Tharaldson Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit Direct materials 7.7 ounces $ 2.00 per ounce $ 15.40 Direct labor 0.2 hours $ 11.00 per hour $ 2.20 Variable overhead 0.2 hours $ 4.00 per hour $ .80 The company reported the following results concerning this product in June. Originally budgeted output 3,100 units Actual output 2,500 units Raw materials used in production 22,300 ounces Purchases of raw materials 23,400 ounces Actual direct labor-hours 450 hours Actual cost of raw materials purchases $ 45,100 Actual direct labor cost $ 13,100 Actual variable overhead cost $ 3,550 The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The labor rate variance for June is:

Multiple Choice

$8,150 U

$2,809 F

$2,809 U

$8,150 F

Wadding Corporation applies manufacturing overhead to products on the basis of standard machine-hours. For the most recent month, the company based its budget on 4,500 machine-hours. Budgeted and actual overhead costs for the month appear below:

The company actually worked 4,520 machine-hours during the month. The standard hours allowed for the actual output were 4,510 machine-hours for the month. What was the overall variable overhead efficiency variance for the month?

Garrison 16e Rechecks 2017-10-31

Multiple Choice

$800 Favorable

$270 Favorable

$229 Favorable

$112 Unfavorable

The Fime Corporation uses a standard costing system. The following data have been assembled for December:

The standard hours allowed for December’s production is:

Multiple Choice

5,100 hours

5,400 hours

6,000 hours

5,700 hours

Miguez Corporation makes a product with the following standard costs:

The company budgeted for production of 4,500 units in September, but actual production was 4,400 units. The company used 7,340 liters of direct material and 1,870 direct labor-hours to produce this output. The company purchased 7,700 liters of the direct material at $9.10 per liter. The actual direct labor rate was $43.10 per hour and the actual variable overhead rate was $3.70 per hour.

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The variable overhead rate variance for September is:

Multiple Choice

$374 F

$264 F

$264 U

$374 U

The following labor standards have been established for a particular product:

The following data pertain to operations concerning the product for the last month:

What is the labor efficiency variance for the month?

Multiple Choice

$19,401 F

$16,125 F

$19,401 U

$16,641 F

At Eady Corporation, maintenance is a variable overhead cost that is based on machine-hours. The performance report for July showed that actual maintenance costs totaled $10,480 and that the associated rate variance was $330 unfavorable. If 5,800 machine-hours were actually worked during July, the standard maintenance cost per machine-hour was:

Multiple Choice

$1.75 per MH

$1.86 per MH

$1.92 per MH

$1.81 per MH

The following standards for variable manufacturing overhead have been established for a company that makes only one product:

The following data pertain to operations for the last month:

What is the variable overhead efficiency variance for the month?

Multiple Choice

$600 U

$15,930 F

$13,865 U

$14,465 U

Daniel Fowler, senior vintner at Napa Winery, had been put in charge of developing an optimal blending plan for the upcoming season. This assignment was the result of a recent Napa Winery board meeting where the CEO had presented her ideas regarding the use of analytics for enhancing profits while at the same time not affecting quality. Industry reports indicated that a growing number of the major wineries were using analytics to assist in the wine-blending process. The board meeting had concluded with the CEO tasking Fowler to develop an analysis and report his findings to the board at next month’s meeting.

The United State has become the largest wine market in the world, with sales approaching $40 billion annually. Typically, two types of wines are produced: varietals and blends. Wine blending is the process of combining several grape varieties to achieve a characteristic that is lacking in the original grapes. There are several reasons why a vintner might want to blend wines, including: (1) enhancing aroma; (2) improving the color; (3) raising or lowering the acidity level; (4) raising or lowering alcohol levels. The process of wine blending contains both objective and subjective components. Alcohol level is an example of an objective standard.

Napa Winery was one of the premium wine producers in the state and had recently begun to sell its products on a global basis. The winery produced and distributed a wide range of premium wine, including its flagship – CS Wine. The firm’s management was considering employing prescriptive analytics as a means of improving the wine-blending process. Typically, wines were produced from a blend of several types of grapes. In producing these blended wines, the vintner had to take into consideration both grape characteristics and government regulations. Each of the candidate blends was then subject to a series of taste tests. In those cases where the candidate wines were found to be unacceptable by the tasters, a set of new products was often produced. The vintner planned to use prescriptive analytics to help develop an optimal blending strategy and assumed that all bottles produced could be sold. More specifically, the vintner was going to undertake a comparative assessment of Napa Winery’ premier CS Wine product sector. The three specific production wines from this sector were:

Vintage CS Wine, which wholesaled for $9 per bottle

Non-vintage CS Wine, which wholesaled for $5.50 per bottle

Non-vintage M Wine, which wholesaled for $2.95 per bottle

Listed below are the winery objectives and government regulations.

Winery objectives and specifications

Maximize net profit.

The acidity level of CS Wine cannot exceed 0.7 grams per 100 milliliters.

The vintage CS Wine must not contain more than 0.2 per cent sugar.

The non-vintage CS Wine must not contain more than 0.3 per cent sugar.

The acidity level of M Wine cannot exceed 0.3 grams per 100 milliliters.  

Government regulations

All wines labeled varietal (e.g. CS Wine) must contain at least 75% of the named grape type.

All wines must contain at least 10% and no more than 15% alcohol level by volume.

All vintage-dated wines must contain 95% blending grapes from the year on the bottle label.

All vintage-dated wines must also report the viticulture area on the label and must contain at least 85% blending grapes from this area.

Presented in Exhibit 1 are the characteristics of the four blending grades along with available quantities and associated costs.

Exhibit 1. Grape type characteristics, quantities and costs

Questions:

What is the optimal blending plan that will help Napa Winery achieve simultaneously its own objectives and specifications, and meet the government regulations?

Are the government regulations adding more pressure on the company? What will be the optimal blending plan if those regulations will not exist? Are certain regulations more restrictive than others? Conduct a comparative analysis to identify which government regulations will be the most beneficial to company’s business.

What other aspects should Daniel Fowler take into consideration in his modeling approach before presenting the results to the CEO during the board meeting? (Hint: New optimization models might be required to sustain your recommendations)

Problem 4: House Prices

Use the “Fairfax City Home Sales” dataset for parts of this problem.

a) Use StatCrunch to construct an appropriately titled and labeled relative frequency histogram of Fairfax home closing prices stored in the “Price” variable. Copy your histogram into your document.

b) What is the shape of this distribution? Answer this question in one complete sentence.

c) Assuming the population has a similar shape as the sample with population mean $510,000 and population standard deviation $145,000; calculate the probability that in a random sample of size 10, the mean of the sample will be greater than $600,000. You may assume a random sample was taken and the sample came from a big population. However, be sure to check the central limit theorem condition of a large sample size before completing this problem using one complete sentence. If this condition is not met, you cannot complete the problem.

d) Assuming the population has a similar shape as the sample with population mean $510,000 and population standard deviation $145,000; calculate the probability that in a random sample of size 36, the mean of the sample will be greater than $600,000. You may assume a random sample was taken and the sample came from a big population. However, be sure to check the central limit theorem condition of a large sample size before completing this problem using one complete sentence. If this condition is not met, you cannot complete the problem.

Data:

Price Year, Days, TLArea, Acres

369900   1922   44   1870   0.39

373000   1952   0   1242   0.27

375000   1952   8   932   0.15

375000   1950   2   768   0.19

379000   1952   31   816   0.21

380000   1941   53   1092   0.19

385000   1951   5   984   0.27

387700   1953   5   975   0.36

395000   1954   18   957   0.29

395000   1951   12   1105   0.22

399900   1954   29   1206   0.28

399900   1951   6   1226   0.18

400000   1954   31   957   0.27

410000   1949   6   1440   0.2

410000   1954   17   1344   0.23

412500   1954   4   1008   0.25

415000   1953   17   1371   0.28

420000   1954   2   957   0.25

426000   1952   3   1694   0.25

430000   1953   19   975   0.23

434900   1950   5   1128   0.18

435000   1954   32   1252   0.24

440000   1960   3   1161   0.26

440000   1954   2   1036   0.28

440000   1955   12   1645   0.28

440000   1960   5   1746   0.31

441000   1952   133   1062   0.23

442000   1961   4   1414   0.32

443000   1951   26   962   0.2

444900   1955   4   1122   0.19

446500   1953   3   962   0.26

450000   1952   2   1488   0.15

450000   1955   49   1122   0.23

450000   1979   0   1092   0.28

450000   1951   70   962   0.2

450000   1957   23   1300   0.51

451000   1947   12   1325   0.34

455000   1952   7   2267   0.81

455000   1962   4   1050   0.31

460000   1955   5   997   0.3

460000   1954   10   1125   0.17

465000   1954   77   1288   0.46

465900   1947   21   1309   0.19

469000   1963   153   1149   0.27

474000   1959   5   1319   0.32

475000   1955   4   1530   0.28

475000   1953   29   1008   0.2

475000   1955   6   1530   0.28

475000   1956   116   1345   0.5

475000   1956   1   1530   0.28

480000   1960   27   1236   0.27

480000   1959   133   1527   0.24

485000   1955   4   1008   0.24

485000   1956   74   977   0.24

488000   1960   11   1972   0.33

500000   1963   0   2145   0.25

500000   1953   14   1758   0.54

500500   1955   6   1630   0.28

510000   1959   5   1680   0.34

512000   1963   0   1968   0.22

519000   1961   1   1312   0.29

520000   1954   15   1492   0.25

520000   1958   80   1443   0.33

520000   1963   122   1822   0.32

530000   1962   6   1393   0.29

540000   1962   12   1414   0.25

543600   1962   4   1414   0.24

560000   1967   5   1530   0.28

560000   1961   16   1438   0.53

565000   1947   6   1510   0.25

565500   1967   5   1217   0.26

589000   1954   32   2368   0.3

593000   1954   9   2044   0.25

610000   1978   140   2091   0.09

655000   1976   180   2728   0.24

660000   1947   10   2635   0.22

665000   1950   37   2645   0.57

685000   1982   120   2752   0.09

795000   2002   259   3402   0.12

852000   2000   4   3215   0.11

895000   2000   63   3230   0.11

930000   2015   135   3175   0.15

940000   1860   42   3038   0.57

968500   1850   74   3630   0.34

1100000   2004   161   3640   0.19

General Journal Entries

The End of Upward Mobility Barack Obama's ascension to the presidency won't end racism, but it does mean race is no longer the dominant issue in American politics. Instead, over the coming decades, class will likely constitute the major dividing line in our society—and the greatest threat to America's historic aspirations. This is a fundamental shift from the last century. Writing in the early 1900s, W.E.B. DuBois observed, "The problem of the 20th century is the problem of the color line." Developments in the ensuing years bore out this assertion. Indeed, before the 1960s, the decade of Barack Obama's birth, even the most talented people of color faced often insurmountable barriers to reaching their full potential. Today in a multiracial America, the path to success has opened up to an extent unimaginable in DuBois's time. Obama's ascent reflects in particular the rise of the black bourgeoisie from tokens to a force at the heart of the meritocracy. Since the late 1960s, the proportion of African-American households living in poverty has shrunk from 70 percent to 46 percent, while the black middle class has grown from 27 percent to 37 percent. Perhaps more remarkable, the percentage who are considered prosperous—earning more than $107,000 a year in 2007 dollars—expanded from 3 percent to 17 percent. Yet as racial equity has improved, class disparities between rich and poor, between the ultra-affluent and the middle class, have widened. This gap transcends race. African-Americans and Latinos may tend, on average, to be poorer than whites or Asians, but stagnant or even diminishing incomes affect all ethnic groups. (Most housecleaners are white, for instance—and the same goes for other low-wage professions.) Divisions may not be as visible as during the Gilded Age. Keep Up With This Story And More By Subscribing Now As Irving Kristol once noted, "Who doesn't wear blue jeans these days?" You can walk into a film studio or software firm and have trouble distinguishing upper management from midlevel employees. But from the 1940s to the 1970s, the American middle class enjoyed steadily increasing incomes that stayed on a par with those in the upper classes. Since then, wages for most workers have lagged behind. As a result, the relatively small number of Americans with incomes seven times or more above the poverty level have achieved almost all the recent gains in wealth. Most disturbingly, the rate of upward mobility has stagnated overall, which means it is no easier for the poor to move up today than it was in the 1970s. This disparity is strikingly evident in income data compiled by Citigroup, which shows that the top 1 percent of U.S. households now account for as much of the nation's total wealth—7 percent—as they did in 1913, when monopolistic business practices were the order of the day. Their net worth is now greater than that of the bottom 90 percent of the nation's households combined. The top 20 percent of taxpayers realized nearly three quarters of all income gains from 1979 to 2000. Even getting a college degree no longer guarantees upward mobility. The implicit American contract has always been that with education and hard work, anyone can get ahead. But since 2000, young people with college educations—except those who go to elite colleges and graduate schools—have seen their wages decline. The deepening recession will make this worse. According to a 2008 survey by the National Association of Colleges and Employers, half of all companies plan to cut the number of new graduates they hire this year, compared with last. But the problem goes well beyond the current crisis. For one thing, the growing number of graduates has flooded the job market at a time when many financially pressed boomers are postponing retirement. And college-educated workers today face unprecedented competition from skilled labor in other countries, particularly in the developing world. The greatest challenge for Obama will be to change this trajectory for Americans under 30, who supported him by two to one. The promise that "anyone" can reach the highest levels of society is the basis of both our historic optimism and the stability of our political system. Yet even before the recession, growing inequality was undermining Americans' optimism about the future. In a 2006 Zogby poll, for example, nearly two thirds of adults did not think life would be better for their children. However inspirational the story of his ascent, Barack Obama will be judged largely by whether he can rebuild a ladder of upward mobility for the rest of America, too. !- Do you think that class differences are emerging as the big issue of this century? 2- Most people in this country think it is only fair that, with schooling and hard work, people should be able to get ahead. How true is that idea today? Explain 3- In your opinion how optimistic or pessimistic are young people in the United States about their chances to get ahead in the years to come? Why?

Bank Balance Sheet (Note: Use this information for all three problems)

Item                             Amount            Duration       Interest Rate       

Cash-type Securities       $50m                1.2 year             2.25%

Commercial Loans          $100m             2.4 years           4.50%

Mortgages                     $350m             8.0 years           6.50%

Core Deposits                $270m             1.0 year             2.00%

Notes Payable                $180m             2.0 years           4.50%

2. On-Balance Sheet Immunization Analysis (Use balance sheet information above, 6 points)

Immunization formulas: 1) Setting D_A x A = D_L x L will immunize the bank against interest rate risk.

2) Setting the Leverage-Adjusted Duration Gap equal to 0 will also immunize the bank against interest rate risk

(0 = D_A – k D_L ).

a. Calculate the duration of assets as a group and the duration of liabilities as a group, using a weighted-average approach (weight each item by the percentage it represents of the total amount). Also, calculate and report the adjusted duration gap.

Assume the bank wants to leave its assets unchanged, and change the composition of its liabilities, but keep the current dollar amount of liabilities the same.

b. What D_L would immunize the bank against interest rate risk? Use either immunization formula.

c. Assume the bank wants to keep its core deposits unchanged, but can issue new zero coupon bonds of any maturity to replace all of the current notes payable, and thereby achieve the desired D_L. Calculate the required maturity of the zero-coupon bonds to immunize the bank against interest rate risk.

d. If the strategy in part b immunizes the bank from interest rate risk, and interest rates do rise from an average rate of 6.0% to 7.0%, calculate the new value of the bank’s assets (A), the bank’s liabilities (L) and the net worth (E). Use the formula: %A or %L = -D x [ ΔR / (1 + R) ]

e. Explain the main implications of this exercise in a full essay of a full paragraph or more, and refer specifically to your numerical results above.

Bank Balance Sheet (Note: Use this information for all three problems)

Item                             Amount            Duration       Interest Rate       

Cash-type Securities       $50m                1.2 year             2.25%

Commercial Loans          $100m             2.4 years           4.50%

Mortgages                     $350m             8.0 years           6.50%

Core Deposits                $270m             1.0 year             2.00%

Notes Payable                $180m             2.0 years           4.50%

2. On-Balance Sheet Immunization Analysis (Use balance sheet information above, 6 points)

Immunization formulas: 1) Setting D_A x A = D_L x L will immunize the bank against interest rate risk.

2) Setting the Leverage-Adjusted Duration Gap equal to 0 will also immunize the bank against interest rate risk

(0 = D_A – k D_L ).

a. Calculate the duration of assets as a group and the duration of liabilities as a group, using a weighted-average approach (weight each item by the percentage it represents of the total amount). Also, calculate and report the adjusted duration gap.

Assume the bank wants to leave its assets unchanged, and change the composition of its liabilities, but keep the current dollar amount of liabilities the same.

b. What D_L would immunize the bank against interest rate risk? Use either immunization formula.

c. Assume the bank wants to keep its core deposits unchanged, but can issue new zero coupon bonds of any maturity to replace all of the current notes payable, and thereby achieve the desired D_L. Calculate the required maturity of the zero-coupon bonds to immunize the bank against interest rate risk.

d. If the strategy in part b immunizes the bank from interest rate risk, and interest rates do rise from an average rate of 6.0% to 7.0%, calculate the new value of the bank’s assets (A), the bank’s liabilities (L) and the net worth (E). Use the formula: %A or %L = -D x [ ΔR / (1 + R) ]

e. Explain the main implications of this exercise in a full essay of a full paragraph or more, and refer specifically to your numerical results above.

Allocating Joint Costs Using the Weighted Average Method

Orchard Fresh, Inc., purchases apples from local orchards and sorts them into four categories. Grade A are large blemish-free apples that can be sold to gourmet fruit sellers. Grade B apples are smaller and may be slightly out of proportion. These are packed in boxes and sold to grocery stores. Apples for slices are even smaller than Grade B apples and have blemishes. Apples for applesauce are of lower grade than apples for slices, yet still suitable for canning.

Information on a recent purchase of 20,000 pounds of apples is as follows: Assume that Orchard Fresh, Inc., uses the weighted average method of joint cost allocation and has assigned the following weights to the four grades of apples:

Total joint cost is $19,000.

Required:

1. Allocate the joint cost to the four grades of apples using the weighted average method. Round your allocation percentages to four decimal places and round the allocated costs to the nearest dollar.

(Note: The joint cost allocation does not equal $19,000 due to rounding.)

2. What if the factory found that Grade A apples were being valued less by customers and decided to decrease the weight factor for Grade A apples to 3.0? How would that affect the allocation of cost to Grade A apples? How would it affect the allocation of cost to the remaining grades? Round your allocation percentages to four decimal places and round the allocated costs to the nearest dollar.

Consider the following table for the U.S.

a) Does the AD curve shift to the right more or less than the LRAS curve in a dynamic AD-AS model from 2006 to 2007? Explain why verbally.

b) Explain why the Federate Funds Rate declines from 2007 to 2009 using Taylor Rule. Based on the Federate Funds Rate data in the table, explain the limitation of monetary policy that is implemented through open market operation during severe recession.

c) Suppose a military operation that costs $200 billion in 2011 can help the real GDP recover to $16.2 trillion one year earlier. What is the minimal required MPC of households in the Aggregate Expenditure model if there is no tax wedge on household income? What if the tax wedge is 1/3 of the pretax household income? What is the difference between the answer based on the Aggregate Expenditure model and the answer based on the static AD-AS model.

d) There was large fiscal stimulus during 2009-2011. People believe that fiscal stimulus is more powerful in 2011 compared to 2017. Explain why this can be true using the Federal Funds Rate data.

California​ Dreamin' manufactures​ 1960’s style clothing and accessories. The company produces two main​ products: Floral and​ Tie-Dye. Currently the company uses a traditional overhead rate in which Manufacturing Overhead is allocated to products based on direct labor hours logged. The projected production levels for the period are​ 1,000 units of Floral and 500 units of​ Tie-Dye.

Due to profitability​ concerns, management is considering switching to Activity Based Costing​ (ABC). Management has divided Manufacturing Overhead Costs into three activities and cost​ pools: Assembly​ $32,000; Machine Setup​ $12,000; and Product Movement​ $102,600. Management has identified the following cost drivers for each overhead​ activity: direct labor hours for​ assembly, number of setups for machine​ setup, and number of moves for product movement.

The following information has been compiled for each product​ line:

The direct material cost for each Floral unit is​ $10.50; the direct material cost for each​ Tie-Dye unit is​ $15.25. Direct laborers are paid at a rate of​ $20 per direct labor hour.

QUESTION​ 1: Using the above​ information, determine the per unit amount by which the​ Tie-Dye line is​ overcosted/undercosted by the current costing system

A.

​$19.28 overcosted

B.

​$9.64 undercosted

C.

​$1.18 overcosted

D.

​$25.01 undercosted

E.

​$20.71 undercosted

QUESTION​ 2: Using the above​ information, complete the following statement . . . Assuming the company marks up costs​ 75% to determine sales​ price, the Floral line is being ​____ (enter the word​ "over" or the word​ "under") priced by ____ per unit ​(round answer to the nearest ​penny).