The management team of Accent Group Limited have received a proposal from the manager of Hype DC. This proposal concerns a major upgrade to Hype DC's stores to improve the customer experience. Key details relating to this proposal include:

• The initial cost will be $22 million. This cost will be depreciated using the straight line method over the 5 year life of the upgrade.
• During year 1, the firm will increase marketing costs by $2.0 million to promote the store upgrades.
• Over the five year life of the project, it is expected that the upgrade will increase the firm's sales by $18 million per year. On average, cost of sales is 45% of revenue.
• The firm will need to higher additional staff over the life of the project to help to deal with the increased sale volume. In year 1, the firm's staffing costs will increase by $1.0 million. These costs will increase by 3.5% p.a.
• The upgrade is expected to increase the firm's energy costs by $500,000 in year 1. This increase will be ongoing across the life of the project and will increase by 6% p.a.
• Upgraded stores will include an old shoe recycling drop off zone. This recylcing program will cost $75,000 in year 1. These costs will increase by 2% p.a.
• At the end of year 3, the firm will spend $1.5 million on a minor refurbishment to the stores.

The firm’s tax rate is 30%. The firm requires a 16% required rate of return on all potential investments.

1. Discuss how sensitive your recommendations are to changes in assumptions in regards to the financial impact of the new capital investment. In your discussion, include examples which illustrate how changes to at least two assumptions impact the financial analysis .

One of the main functions of saliva is to buffer against acid from food and plaque, which contributes significantly to the formation of cavities. While there are several buffers in saliva, carbonic acid (H2CO3) has the highest concentration and has the greatest effect on pH.

(a) While the salivary concentration of carbonic acid stays at a fairly constant 1.3 mM, the level of bicarbonate (HCO3-) can vary with the rate that saliva flows from salivary glands. For low flow rates, the bicarbonate concentration is around 2 mM; for medium flow rates, it is 30 mM; and for high flow rates, around 60 mM. The pKa of carbonic acid at body temperature is 6.1. Assuming that the pH of Saliva is determined primarily by carbonic acid and bicarbonate, determine the pH of saliva for each of the three flow rates. The normal pH of saliva is about 6.3.

(b) The most prevalent bacterium in the mouth, streptococcus mutans, breaks down sugar and releases lactic acid (pKa = 3.86). If S. mutans has produced 10^-8 moles of lactic acid since your last swallow, what is the pH of your saliva? What would the pH be without the bicarbonate buffer? Assume that your mouth contains about 1 mL of saliva and that your saliva is flowing at a low rate.

(c) You take a drink of orange juice, and after you swallow, 0.5 mL remains in your mouth. What is the pH of your saliva if your mouth contains 1 mL of pure saliva, and if you model orange juice as 1.0 mM citric acid (pKa = 3.13; assume only one dissociation).

(d) Why do some toothpastes contain baking soda (sodium bicarbonate)?

Marty’s Mask produces a variety of masks used in industrial and healthcare settings as well as plastic masks used in costumes. Due to the current pandemic, Marty is going to produce only masks that are useful in a healthcare setting and will focus on three models – N95, disposable surgical and plastic shields (simple retooling and changing of the material allows the plastic masks machines to make the shields). Marty is limited by the number of machine hours available and has a higher demand for the masks than can currently be met. Current production capabilities are limited by the 200,000 machine hours per week. Following is information for each of these products:

*20% of the fixed costs are unavoidable regardless of how many of each unit is produced

A. In order to maximize the company’s total contribution margin, in what sequence should Marty fill orders?

B. How many of each should Marty produce?

C. What are three other possible criteria/issues Marty should consider besides maximizing contribution margin when evaluating the order in which to produce the masks?

Part II

Question 2:

Wood World manufactures many wooden products. One of its popular product lines is the wooden crate line. It currently produces 100,000 crates monthly and this production volume represents 80% of capacity. These crates are sold in their unfinished form (no paint or stain) and are used by individuals and businesses in various ways. College students often stack them to make shelves and storage areas. Wood World is considering adding paint, various stains and even decoupage to 25% of the crates and selling them as their “designer crate line.” A single unfinished crate consists of $7 in direct materials, $12 in direct labor, $3 in variable manufacturing overhead $5 in fixed manufacturing overhead and sells for $40. The designer crate line would add the following: $4 in direct materials, $8 in direct labor, and $2 in variable manufacturing overhead and $1 in additional fixed costs. Market studies indicate a designer crate can be sold for $55.

A. Should Wood World sell all the crates in the unfinished form or should it process them further into designer crates? Why? (be sure to back up your explanation with numbers)

B. Would your answer change if Wood World was operating at capacity? Why or why not?

C. What are three non-quantitative issues Wood World should consider in making this decision?

Part II

Question 3:

Louis Luggage produces many different types and sizes of luggage. Their best seller, the Weekend Warrior, sells for $140. Louis has been asked by Macrosoft, Inc. to produce 2,000 of the Weekend Warrior with a specially designed fingerprint security lock and with the Macrosoft company logo. These will be given to Macrosoft employees who must travel frequently for work. Macrosoft has offered to pay $120 per suitcase. Louis’ costs related to the Weekend Warrior consist of variable costs per unit of $50 and fixed costs per unit of $35 of which $9 are unavoidable. In addition, Louis will encounter additional variable costs of $10 per unit for the security lock component and $4,000 as a one-time fixed cost for the Macrosoft label.

A. What is the operating income generated by the special order?

B. Should the special order be accepted? Why or why not?

C. What are three other considerations that Louis, or any company, should think about when choosing whether to accept a special order?

Part II

Question 4:

Cassie’s Clowns produces clown costumes and other party favors and supplies and has three divisions – Funny, Scary and Sad. Based on the latest information presented to the CEO by the controller, a discussion has ensued as to the fate of the Scary division. The division is operating at a loss. The manager of the Scary Division, Vam Pire, argues that his division is profitable and that the company will be worse off it they close the Scary Division. Here is the latest information for Cassie’s Clowns:

Of the fixed S&A costs, 15% represent common costs that have been allocated equally to each product line. In addition, 25% of Scary’s fixed production costs are unavoidable as these are fixed costs associated with facilities and equipment shared by all three divisions.

A. Is Vam Pire correct – should the Scary Division be kept or eliminated? Why or why not?

B. What would be total corporate income if Scary Division is eliminated currently?

C. What are two areas Cassie and in particular Scary’s management should look at to improve Scary’s bottom line?

D. What are three qualitative things that Cassie should consider when deciding if a division is eliminated?

Part II

Question 5:

Ace Acting Co. is a professional actor training group that trains stage actors and is headquartered in Los Angeles. The CEO of the company, Allen Ace, is considering expanding and opening an office in New York City but he just received an interesting business opportunity in the San Francisco area to partner with a movie production company located there. Mr. Ace knows he can only accept one of these opportunities at the current time. He has already purchased his non-refundable ticket to New York for $525 however the ticket can be exchanged for a voucher for a future trip. To ensure that he was able to stay in the appropriate location within each city, he has already made hotel reservations. These reservations are cancelable except for a 5% cancellation fee. The hotel in New York is $650 total for the two nights and the San Francisco hotel is $500 for the length of the stay. If he goes to New York, Mr. Ace plans to purchase a ticket to see Hamilton on Broadway at a cost of $400. He will also incur taxi fees of $100 and expects to spend $200 for meals in New York and $300 in San Francisco. Since he would be able to drive from Los Angeles to San Francisco, he would get reimbursed $250 for mileage. Mr. Ace will pay for all costs and will be reimbursed by his company for business expenses.

Required:

A. What are the relevant costs of each trip?

B. What are the incremental costs (and what is the total incremental cost)?

C. Without considering qualitative factors (thus use numbers to analyze), which alternative should Allen choose? Why?

D. What are three qualitative factors that Allen might consider?

E. Why is it important to use relevant costs and revenues when evaluating decisions?

Part I The input to the program will be a text file containing the information for a tolerance table. An example follows using the values from the first lecture on tolerance analysis. These values will be stored in a text file. The data is comma delimited, which means that each data field is separated by a comma. If the first word is ‘PART’ the following values are the nominal size, +/- impact, tolerance, and fixed/variable. If the first word is ‘GAP’ the following values are the minimum and maximum gap sizes. (Note: assume all units are inches.) PART,2.000,-1,0.050,V PART,0.975,-1,0.025,V PART,3.000,+1,0.010,F GAP,0.000,0.080 These input values will be processed using the methods taught in class. A sample output for the first stage is given. Actual Gap Mean: 0.025” Actual Gap Tolerance: 0.085” The Maximum Gap (0.110”) is (Greater) than specified (0.080”) The Minimum Gap (-0.060”) is (Less) than the specified (0.000”)  

Part II The second stage extends the Stage 1 analysis. In this stage the program will suggest various combinations of part dimensions and tolerances to meet the gap specifications. The fixed dimension parts are not able to have their dimensions or tolerances adjusted. Take the required adjustment to all the variable parts and apply this adjustment to each part equally as a percentage of the total part dimension. Round dimensions to the nearest thousandth. Do the same application to adjust the gaps of all parts to have the gap fully use the available tolerance. Example Input: PART,2.000,-1,0.050,V PART,0.975,-1,0.025,V PART,3.000,+1,0.010,F GAP,0.000,0.080 Example Output: Recommended Adjustments to meeting GAP,0.000,0.80: PART,1.990,-1,0.020,V PART,0.970,-1,0.010,V PART,3.000,+1,0.010,F Math used to get to the result Variable parts should add to (3 – 0.04) = 2.96 Variable parts actually add to (2 + 0.975) = 2.975 All variable parts must be adjusted to 2.96/2.975 = 99.496% of the original value Variable tolerance should add to (0.04 – 0.01) = 0.03 Variable tolerance actually add to (0.05 + 0.025) = 0.075 All variable parts’ tolerance must be adjusted to 0.3/0.073 = 40% of the original value

Part III The third stage involves a statistical analysis called Monte Carlo simulation. Basically each of the dimensions is varied randomly and the gap is calculated. This random calculation is repeated hundreds or thousands of times. For each iteration, the individual gap value is calculated and stored in an array and in a file. The array of values will be used to compute the mean and standard deviation of the gap. The file will be opened using a spreadsheet program to graph a histogram, calculate an average, and calculate the standard deviation, which should match the result from your program. These values will then be used to estimate the number of rejected assemblies during production. It is reasonable to assume that the tolerance for a part is 3 standard deviations (99.73% of parts will fall within the tolerance). So for any part, we can generate random realistic values by taking the nominal value and adding/subtracting a random number, which represents variations due to the tolerance. To do this, we will need to generate a specific type of random numbers. The standard random number function in most programming language (rand() in C included) has a uniform distribution. This means that if we are finding random numbers from 0.0 to 1.0, the probability of getting 0.5 is the same as getting 0.1. This is not realistic for our application, since it will be more likely that we have our dimensions change by 0.1 than it is 0.5. For this reason, we need to modify the numbers from the rand() function so that they have a Gaussian (Normal) Distribution, which is sometimes referred to as the “bell curve”. This can be accomplished by using the Box-Muller Transformation. Although it sounds complicated, this transformation can be easily done and applied to generate a random dimension with the code given. Summary of Part 3: Apply the random_dimension() function below to get an output of a random_value of each part that will follow the explanation above. This will create a statistically likely value for each dimension given that you can then use to rerun the “actual mean gap” calculation from Part 1 1000 times. For each calculation, have the program store the value as a line in a text file (.csv extension.) You’ll be able to open this file up using Excel as a .csv file. In Excel, graph a histogram, calculate the average gap of all assemblies (of parts), and the standard deviation of the gap of all assemblies. void random_dimension(double nominal, double tolerance, double *random_value){ double r1, r2, r12; double sigma = tolerance / 3; do{ r1 = (double)( rand() % 10001 ) / 10000; }while(r1==0); r2 = (double)( rand() % 10001 ) / 10000; r12 = sqrt(-2*log(r1))*cos(2*M_PI*r2); *random_value = nominal + sigma * r12; }

Coastline Community College

Acct C103, Individual Taxation

Summer 2018

Tax Year 2017 Form 1040 Tax Return Project

Based upon Bill and Susan Minor’s information below, complete a Form 1040 for Tax Year 2017.

You will receive 10 points for each correct figure you list on Lines 7, 8a, 12, 21, 37, 40, 42, 43, 63, and 64.Email your completed Form 1040 to me by August 15, 2018.

-In 2017, Bill and Susan Minor had W-2 Wages totaling $99,000, Federal Tax Withheld of $9,000, and State Tax Withheld of $4,000.

-In 2017, Bill and Susan both had health insurance for the entire year through their employers which met the Minimum Essential Coverage requirements under the Affordable Care Act.

-Bill is an auditor at a hotel and Susan is a high school business teacher.

-Bill and Susan will file Married Filing Joint in 2017.

-In 2017, Bill received interest income of $250 from his 1^st Bank of the Third Best Account.He also cashed in a Certificate of Deposit early and the bank assessed a $25 penalty for early withdrawal of savings.

-In 2017, Bill and Susan spent $3,700 making repairs on their home.The repairs included work on their garage door, replacement of the kitchen flooring, and refurbishing their electrical breaker box.

-The Minor’s took the Standard Deduction on their Form 1040 Tax Return in 2016.They don’t know if they can take the Standard Deduction or not in 2017.They want to take the largest deduction they can in 2017, whether that be the Standard Deduction OR the Itemized Deduction.

-In 2017, Susan received a $6,000 inheritance from the estate of her great-great-grandmother.

-Susan and Bill are both 50 years old and neither one is blind or disabled.

-Their grown children are Porsche and Carmen.The kids are out of the house and have their own jobs and apartments.Porsche, who made $96,000 in 2017, is a poor money manager and Bill gave her $3,800 in 2017.

-In 2017, Susan sent her Mom $1,500 to help her Mom buy medication and medical devices.Susan does not and cannot claim her Mom as a Dependency Exemption.

-The Minor’s took fencing lessons in 2017 that cost $2,400.They said these lessons help them “unwind” after a busy workday. Susan liked fencing so much she bought a foil, epee, and saber costing $2,200.A day after buying the fencing equipment, a thief broke into Susan’s fencing locker at the fencing center and stole the foil and saber worth $1,800.Susan filed a police report, had no insurance on the foil and saber, and the property was not recovered.

-In 2017, Susan paid $850 in union dues to the El Camino Real Teachers, Educators, and Mentors Union.

-Bill owed the IRS $4,600 from his 2015 Federal Income Tax Return.He is paying $212 a month on this debt.In 2017, Bill calculated he paid $2,344 in tax and $200 in interest to the IRS.

-Susan helped her friend start a business.The friend plans on paying Susan $4,950 for all the work

she did.This payment will be made in December 2018.

-Susan decided in 2017 to become a self-employed tutor/teacher.She taught 2 kids business planning and

was paid $400.Her ONLY business expenses as a self-employed tutor/teacher were $50 for business cards and $75 for paper, pencils, and supplies.Susan also tells you she paid “Mystic Maria the World’s   7^th Best and Inexpensive Fortune Teller” $540 to predict Susan’s success.Maria reported that Susan would be wildly successful in her tutoring/teaching business and would gross approximately $500 in 2018.

-In 2017, Bill and Susan owned a rental property and calculated Total Rental Real Estate Income on Line 26, Schedule E, of $6,820.

-In 2017, Bill won a $470 cash prize for a contest he entered.Bill said he did NOT get a W-2 or a Form 1099 for the $470 he won.

-The Minor’s received a State Tax Refund of $630 in April 2017 from the State of California.This refund was for Tax Year 2016.

-Bill stated he contributed $2,000 to his Roth IRA in 2017.

-Bill and Susan are members of their local Elks Lodge, which is a non-profit organization, involved in charitable work, and a Qualifying Charitable Organization.The Minor’s pay $140 a year for dues and their only activity with the Elks is going to eat Sunday breakfast, attending dances, and buying drinks at the bar.

-The Minor’s paid $9,850 in Home Mortgage Interest in 2017.They paid a property tax bill of $3,700 in 2017.

-In 2017, Bill drove his personal auto 3,900 miles as a volunteer meal deliverer for Let’s Feed All of the Hungry, a Qualifying Charitable Organization.   

-In 2017, Bill donated 150 hours of time to Goodwill, a Qualifying Charitable Organization. He figures his time is worth $40 an hour.

-Susan has AB- blood type. When the Red Cross Bloodmobile stops by her work, Susan donated blood. In 2017, she donated 6 pints of blood. The local hospital charges $300 a pint for patients who receive AB- Blood.

-In 2017, Bill incurred $2,900 in gambling losses at Lost Wages Casino. In 2017, he won $4,100 in the California Super Big Lotto.

-Bill and Susan calculated they had 6,000 commuting miles to their W-2 jobs in 2017.

-The Minor’s donated $1,600 to Let’s Feed the Whales and Save the Children Fund in 2017. Bill’s friend Dante said the fund was is a scam. Bill went on the IRS Website and found that the fund was a Qualifying Charitable Organization.

- In 2017, Susan sold stock she had in The Coffee Grind Company. Susan’s friend, Alma Cabrera, an Enrolled Agent, and calculated that Susan had a Short-Term Capital Gain of $5,300 from the sale of the stock.

-In 2017, Susan decided to run for the city council. She paid a $255 filing fee and borrowed $15,000 from the local bank to finance her campaign. Susan lost the election.

-In 2017, Bill and Susan paid homeowner’s association dues of $1,400 on their personal residence.

-In 2017, Bill paid a dental bill of $7,500 for removal of 16 of his bad teeth and the filling of 16 of his other teeth.

In 2017, Bill paid $580 for DMV registration fees for his 2002 Chevy S-10 Pickup Truck and Susan’s 2007 Yaris. Bill has determined these DMV fees are deductible on a Schedule A.

In 2017, Susan’s sister, who is a well-known, successful, and highly paid entertainer, gave Susan a Tesla Model S Automobile with a Fair Market Value of $80,000. Susan uses the car to commute to her job and paid $900 in DMV registration fees that she has determined are deductible on a Schedule A.

In 2017, Bill was ticketed for driving his car without a valid registration and no proof of insurance. He paid a fine of $350, which included court costs.

-In 2017, Susan found a gold and diamond ring near hear house. She turned it into the police department and after 30 days, the police gave the property back to Susan since no one claimed it. In November 2017, Susan had the ring appraised and found out the fair market value of this found property was $6,200.

-In 2017, Susan paid a researcher $300 to trace her family history. The researcher reported to Susan she may be the rightful owner of a small farm in Germany worth $1,000,000. Susan has made plans to see if she owns the land, she has set aside $2,500 in a savings account for a title and legal search, and she will hire an attorney in December 2018 to determine her ownership rights.

For each of the salts on the left, match the salts on the right that can be compared directly, using K_sp values, to estimate solubilities.

(If more than one salt on the right can be directly compared, include all the relevant salts by writing your answer as a string of characters without punctuation, e.g, ABC.)

Write the expression for K in terms of the solubility, s, for each salt, when dissolved in water.

Note: Multiply out any number and put it first in the K_sp expression. Combine all exponents for s.

In this problem, we will compare the merits of leasing vs. buying a car. When you lease a car, you will typically have a smaller payment for a shorter period of time. This sounds attractive, but at the end of the lease you either have to buy the car or get a new car with no equity. If you buy a car, you have equity. You could use your car as a trade-in or sell it outright when you want to buy your next car. We want to see if it makes sense to lease then buy the car after the lease.

To make the comparison, we're going to assume you can afford the payment on a new car. If you choose to lease, you will set aside the money you're saving into an annuity. If the car payment is $500 but the lease payment is $300, then you are going to set aside $200 per month into the annuity. At the end of the lease, you will use the money from the annuity to make a down payment on buying out the car. Then you'll take out a new loan to pay off the car.

Car

We will be looking at a Ford Fusion that has a selling price of $31,000.

Buying the Car

You are going to buy the car with monthly payments at 3.85% interest for 5.5 years.

Your monthly payment will be: $522

How much money will you pay over the life of the loan? $

36-month Lease

You are given the option to lease the same car for 36 months. Your payment will be $470 per month. You can then buy the car at the end of the lease for $18,600.

Since you can afford $522 per month, how much money would you be putting into an annuity each month? $

If the annuity offers 1.0% annual interest, how much money will be in your account at the end of 36 months? $ (Round to the nearest dollar.)

At the end of the lease, you owe $18,600. If you use the money from your annuity as a down payment, how much is left that you need to borrow? $

If you are going to finance the remaining balance at 3.85% interest for 2 years, what will your payment be? $ (Round to the nearest dollar.)

Fill in the following table to help determine the money you have spent out of pocket over five years:

24-month Lease

You are given the option to lease the same car for 24 months. Your payment will be $462 per month. You can then buy the car at the end of the lease for $23,870.

Since you can afford $522 per month, how much money would you be putting into an annuity each month? $

If the annuity offers 1.0% annual interest, how much money will be in your account at the end of 24 months? $ (Round to the nearest dollar.)

At the end of the lease, you owe $23,870. If you use the money from your annuity as a down payment, how much is left that you need to borrow? $

If you are going to finance the remaining balance at 3.85% interest for 3 years, what will your payment be? $ (Round to the nearest dollar.)

Fill in the following table to help determine the money you have spent out of pocket over five years:

Conclusion

Complete the following table:

Which option is the best?

• Buying the Car
• 36-Month Lease
• 24-Month Lease