Below are percentages for annual sales growth and net sales attributed to loyalty card usage at 74 Noodles & Company restaurants.

(b) Find the correlation coefficient. (Round your answer to 3 decimal places. A negative value should be indicated by a minus sign.)
  
r            ___________

(c-1) To test the correlation coefficient for significance at α = 0.05, fill in the following. (Use the rounded value of the correlation coefficient from part b in all calculations. For final answers, round t_calc to 3 decimal places and the p-value to 4 decimal places. Negative values should be indicated by a minus sign.)
  

Below are percentages for annual sales growth and net sales attributed to loyalty card usage at 74 Noodles & Company restaurants.

(b) Find the correlation coefficient. (Round your answer to 3 decimal places. A negative value should be indicated by a minus sign.)
  
r            _________

(c-1) To test the correlation coefficient for significance at α = 0.01, fill in the following. (Use the rounded value of the correlation coefficient from part b in all calculations. For final answers, round t_calc to 3 decimal places and the p-value to 4 decimal places. Negative values should be indicated by a minus sign.)

Stocks A and B have the following probability distributions of expected future returns:

1. Calculate the expected rate of return, , for Stock B ( = 9.40%.) Do not round intermediate calculations. Round your answer to two decimal places.
     %

2. Calculate the standard deviation of expected returns, σ_A, for Stock A (σ_B = 27.07%.) Do not round intermediate calculations. Round your answer to two decimal places.
     %

   Now calculate the coefficient of variation for Stock B. Round your answer to two decimal places.

   Is it possible that most investors might regard Stock B as being less risky than Stock A?

   1. If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense.
   2. If Stock B is more highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be less risky in a portfolio sense.
   3. If Stock B is more highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense.
   4. If Stock B is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense.
   5. If Stock B is less highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense.
   
   
   

3. Assume the risk-free rate is 2.0%. What are the Sharpe ratios for Stocks A and B? Do not round intermediate calculations. Round your answers to two decimal places.

   Stock A:

   Stock B:

   Are these calculations consistent with the information obtained from the coefficient of variation calculations in Part b?

   1. In a stand-alone risk sense A is more risky than B. If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense.
   2. In a stand-alone risk sense A is less risky than B. If Stock B is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense.
   3. In a stand-alone risk sense A is less risky than B. If Stock B is less highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense.
   4. In a stand-alone risk sense A is less risky than B. If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense.
   5. In a stand-alone risk sense A is more risky than B. If Stock B is less highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense.
   
   
   

Total marks: 50, plus 10 bonus marks for an answer in PLAN/DO/REPORT format.

An Elevating Business. The annual global market for selling elevators is worth $40bn and the annual global market for maintaining them is also worth $40bn. Just 5 companies have 80% of the market for sales: Kone, Otis, Schindler, Thyssenkrupp and Hitachi, however they have only 40% of the market for maintenance since a large number of small companies maintain elevators even though they don’t sell them. Thyssenkrupp is one of the most innovative elevator suppliers, having recently developed technology that allows elevators to move sideways and well as up and down. Another major innovator is Kone that has recently developed extra strength cables which allow very long travel heights, suited to new buildings over 100 stories high in Asia and the Middle East.

Thyssenkrupp is considering selling its elevator division, to cover financial problems in other divisions of the company. You are a financial analyst, assessing the probability of Thyssenkrupp’s elevator division being sold and to whom and also assessing the revenues if it is sold. Based on your experience in the elevator business, you estimate the following probabilities.

The probability of global sales increasing by > 2% next year is 0.25; and the probability of global maintenance revenues increasing by > 2% next year is 0.2. If at least one of these markets increases by > 2% next year, Thyssenkrupp will not sell its elevator division.

If Thyssenkrupp does want to sell, it could plan on selling to: 

a private equity company with a probability of 0.35. This would bring a quick infusion of cash to Thyssenkrupp    to assist its other divisions, 

Kone, with a probability of 0.45, resulting in a very large and innovative company, 

Otis, Schindler or Hitachi with a probability of 0.2.

If Thysennkrupp wants to sell to Kone, the deal may be prevented by European regulators with a probability of 0.65, since it would result in a single very large European elevator company which could constitute a monopoly.
(a) (20) Draw a probability tree to represent the above situation.
(b) (5) Which method of probability assessment was used to estimate the above probabilities?
(c) (10) What is the probability Thyssenkrupp does actually sell its elevator division to Kone?
(d) (15) You estimate that if Kone buys Thyssenkrupp’s elevator division the revenues will be as follows:

What is your estimate of the mean and standard deviation of the total revenues of the combined company assuming that Kone buys Thyssenkrupp’s elevator division?

Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been experiencing problems as shown by its June contribution format income statement below:

*Contains direct materials, direct labor, and variable manufacturing overhead.

Janet Dunn, who has just been appointed general manager of the Westwood Plant, has been given instructions to “get things under control.” Upon reviewing the plant’s income statement, Ms. Dunn has concluded that the major problem lies in the variable cost of goods sold. She has been provided with the following standard cost per swimming pool:

*Based on machine-hours.

During June, the plant produced 3,000 pools and incurred the following costs:

Purchased 15,800 pounds of materials at a cost of $2.45 per pound.

Used 10,600 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.)

Worked 2,100 direct labor-hours at a cost of $6.30 per hour.

Incurred variable manufacturing overhead cost totaling $3,000 for the month. A total of 1,200 machine-hours was recorded.

It is the company’s policy to close all variances to cost of goods sold on a monthly basis.

1a. Compute the following variances for June, materials price and quantity variances.

1b. Compute the following variances for June, labor rate and efficiency variances.

1c. Compute the following variances for June, variable overhead rate and efficiency variances.

(Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

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Summarize the variances that you computed in (1) above by showing the net overall favorable or unfavorable variance for the month. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

1. Flexible Budgeting and Variance Analysis

   I Love My Chocolate Company makes dark chocolate and light chocolate. Both products require cocoa and sugar. The following planning information has been made available:

   Standard Amount per Case
   	Dark Chocolate		Light Chocolate		Standard Price per Pound
   Cocoa	10 lb.		7 lb.		$4.4
   Sugar	8 lb.		12 lb.		0.6
   Standard labor time	0.3 hr.		0.4 hr.

   	Dark Chocolate		Light Chocolate
   Planned production	5,100 cases		13,800 cases
   Standard labor rate	$15.5 per hr.		$15.5 per hr.

   I Love My Chocolate does not expect there to be any beginning or ending inventories of cocoa or sugar. At the end of the budget year, I Love My Chocolate Company had the following actual results:

   	Dark Chocolate		Light Chocolate
   Actual production (cases)	4,800		14,400
   	Actual Price per Pound		Actual Pounds Purchased and Used
   Cocoa	$4.5		149,500
   Sugar	0.55		205,900
   	Actual Labor Rate		Actual Labor Hours Used
   Dark chocolate	$15 per hr.		1,310
   Light chocolate	16 per hr.		5,900

   Required:

   Prepare the following variance analyses for both chocolates and total, based on the actual results and production levels at the end of the budget year:

   1. Price variance is the difference between the actual and standard prices, multiplied by the actual quantity.Direct materials price variance, The cost associated with the difference between the standard quantity and the actual quantity of direct materials used in producing a commodity.direct materials quantity variance, and total variance.
   2. The cost associated with the difference between the standard rate and the actual rate paid for direct labor used in producing a commodity.Direct labor rate variance, The cost associated with the difference between standard and actual hours of direct labor spent for producing a commodity.direct labor time variance, and total variance.

   Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. If there is no variance, enter a zero.

   a.	Direct materials price variance	$	Favorable Unfavorable
   	Direct materials quantity variance	$	Favorable Unfavorable
   	Total direct materials The difference between actual cost and the flexible budget at actual volumes.cost variance	$	Favorable Unfavorable
   b.	Direct labor rate variance	$	Favorable Unfavorable
   	Direct labor time variance	$	Favorable Unfavorable
   	Total direct labor cost variance	$	Favorable Unfavorable

   2. The variance analyses should be based on the

   • actual
   • standard
   amounts at
   • actual
   • standard
   volumes. The budget must flex with the volume changes. If the
   • actual
   • standard
   volume is different from the planned volume, as it was in this case, then the budget used for performance evaluation should reflect the change in direct materials and direct labor that will be required for the
   • actual
   • standard
   production. In this way, spending from volume changes can be separated from efficiency and price variances.

Tombro Industries is in the process of automating one of its plants and developing a flexible manufacturing system. The company is finding it necessary to make many changes in operating procedures. Progress has been slow, particularly in trying to develop new performance measures for the factory. In an effort to evaluate performance and determine where improvements can be made, management has gathered the following data relating to activities over the last four months: Month 1 2 3 4 Quality control measures: Number of defects 201 179 140 98 Number of warranty claims 62 55 46 43 Number of customer complaints 118 112 95 74 Material control measures: Purchase order lead time 10 days 9 days 7 days 5 days Scrap as a percent of total cost 1 % 1 % 2 % 3 % Machine performance measures: Machine downtime as a percentage of availability 5 % 6 % 6 % 10 % Use as a percentage of availability 94 % 91 % 88 % 84 % Setup time (hours) 10 12 13 14 Delivery performance measures: Throughput time ? ? ? ? Manufacturing cycle efficiency (MCE) ? ? ? ? Delivery cycle time ? ? ? ? Percentage of on-time deliveries 95 % 94 % 91 % 88 % The president has read in industry journals that throughput time, MCE, and delivery cycle time are important measures of performance, but no one is sure how they are computed. You have been asked to assist the company, and you have gathered the following data relating to these measures: Average per Month (in days) 1 2 3 4 Wait time per order before start of production 9.0 10.9 12.0 14.0 Inspection time per unit 0.9 0.8 0.8 0.8 Process time per unit 3.2 2.7 2.0 1.1 Queue time per unit 3.6 5.0 6.6 8.4 Move time per unit 0.3 0.6 0.6 0.7 Required: 1-a. Compute the throughput time for each month. 1-b. Compute the manufacturing cycle efficiency (MCE) for each month. 1-c. Compute the delivery cycle time for each month. 3-a. Refer to the inspection time, process time, and so forth, given for month 4. Assume that in month 5 the inspection time, process time, and so forth, are the same as for month 4, except that the company is able to completely eliminate the queue time during production using Lean Production. Compute the new throughput time and MCE. 3-b. Refer to the inspection time, process time, and so forth, given for month 4. Assume that in month 6 the inspection time, process time, and so forth, are the same as in month 4, except that the company is able to eliminate both the queue time during production and the inspection time using Lean Production. Compute the new throughput time and MCE.

1.2 Answer the following multiple choice questions, by selecting the appropriate answer from the possibilities given.
(For example, 1.2.1 - d)

1.2.1 As specialization becomes the order of the day, vertically integrated companies may be supplanted by networked constellations of business partners. Which of the following activities would resort under this new partnership?



(1)
a) Outsourcing everything
b) Talking inventories
c) An industrial army of robots
d) All of the above

1.2.2 Which of the following is a major challenge for the future in the field of Operations Management?

(1)
a) Managing customer touch points
b) Inventory
c) Environmental quality
d) Transformation

1.2.3 Which heading does not appear in an Income Statement?
(1)
a) Gross profit
b) Operating Profit
c) Total assets
d) Net profit before taxes
1.2.4 The point where neither profit or loss is realized is called:
(1)
a) Breakeven point
b) Median point
c) Central point
d) Balanced point

1.2.5 Total costs can be divided into three (3) main categories namely:

(1)
a) Overheads, sales, expenses
b) Overheads, labour, material
c) Material, expenses, labour
d) None of the above

1.2.6 ABC Company has total current assets of R1 000 000,00 and Total current liabilities of R500 000,00. Calculate the current ratio.


(1)
a) 1:2
b) 2:1
c) 1:1
d) 0.5:1

1.2.7 DEF Company has current assts including cash of R200 000,00, accounts receivable of R200 000,00 and marketable securities(public traded stock) valued at R100 000,00. Current liabilities total R500 000,00. Calculate the Quick ratio.




(1)
a) 1:1
b) 0.5:1
c) 0.4:1
d) 0.3:1



1.2.8 XYZ Company has accounts payable of R100 000,00 and cost of goods sold for the year of R1 400 000,00. Calculate the Days payable outstanding.


(1)
a) 14 days
b) 26.07 days
c) 27.03 days
d) 15.01 days

1.2.9 Company A sells pencils for R8,00 each. The company’s fixed costs amount to R120,00 per month and an additional cost of R3,00 is incurred per pencil (e.g. variable cost). In month A the company sold 50 pencils. Determine the breakeven point for month A.




(1)
a) 11 units
b) 40 units
c) 15 units
d) 24 units

1.2.10 Determine the Re- order level for Item XXX1 using the following information:

Re- order quantity: 1200
Re- order period: 4-6 weeks
Maximum consumption: 225 units per week
Normal consumption per week: 200 units per week






(1)
a) 1350 units
b) 1125 units
c) 1000 units
d) 900 units
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