Key concepts in statistics for business decision making are “Population”, “Census”, “Random Sample” and “Sampling Error”.

The Foodmart CEO (Chief Executive Officer) has very little knowledge about statistics and believes that a sample should not be used for gathering data as a sample cannot provide accurate information about a whole population.

Explain briefly each of the terms given below, drawing on the pleminary comments from the previous page. In your answers below, use the Foodmart supermarkets to provide examples.

(a) Define the term “population”, and explain what the population is for the Foodmart situation outlined in the Preliminary Comment.

(b) Define the term “census”, and explain what this would mean in studying supermarkets in the Foodmart chain.

(c) Define the term “random sample”. In your answer also include an explanation of a “biased sample”. Also explain how you would take a random sample of 150 supermarkets for Foodmart.

(d) Define the term “Sampling Error” and explain in plain language for the CEO how we can manage this if we have a random sample.

I have figured them all out except D

On average, commuters in Phoenix, Arizona, area require m= 40.0 minutes to get to work.  Assume the times to get to work are normallydistributed with a standard deviation of s= 10 minutes, and that Joe is an average Phoenix resident.

1. What is the probability that on any given day Joe will require over 45 minutes to get to work?

2. What is the probability it will take Joe exactly40.0 minutes to get to work on any given day?

3. Joe has just left home from lunch to attend a meeting with the CEO in 30 minutes.  If the CEO routinely fires employees who are tardy for meetings, what is the probability the Joe will still be employed tomorrow?

4. Joe leaves home for work at exactly the same time.  His work starts at 8:00 AM sharp.  Due to traffic jams during the morning rush hour, Joe was tardy for work on 38.2% of the time.  What time does Joe leave home for work every morning?  Briefly explain your train of thought in arriving to the answer.

Richard Scott, CEO of XYZ Enterprises, is considering a merger with Empire Inc., which is led by CEO Mickey Thompson. The merger of their two firms will enable the creation of a very large diversified conglomerate, with businesses ranging from office supplies to sporting goods, industrial paints, consumer electronics, video games, and marine engines. Consultants from Boston Consulting Group have advised Scott and Thompson that the merger could create a great deal of value, because the new combined entity can use several lucrative yet mature "cash cows" within Empire Inc. to fund the growth of several promising, but not yet highly profitable, young businesses. Scott and Thompson have decided to seek a second opinion from your consulting firm, International Associates.

Please respond to the following questions posed to you by these two CEOs:

• Could you please explain the BCG matrix to us? What is the logic of this model? What are the model’s limitations and weaknesses?
• Should we be employing the matrix to evaluate this merger? Could we create value in the manner that BCG has described?

On May 1, Donovan Company reported the following account balances:

On May 1, Beasley paid $400,000 in stock (fair value) for all of the assets and liabilities of Donovan, which will cease to exist as a separate entity. In connection with the merger, Beasley incurred $15,000 in accounts payable for legal and accounting fees.

Beasley also agreed to pay $75,000 to the former owners of Donovan contingent on meeting certain revenue goals during the following year. Beasley estimated the present value of its probability adjusted expected payment for the contingency at $20,000. In determining its offer, Beasley noted the following:

• Donovan holds a building with a fair value $30,000 more than its book value.
• Donovan has developed unpatented technology appraised at $25,000, although is it not recorded in its financial records.
• Donovan has a research and development activity in process with an appraised fair value of $45,000. The project has not yet reached technological feasibility.
• Book values for Donovan’s current assets and liabilities approximate fair values.

What should Beasley record as total liabilities incurred or assumed in connection with the Donovan merger?

1.Nortel Networks experienced one of the most notorious Canadian bankruptcies. Eventually there was a distribution of funds obtained from selling off Nortel’s assets, including intellectual property. Former Nortel employees eligible to receive pensions made up one of the major groups seeking relief from the court. Would those entitled to pension funds have been secured or unsecured creditors in the bankruptcy?

2.Dedrisan Inc. has experienced an unusually large loss from which it is very unlikely to recover. It is in default on some debt covenants. The auditor of the company concludes that Dedrisan is no longer a going concern. Management has requested the auditor issue an auditor’s report on the financial statements for the current year. The financial statements have been prepared using the historical cost principle and do not reflect any adjustments to the assets or any disclosure of the loan defaults. The auditor informs Dedrisan that, under the current financial statement presentation, an adverse audit opinion would be issued. Without the necessary adjustments and disclosure, the financial statements taken as a whole are not in accordance with GAAP. Once issued, the adverse opinion could lead to the bankruptcy of Dedrisan Inc.

What measures, if any, can Dedrisan Inc. take to obtain an unmodified opinion from the auditor?

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