ate in all 65 Chart House restaurants. Unfortunately, the company underestimated the zeal of its 300,000 members. Forty-one members qualified, costing the company a considerable sum of money” (Winer, 2016 pg. 429). Many consumers think they are getting great deals; in addition, at low cost too. Customers and the companies tend to try to get over each other in this marketing structure. “Reward programs are incentives designed to create loyalty among customers with the idea that they can provide the best rewards to the “best” customers. Loyal customers are, by definition, less price-sensitive customers. However, managers frequently question the value of their reward programs and wonder what, if any, incrementality is gained from offering rewards for customer patronage. Consequently, managers are frequently challenged to think of ways to manage their loyalty programs that reward high patronage without creating “deal” seeking customers and without further discounting price”. Consumers only want the deals; consequently, the company wants the long-term shopper, without a return of investments

1. Archway Adventures has compiled data for 2017 on customer orders by region and product group as follows:

Let us assume that these are representative of the pattern of orders that they anticipate seeing in 2018.

1. What is the probability that a randomly selected order will be from North America?
2. What is the probability that an order is from North America and it is for a game?
3. What is the probability that an order is from outside North America and Europe or is for something other than a toy or game?
4. Among orders from the “rest of the World”, what is the probability it is for a toy?
5. Among orders for toys, what is the probability that the order comes from the “Rest of the World”?
6. Are the events “Toy” and “Rest of the World” independent? Explain.
7. The rows of the table are mutually exclusive categories. How would our summary be complicated if some orders were for multiple products?

2. 54.5% of Archway’s orders come from North America, 31.5% from Europe and the remaining 14% from the rest of the world. Among North American customers, 3% complained about late or lost deliveries. Similarly, complaints were received from 8% of European customers and 15% of customers from the rest of the world.

1. Construct a probability tree that shows all combinations of where orders originated and whether customers complained. Label all branches in terms of what the event is on the branch and the corresponding probability (e.g., P(A), PA’), P(B|A), P(B’|A),…). Also determine the probability for each ending joint event (e.g., P(Europe and Complain)).
2. Summarize all of the joint probabilities in a probability table.
3. What percentage of Archway customers complained about delivery problems?
4. Among those who complained, what percentage were from Europe?

You are the audit senior responsible for the audit of Spectrum Ltd for the year ended 30 June 2018. During your initial planning meeting with Justin James, the chief financial officer (CFO), he informs you of the following changes in the company’s operations.

(a) To help achieve budgeted sales for the year, Spectrum is about to introduce bonuses for sales staff. The bonuses will be an increasing percentage of the gross sales made by each salesperson above certain monthly targets.

(b) Spectrum plans to close an inefficient factory in country Tasmania before the end of 2018. It is expected that the redeployment and disposal of the factory assets will not be completed until the end of

(c) the following year. However, Justin is confident that he will be able to determine reasonably accurate closure provisions.

(d) The chief executive officer (CEO), Geoff Alderton, has just returned from Italy, where he signed a contract to import a line of clothing that has become the latest fashion fad there. The company has not previously been engaged in the clothing industry.

Due to Justin’s workload, the company recently employed a treasurer, Alice Campbell. Justin is excited about the appointment, because in the three months since Alice has been with the company she has realized a small profit for the company through foreign exchange transactions in US dollars.

For each of the scenarios provided, outline how the information affects inherent risk.

1. Prepare an expanded accounting equation worksheet for the Zeon Company to show the effect of the following transactions on the given dates – our accounting period is January:
   • January 2 Investment of $75,000 in cash into the business by stockholders.
   • January 4 Paid $10,000 in cash toward a building that cost $90,000 with the rest being borrowed from the bank to be paid back in 5 years.
   • January 10 Bought inventory on credit for $4,200
   • January 14 Paid cash wages to employees who worked in January for the business for $2,300.
   • January 21 Sold merchandise for $900 in cash. This merchandise (inventory) originally cost $500.
   • January 30 Received a bill from the utilities company for $600 for utilities used during January that will be due in February.
   • January 31 Paid cash dividends of $300 to stockholders.
2. Prepare the income statement, statement of stockholders equity, balance sheet and cash flow statement for the month of January for Zeon.
3. Prepare an expanded accounting equation worksheet for the Zeon Company for February given what was done in January and the following transactions:
   • February 5 Paid $750 in cash to the bank on the loan borrowed in January and paid $900 in interest on that loan.
   • February 11 Paid the bill from the utilities company from January
   • February 12 Paid the accounts payable associated with the inventory purchased in January.
   • February 18 Sold merchandise to a customer for $1,200 in cash. This merchandise originally cost $750.
   • February 27 Received a bill from the utilities company for $585 for utilities used during February that will be due in March.
   • February 28 Paid cash dividends of $300 to stockholders.
4. Prepare the income statement, statement of stockholders equity, balance sheet and cash flow statement for the month of February for Zeon.

The following was taken from the books of Coyote Company as of December 31, 2017.

a. Prepaid insurance expired during the year, $11,000.

b. Estimated bad debts, 1.0% of sales.

c. Inventory as of 12/31/2017 turned out to be $40,000.

d. Four month rent of $56,000 was paid in advance on October 1, 2017 and charged to rent expense then. 4 months From Oct. 2017 to Jan 2018.

e. Furniture and equipment have an average useful life of 5 years and no salvage value. Coyote Company uses the straight line method of depreciation.

f. Utility bill of $600 for the month of December 2017 will be paid on its due date, January 10, 2018: a missing record.

g. Salaries earned but not yet paid by December 31, 2017, $6,000.

Instruction: prepare

1. Any necessary adjusting entries at the end of 2017.

2. Income Statement and statement of retained earnings, and balance sheet of the company for the year 2017.

3. Any necessary closing entries at the end of 2017.

Bass hunt is a local outdoor store that competes with other outdoor stores.

They are proposing two marketing plans follow (consider them independent of each other)

Plan 1: They sell a deer tree stand. they take a standard tree and modify it to make it work.

- They sold 80 stands during 2018 for $400 each

- the stands are warrantied for 3 years (manufacture defects)

- the company's purchase cost per stand is $250 and they spent another $3,000 modifying the 80 stands.

- in addition to the sale of the stand, they sold extended warranties for 20 stands that added 2 years to the period.

- the extended warranty was sold for $250 each

- the company estimates that they will incur $2,600 of total cost servicing the 3 year standard warranty for the 80 stands sold during 2018.

Plan 2: they have a customer royalty program that "rewards" customer with one point for every $10 purchase.

- each point is redeemable for $1.00 off any purchase from the store in the next two years.

- during 2018, customers bought $100,000 of products and earned 10,000 points.

- the standalone selling price of the products was $100,000

- based on previous data, they expect 9,400 of the points to be redeemed from the 10,000

Required:

A- prepare journal entries for the 2018 sale of tree stands and warranty.

B- The company incurred $350 of warranty cost during 2018 relating with 2018 sales. prepare journal entry to record the incurrence of these costs and prepare any 12/31/18 adjusting entries.

C- prepare journal entries related to bonus point sales for 2018.

D- How much will the company recognize additional revenue in 2019 assuming 4,600 of the 2018 points are redeemed.