Accounts of Evacuees in WW2

Accounts of Evacuees in WW2 When and how did evacuation happen? Introduction Evacuation was a key wartime strategy to protect the civilian population and minimise panic in areas that would likely be enemy targets, but the plans for evacuation were started well in advance of World War II. Hitler’s appointment as Chancellor, and the devastation of aerial bombing campaigns during the Spanish Civil War, served to alert the British government to the threat on war and particularly the need to be prepared for air strikes on major cities (Ross, 2001). The Anderson Committee served to divide Britain up into areas based on risk of air strike, designating areas as being for evacuation, neutral, or reception areas. In September 1938, the British government announced its plans to evacuate 2 million people in the event of war and had found accommodation for up to 4 million people. The official evacuations started in earnest in September 1939, with ‘Operation Pied Piper’. The objective was to evacuate priority groups (children, mothers and children, the pregnant, the disabled, and teachers – as outlined in source 2) from the major cities. During this phase, 3.5 million people were relocated to reception areas, mainly by train, and often on a first come first served basis. The haphazard nature of the evacuation meant that groups were sometimes split, reception areas over-subscribed, and evacuees placed with families who were expecting to receive a different priority group or evacuees of the same social class. After the fall of France, and the onset of the Blitz, further waves of evacuations continued until September 1944. The priority groups now included the elderly and people were also relocated from coastal towns and ports. In this phase of the evacuations, approximately 200,000 children were relocated including children who had been earlier evacuated to these areas from the major cities. The government also provided free domestic travel to those who wished to make their own arrangements (Brown, 2005). Experiences of the evacuees From our knowledge of the evacuation process, particularly with regard to the haphazard nature of the allocations to reception areas and host families, we might infer that the experiences of evacuees could be quite traumatic. This is the case for Mrs Preedy, who recounted her experiences of being an evacuee over 45 years later in her book based on her wartime diary (source 7). She was evacuated with her close friends but was separated from them on arrival at the designated reception area. She was billeted with another girl who was not a friend and â€Å"foisted† upon an older and childless couple, which tallies with our understanding that evacuees were often placed with hosts who were expecting a different priority group – in this case, possibly an adult. The household that Mrs Preedy describes is working-class, with the woman having previously been in service, and the house lacking in heat (as well as emotional warmth), and dimly lit. We can infer that Mrs Preedy is most likely from a middle class background, unused to assisting regularly in household chores, and used to a warmer and brighter environment. This experience again tallies with our understanding that many evacuees were mismatched with host families on the basis of social class. Mrs Preedy’s account of her wartime experiences is useful as she has based her account on her own contemporaneous diaries. The diaries will, however, likely be dominated by the discomforts she experienced (being separated from her friends, with ‘cold’ hosts, in their cold home). We are not told how old Mrs Preedy was at the time of her evacuation or how long she was evacuated for but her unhappiness with the experience is palpable. For one 10 year old (source 11), the contemporaneous account we are given is very basic. After enquiring as to her mother’s health, she says that she doesn’t like her hosts’ faces but refers to not having seen the lady in daylight. We might infer from this that the letter was written soon after a night-time arrival and these first impressions are from a child searching for signs of friendliness in her hosts, and only finding it in their dog. While the letter is not detailed, there is significant value in this child’s immediate response to her new environment. Mr Kops’ autobiography, written almost twenty years after the end of the war, recounts his awe at the cleanliness and lavishness of his new surroundings (source 10). Mr Kops was evacuated from a poor district of London to a Buckinghamshire village, making the transition from a poor working class household to a middle class home. Mr Kops does not describe his hosts, or the other evacuees he was billeted with; his recollections are solely on the material benefits of his new environment (such as hot tap water and an indoor loo!). While Mr Kops’ autobiography is not based on notes he made during the war, his account reads as though the unadulterated joy of discovering this new lifestyle is still very much fresh in his mind. Further, his transition from a working class to a middle class home appears to have been as wondrous as Mrs Preedy’s transition from a middle class to working class environment was traumatic. Experience of the host families Having seen two very different reactions from evacuees to their experiences, we shall now turn our attention to the experiences of the host families who, as with the evacuees, could be expected to find the haphazard allocations system to have been traumatic. For many, there was a feeling of horror about the condition and behaviour of the children who had been placed with them. One extract from a contemporaneous report published in 1940 (source 14), describes in detail the concerns about the children’s lack of hygiene, poor health, poor clothing, and also describes both mothers and children being in the habit of soiling their beds. While this extract undoubtedly describes the views of some, it has been taken from a wider report and it is unclear if the rest of the report is in the same light. Some of the comments made appear almost hysterical, such as the assertion that â€Å"one child was suffering from scabies and the majority had it in their hair† [this could have simply been itchiness due to nits] and that the â€Å"school had to be fumigated after the reception†. While the veracity of some of the comments may be disputed, the excerpt is useful as social commentary as it gives a good insight into the reactions and possibly prejudices of people towards the influx of children and some of their mothers from the inner cities. For one boy (source 16), having two evacuee children sharing his home didn’t appear to be such a traumatic experience. In an interview in September 1939, the boy describes being disappointed that the evacuees were girls, as he’d expected boys, but sounds relaxed and cheerful about â€Å"showing them around†. The billeting of girls rather than boys to this home may have been a mismatch in the allocation or the child (and his family) may simply have assumed that other boys would be placed in the household. The interview with the boy was made by the BBC in the first month of Operation Pied Piper and was presumably intended to reassure the families of the evacuated, the prospective evacuees, as well as possibly encouraging further host families to come forward. The radio interview is also accompanied by a photograph of the boy, leading a small child on a donkey; as it is unlikely that all radio interviewees were routinely photographed, we might infer that the there w as a propaganda aspect to this interview and that the photograph was reproduced to promote both the interview and the evacuation programme. In considering the impact of evacuees on host families, some historians writing almost fifty years after the end of the war noted the disparity in the living conditions between the urban poor and the rural middle-classes (source 18). There is a sense in this account that there was a strong class divide in Britain during the war and that the rural middle class had been oblivious to the living conditions of those in industrial areas. The exposure to the evacuees was considered to be a shocking experience, but one that had united people into a commitment to improving living conditions after the war. Conclusion In our consideration of this topic, we have accessed only a few accounts, representing the experiences of child evacuees and their hosts. That said, we are still able to conclude that evacuation had a profound effect on both evacuees and their host families. For the evacuees, there was undoubted upheaval as they were wrenched from their families and placed in unfamiliar surroundings. Being placed with host families who may not have been expecting a child (but rather an adult), or were from a different social class may have been added to the stress of the evacuation. For the host families, evacuation brought an insight into urban and industrial life that was unexpected and in some cases unwelcome. The condition of the children was for many quite shocking, with wide-ranging concerns about the children’s health, attire and conduct. Historians have access to a wide range of evidence in order to find out about the effects of the evacuation. There is contemporaneous evidence, reflective accounts, and also the works of other historians. Assessing the value of these sources is a matter of judgment as most material is produced with a purpose in mind: determining whether that purpose enhances or undermines the credibility of the source is one of the tasks of the historian. Bibliography Assignment sources 1-18 (as provided by client) Mike Brown (2005) Evacuees: Evacuation in Wartime Britain 1939-1945. Sutton Publishing Stewart Ross (2001) Evacuation (At Home in World War II). Evans Brothers Limited.

Cases for Management Decision Making

Cases for Management Decision Making CA-1 suggested uses of cases Case CASE 1 Greetings Inc. : Job Order Costing CASE 2 Greetings Inc. : Activity-Based Costing CASE 3 Greetings Inc. : Transfer Pricing Issues CASE 4 Greetings Inc. : Capital Budgeting CASE 5 Auburn Circular Club Pro Rodeo Roundup CASE 6 Sweats Galore CASE 7 Armstrong Helmet Company Overview This case is the first in a series of four cases that presents a business situation in which a traditional retailer decides to employ Internet technology to expand its sales opportunities. It requires the student to employ traditional job order cost- ing techniques and then requests an evaluation of the resulting product costs. (Related to Chapter 2, Job Order Costing. ) This case focuses on decision-making benefits of activity-based costing relative to the traditional approach. It also offers an opportunity to discuss the cost/ benefit trade-off between simple ABC systems versus refined systems, and the potential benefit of using capacity rather than expected sales when allocating fixed overhead costs. (Related to Chapter 4, Activity-Based Costing. This case illustrates the importance of proper transfer pricing for decision making as well as performance evaluation. The student is required to evaluate profitability using two different transfer pricing approaches and comment on the terms of the proposed transfer pricing agreement. (Related to Chapter 8, Pricing. ) This case is set in an environment in which the company is searching for new op- portunities for growth. It requires evaluation of a proposal based on initial esti- mates as well as sensitivity analysis. It also requires evaluation of the underlying assumptions used in the analysis. Related to Chapter 12, Planning for Capital Investments. ) This comprehensive case is designed to be used as a capstone activity at the end of the course. It deals with a not-for-profit service company. The case involves many managerial accounting issues that would be common for a start-up business. (Related to Chapter 5, Cost-Volume-Profit; Chapter 7, Incremental Analysis; and Chapter 9, Budgetary Planning. ) This case focuses on setting up a new business. In planning for this new busi- ness, the preparation of budgets is emphasized. In addition, an understanding of cost-volume-profit relationships is required. (Related to Chapter 5, Cost-Volume- Profit, and Chapter 9, Budgetary Planning. ) This comprehensive case involves finding the cost for a given product. In addi- tion, it explores cost-volume-profit relationships. It requires the preparation of a set of budgets. (Related to Chapter 1, Managerial Accounting; Chapter 5, Cost- Volume-Profit; Chapter 9, Budgetary Planning; Chapter 10, Budgetary Control and Responsibility Accounting; Chapter 11, Standard Costs and Balanced Scorecard; and Chapter 12, Planning for Capital Investments. CA-2 case 1 ?Greet ings Inc. Greetings Inc. : Job Order Costing Developed by Thomas L. Zeller, Loyola University Chicago, and Paul D. Kimmel, University of Wisconsin–Milwaukee THE BUSINESS SITUATION Greetings Inc. has operated for many years as a nationally recognized retailer of greeting cards and small gift items. It has 1,500 stores throughout the United States located in high-traffic malls. As the stock price of many other companies soared, Greetings’ stock price re- mained flat. As a result of a heated 2010 shareholders’ meeting, the president of Greetings, Robert Burns, came under pressure from shareholders to grow Greetings’ stock value. As a consequence of this pressure, in 2011 Mr. Burns called for a formal analysis of the company’s options with regard to business op- portunities. Location was the first issue considered in the analysis. Greetings stores are located in high-traffic malls where rental costs are high. The additional rental cost was justified, however, by the revenue that resulted from these highly visi- ble locations. In recent years, though, the intense competition from other stores in the mall selling similar merchandise has become a disadvantage of the mall locations. Mr. Burns felt that to increase revenue in the mall locations, Greetings would need to attract new customers and sell more goods to repeat customers. In order to do this, the company would need to add a new product line. However, to keep costs down, the product line should be one that would not require much addi- tional store space. In order to improve earnings, rather than just increase rev- enues, Greetings would have to carefully manage the costs of this new product line. After careful consideration of many possible products, the company’s management found a product that seemed to be a very good strategic fit for its existing products: high-quality unframed and framed prints. The critical el- ement of this plan was that customers would pick out prints by viewing them on wide-screen computer monitors in each store. Orders would be processed and shipped from a central location. Thus, store size would not have to in- crease at all. To offer these products, Greetings established a new e-business unit called Wall Decor. Wall Decor is a â€Å"profit center†; that is, the manager of the new business unit is responsible for decisions affecting both revenues and costs. Wall Decor was designed to distribute unframed and framed print items to each Greetings store on a just-in-time (JIT) basis. The system works as follows: The Wall Decor website allows customers to choose from several hundred prints. The print can be purchased in various forms: unframed, framed with a steel frame and no matting, or framed with a wood frame and matting. When a CA-3 Greet ?ings CA-4 ase 1 Cases for Management Decision Making customer purchases an unframed print, it is packaged and shipped the same day from Wall Decor. When a customer purchases a framed print, the print is framed at Wall Decor and shipped within 48 hours. Each Greetings store has a computer linked to Wall Decor’s Web server so Greetings’ customers can browse the many options to make a selection. Once a selection is made, the customer ca n complete the order immediately. Store em- ployees are trained to help customers use the website to shop and to complete their purchases. The advantage to this approach is that each Greetings store, through the Wall Decor website, can offer a wide variety of prints, yet the indi- vidual Greetings stores do not have to hold any inventory of prints or framing materials. About the only cost to the individual store is the computer and high- speed line connection to Wall Decor. The advantage to the customer is the wide variety of unframed and framed print items that can be conveniently purchased and delivered to the home or business, or to a third party as a gift. Wall Decor uses a traditional job order costing system. Operation of Wall Decor would be substantially less complicated, and overhead costs would be sub- stantially less, if it sold only unframed prints. Unframed prints require no addi- tional processing, and they can be easily shipped in simple protective tubes. Framing and matting requires the company to have multiple matting colors and frame styles, which requires considerable warehouse space. It also requires skilled employees to assemble the products and more expensive packaging pro- cedures. Manufacturing overhead is allocated to each unframed or framed print, based on the cost of the print. This overhead allocation approach is based on the assumption that more expensive prints will usually be framed and therefore more overhead costs should be assigned to these items. The predetermined over- head rate is the total expected manufacturing overhead divided by the total ex- pected cost of prints. This method of allocation appeared reasonable to the ac- counting team and distribution floor manager. Direct labor costs for unframed prints consist of picking the prints off the shelf and packaging them for ship- ment. For framed prints, direct labor costs consist of picking the prints, framing, matting, and packaging. The information in Illustration CA 1-1 for unframed and framed prints was collected by the accounting and production teams. The manufacturing overhead budget is presented in Illustration CA 1-2. Illustration CA 1-1 Information about prints and framed items for Wall Decor ?Unframed Steel-Framed Print, Wood-Framed Print, Volume—expected units sold Cost Elements Direct materials Print (expected average cost for each of the three categories) Frame and glass Matting Direct labor Picking time Picking labor rate/hour Matting and framing time Matting and framing rate/hour Print 0,000 $12 10 minutes $12 No Matting 15,000 $16 $4 10 minutes $12 20 minutes $21 with Matting 7,000 $20 $6 $4 10 minutes $12 30 minutes $21 ?Greet ?ings ?case 1 Cases for Management Decision Making CA-5 Illustration CA 1-2 Manufacturing overhead budget for Wall Decor ?Manufacturing Overhead Budget Supervisory salaries Factory rent Equipment rent (framing and matting equipment) Utilities Insurance Information te chnology Building maintenance Equipment maintenance Budgeted total manufacturing overhead costs $100,000 130,200 50,000 20,000 10,000 50,000 11,000 4,000 $375,200 Instructions Use the information in the case and your reading from Chapters 1 and 2 of the text to answer each of the following questions. 1. Define and explain the meaning of a predetermined manufacturing overhead rate that is applied in a job order costing system. 2. What are the advantages and disadvantages of using the cost of each print as a man- ufacturing overhead cost driver? 3. Using the information in Illustrations CA1-1 and CA1-2, compute and interpret the predetermined manufacturing overhead rate for Wall Decor. 4. Compute the product cost for the following three items. a) Lance Armstrong unframed print (base cost of print $12). (b) John Elway print in steel frame, no mat (base cost of print $16). (c) Lambeau Field print in wood frame with mat (base cost of print $20). 5. (a) How much of the total overhead cost is expected to be allocated to unframed prints? (b) How much of the total overhead cost is expected to be allocated to steel framed prints? (c) How much of the tot al overhead cost is expected to be allocated to wood framed prints? (d) What percentage of the total overhead cost is expected to be allocated to un- framed prints? . Do you think the amount of overhead allocated to the three product categories is rea- sonable? Relate your response to this question to your findings in previous questions. 7. Anticipate business problems that may result from allocating manufacturing over- head based on the cost of the prints. case 2 ?Greet ings Inc. Greetings Inc. : Activity-Based Costing Developed by Thomas L. Zeller, Loyola University Chicago, and Paul D. Kimmel, University of Wisconsin–Milwaukee THE BUSINESS SITUATION Mr. Burns, president of Greetings Inc. created the Wall Decor unit of Greetings three years ago to increase the company’s revenue and profits. Unfortunately, even though Wall Decor’s revenues have grown quickly, Greetings appears to be losing money on Wall Decor. Mr. Burns has hired you to provide consulting serv ices to Wall Decor’s management. Your assignment is to make Wall Decor a profitable business unit. Your first step is to talk with the Wall Decor work force. From your conver- sations with store managers you learn that the individual Greetings stores are very happy with the Wall Decor arrangement. The stores are generating addi- tional sales revenue from the sale of unframed and framed prints. They are espe- cially enthusiastic about this revenue source because the online nature of the product enables them to generate revenue without the additional cost of carry- ing inventory. Wall Decor sells unframed and framed prints to each store at product cost plus 20%. A 20% markup on products is a standard policy of all Greetings intercompany transactions. Each store is allowed to add an additional markup to the unframed and framed print items according to market pressures. That is, the selling price charged by each store for unframed and framed prints is determined by each store manager. This policy ensures competitive pricing in the respective store locations, an important business issue because of the intense mall competition. While the store managers are generally happy with the Wall Decor products, they have noted a significant difference in the sales performance of the unframed prints and the framed prints. They find it difficult to sell unframed prints at a competitive price. The price competition in the malls is very intense. On average, stores find that the profits on unframed prints are very low because the cost for unframed prints charged by Wall Decor to the Greetings stores is only slightly be- low what competing stores charge their customers for unframed prints. As a re- sult, the profit margin on unframed prints is very low, and the overall profit earned is small, even with the large volume of prints sold. In contrast, stores make a very good profit on framed prints and still beat the nearest competitor’s price by about 15%. That is, the mall competitors cannot meet at a competitive price the quality of framed prints provided by the Greetings stores. As a result, store managers advertise the lowest prices in town for high-quality framed prints. One store manager referred to Wall Decor’s computer on the counter as a â€Å"cash machine† for framed prints and a â€Å"lemonade stand† for unframed prints. In a conversation with the production manager, you learned that she be- lieves that the relative profitability of framed and unframed prints is distorted CA-6 ?Greet ?ings ?case 2 Cases for Management Decision Making CA-7 ecause of improper product costing. She feels that the costs provided by the company’s traditional job order costing system are inaccurate. From the very beginning, she has carefully managed production and distribution costs. She explains, â€Å"Wall Decor is essentially giving away expensive framed prints, and it appears that it is charging the stores too much for unframed prints. † In her office she shows you her own product costing system, which supports her point of view. Your tour of the information technology (IT) department provided additional insight as to why Wall Decor is having financial problems. You discovered that to keep the website running requires separate computer servers and several in- formation technology professionals. Two separate activities are occurring in the technology area. First, purchasing professionals and IT professionals spend many hours managing thousands of prints and frame and matting materials. Their tasks include selecting the prints and the types of framing material to sell. They also must upload, manage, and download prints and framing material onto and off of the website. The IT staff tells you much of their time is spent with framing and matting material. Only a highly skilled IT professional can properly scan a print and load it up to the site so that it graphically represents what the print will look like when properly matted and framed. In addition, you discover that a different team of IT professionals is dedi- cated to optimizing the operating performance of the website. These costs are classified as manufacturing overhead because a substantial amount of work is required to keep the site integrated with purchasing and production and to safe- guard Wall Decor’s assets online. Most time-consuming is the effort to develop and maintain the site so that customers can view the prints as they would appear either unframed or framed and matted. A discussion with the IT professionals suggests that the time spent develop- ing and maintaining the site for the unframed prints is considerably less than that required for the framed prints and in particular for the framed and matted prints. Developing and maintaining a site that can display the unframed prints is relatively straightforward. It becomes more complicated when the site must al- low the customer to view every possible combination of print with every type of steel frame, and immensely more complicated when one considers all of the pos- sible wood frames and different matting colors. Obviously, a very substantial portion of the IT professionals’ time and resources is required to present the over 1,000 different framing and matting options. Based on your preliminary findings, you have decided that the company’s ability to measure and evaluate the profitability of individual products would be improved if the company employed an activity-based costing (ABC) system. As a first step in this effort, you compiled a list of costs, activities, and values. Your work consisted of taking the original manufacturing overhead cost ($375,200, provided in Case 1) and allocating the costs to activities. You identified four ac- tivities: picking prints; inventory selection and management (includes general management and overhead); website optimization; and framing and matting cost (includes equipment, insurance, rent, and supervisor’s salary). The first activity is picking prints. The estimated overhead related to this ac- tivity is $30,600. The cost driver for this activity is the number of prints. It is ex- pected that the total number of prints will be 102,000. This is the sum of 80,000 unframed, 15,000 steel-framed, and 7,000 wood-framed. Illustration CA 2-1 Information for activity 1 ?Estimated Activity Cost Driver Overhead Picking prints Number of prints $30,600 Expected Use of Cost Driver (80,000 15,000 7,000) 102,000 prints Greet ?ings CA-8 case 2 Cases for Management Decision Making The second activity is inventory selection and management. The estimated overhead related to this activity is $91,700. The cost driver for this activity is the number of components per print item. An unframed print has one component, a steel-framed print has two components (the print and the frame), and a wood- framed print has three components (the print, the mat, and the frame). The total number of components is expected to be 131,000. Illustration CA 2-2 Information for activity 2 ?Activity Inventory selection and management Cost Driver Number of components: Print (1) Print and frame (2) Print, mat, and frame (3) Estimated Overhead $91,700 Expected Use of Cost Driver Prints: 80,000 components Print and frame: 15,000 2 30,000 components Print, mat, and frame: 7,000 3 21,000 components Total 131,000 components The third activity is website optimization. The total overhead cost related to website optimization is expected to be $129,000. It was difficult to identify a cost driver that directly related website optimization to the products. In order to re- flect the fact that the majority of the time spent on this activity related to framed prints, you first split the cost of website optimization between unframed prints and framed prints. Based on your discussion with the IT professionals, you de- termined that they spend roughly one-fifth of their time developing and main- taining the site for unframed prints, and the other four-fifths of their time on framed prints, even though the number of framed prints sold is substantially less than the number of unframed prints. As a consequence, you allocated $25,800 of the overhead costs related to website optimization to unframed prints and $103,200 to framed prints. You contemplated having three categories (unframed, steel-framed, and wood-framed with matting), but chose not to add this addi- tional refinement. Illustration CA 2-3 Information for activity 3 ?Activity Website optimization: Unframed Framed Cost Driver Number of prints at capacity Number of prints at capacity Estimated Overhead $25,800 $103,200 Expected Use of Cost Driver Unframed prints: 100,000 print capacity Framed and/or matted prints: 25,000 print capacity (16,000 steel; 9,000 wood) Once the $129,000 of the third activity was allocated across the two broad product categories, the number of prints at operating capacity was used as the cost driver. Note that operating capacity was used instead of expected units sold. The overhead costs related to website optimization are relatively fixed be- cause the employees are salaried. If a fixed cost is allocated using a value that varies from period to period (like expected sales), then the cost per unit will vary from period to period. When allocating fixed costs it is better to use a base that does not vary as much, such as operating capacity. The advantage of using operating capacity as the base is that it keeps the fixed costs per unit stable over time. ?Greet ?ings ?case 2 Cases for Management Decision Making CA-9 The final activity is framing and matting. The expected overhead costs re- lated to framing and matting are $123,900. None of this overhead cost should be allocated to unframed prints. The costs related to framing and matting are rela- tively fixed because the costs relate to equipment and other costs that do not vary with sales volume. As a consequence, like website optimization, you chose to base the cost driver on levels at operating capacity, rather than at the expected sales level. The cost driver is the number of components. Steel-framed prints have two components (the print and frame), and wood-framed prints have three components (the print, mat, and frame). The total components at operating ca- pacity would be steel frame 32,000 or (16,000 2) and wood frame 27,000 or (9,000 3,000). Illustration CA 2-4 Information for activity 4 ?Activity Framing and matting cost (equipment, insurance, rent, and supervisory labor) Cost Driver Number of components at capacity Estimated Overhead $123,900 Expected Use of Cost Driver Print and frame: 16,000 2 32,000 components at capacity Print, mat, and frame: 9,000 3 27,000 components at capacity Total 59,000 components To summarize, the overhead costs and cost drivers used for each product are expected to be: Illustration CA 2-5 Summary of overhead costs and cost drivers ?Cost Activity Driver 1. Picking Number of prints prints Steel- Wood- Framed, Framed, No with Unframed Matting Matting Total 80,000 15,000 7,000 102,000 80,000 30,000 21,000 131,000 Overhead Cost $ 30,600 91,700 25,800 103,200 123,900 $375,200 ?2. Inventory selection and management 3. Website optimization 4. Framing and matting Number of components Number of 100,000 prints at capacity Number of components at capacity na 16,000 32,000 9,000 27,000 100,000 25,000 59,000 Instructions Answer the following questions. . Identify two reasons why an activity-based costing system may be appropriate for Wall Decor. 2. Compute the activity-based overhead rates for each of the four activities. 3. Compute the product cost for the following three items using ABC. (Review Case 1 for additional information that you will need to answer this question. ) (a) Lance Armstrong unframed print (base cost of print $12). (b) John Elway print in steel frame, no mat ( base cost of print $16). (c) Lambeau Field print in wood frame with mat (base cost of print $20). ? Greet ?ings CA-10 ase 2 Cases for Management Decision Making 4. 5. 6. 7. In Case 1 for Greetings, the overhead allocations using a traditional volume-based approach were $3. 36 for Lance Armstrong, $4. 48 for John Elway, and $5. 60 for Lam- beau Field. The total product costs from Case 1 were Lance Armstrong $17. 36, John Elway $33. 48, and Lambeau Field $48. 10. The overhead allocation rate for unframed prints, such as the unframed Lance Armstrong print in question 3, decreased under ABC compared to the amount of overhead that was allocated under the traditional approach in Case 1. Why is this the case? What are the potential implications for the company? Explain why the overhead cost related to website optimization was first divided into two categories (unframed prints and framed prints) and then allocated based on number of prints. When allocating the cost of website optimization, the decision was made to initially allocate the cost across two categories (unframed prints and framed prints) rather than three categories (unframed prints, steel-framed prints, and wood-framed prints with matting). Discuss the pros and cons of splitting the cost between two categories rather than three. Discuss the implications of using operating capacity as the cost driver rather than the expected units sold when allocating fixed overhead costs. 8. (a) Allocate the overhead to the three product categories (unframed prints, steel- framed prints, and wood-framed prints with matting), assuming that the estimate of the expected units sold is correct and the actual amount of overhead incurred equaled the estimated amount of $375,200. (b) Calculate the total amount of overhead allocated. Explain why the total overhead of $375,200 was not allocated, even though the estimate of sales was correct. What are the implications of this for management? case 3 ?Greet ings Inc. Greetings Inc. : Transfer Pricing Issues Developed by Thomas L. Zeller, Loyola University Chicago, and Paul D. Kimmel, University of Wisconsin–Milwaukee THE BUSINESS SITUATION Two years ago, prior to a major capital-budgeting decision (see Case 4), Robert Burns, the president of Greetings Inc. , faced a challenging transfer pricing issue. He knew that Greetings store managers had heard about the ABC study (see Case 2) and that they knew a price increase for framed items would soon be on the way. In an effort to dissuade him from increasing the transfer price for framed prints, several store managers e-mailed him with detailed analyses show- ing how framed-print sales had given stores a strong competitive position and had increased revenues and profits. The store managers mentioned, however, that while they were opposed to an increase in the cost of framed prints, they were looking forward to a price decrease for unframed prints. Management at Wall Decor was very interested in changing the transfer pric- ing strategy. You had reported to them that setting the transfer price based on the product costs calculated by using traditional overhead allocation measures had been a major contributing factor to its non-optimal performance. Here is a brief recap of what happened during your presentation to Mr. Burns and the Wall Decor managers. Mr. Burns smiled during your presentation and graciously acknowledged your excellent activity-based costing (ABC) study and analysis. He even nodded with approval as you offered the following suggestions. 1. Wall Decor should decrease the transfer price for high-volume, simple print items. . Wall Decor should increase the transfer price for low-volume, complex framed print items. 3. Youranalysispointstoatransferpricethatmaintainsthe20%markupovercost. 4. Adoption of these changes will provide Wall Decor with an 11% return on investment (ROI), beating the required 10% expected by Greetings’ board of directors. 5. Despite the objections of the store managers, the Gr eetings stores must ac- cept the price changes. Finishing your presentation, you asked the executive audience, â€Å"What questions do you have? † Mr. Burns responded as follows. Your analysis appears sound. However, it focuses almost exclu- sively on Wall Decor. It appears to tell us little about how to move for- ward and benefit the entire company, especially the Greetings retail stores. Let me explain. CA-11 Greet ?ings CA-12 case 3 Cases for Management Decision Making I am concerned about how individual store customers will react to the price changes, assuming the price increase of framed-print items is passed along to the customer. Store managers will welcome a decrease in the transfer price of unframed prints. They have complained about the high cost of prints from the beginning. With a decrease in print cost, store managers will be able to compete against mall stores for print items at a competitive selling price. In addition, the increase in store traffic for prints should increase the sales revenue for related items, such as cards, wrapping paper, and more. These are all low- margin items, but with increased sales volume of prints and related products, revenues and profits should grow for each store. Furthermore, store managers will be upset with the increase in the cost of framed prints. Framed prints have generated substantial rev- enues and profits for the stores. Increasing the cost of framed prints to the stores could create one of three problems: First, a store manager may elect to keep the selling price of framed-print items the same. The results of this would be no change in revenues, but profits would de- cline because of the increase in cost of framed prints. Second, a store manager may elect to increase the selling price of the framed prints to offset the cost increase. In this case, sales of framed prints would surely decline and so would revenues and profits. In addition, stores would likely see a decline in related sales of other expensive, high-quality, high-margin items. This is because sales data indicate that customers who purchase high-quality, high-price framed prints also purchase high-quality, high-margin items such as watches, jewelry, and cosmetics. Third, a store manager may elect to search the outside market for framed prints. † Mr. Burns offered you the challenge of helping him bring change to the company’s transfer prices so that both business units, Greetings stores and Wall Decor, win. From his explanation, you could see and appreciate that set- ting the transfer price for unframed and framed prints impacts sale revenues and profits for related items and for the company overall. You immediately rec- ognized the error in your presentation by simply providing a solution for Wall Decor alone. You drove home that night thinking about the challenge. You recognized the need and importance of anticipating the reaction of Greetings store customers to changes in the prices of unframed and framed prints. The next day, the market- ing team provided you with the following average data. For every unframed print sold (assume one print per customer), that cus- tomer purchases related products resulting in $4 of additional profit. †¢ For every framed print sold (assume one print per customer), that customer purchases related products resulting in $8 of additional profit. †¢ Each Greetings store sets its own selling price for unframed and framed prints. Store managers nee d this type of flexibility to be responsive to com- petitive pressures. On average the pricing for stores is as follows: unframed prints $21, steel-framed without matting $50, wood-framed with matting $70. Instructions Answer each of the following questions. 1. Prepare for class discussion what you think were the critical challenges for Mr. Burns. Recognize that Wall Decor is a profit center and each Greetings store is a profit center. ?Greet ?ings ?case 3 Cases for Management Decision Making CA-13 2. After lengthy and sometimes heated negotiations between Wall Decor and the store managers, a new transfer price was determined that calls for the stores and Wall Decor to split the profits on unframed prints 30/70 (30% to the store, 70% to Wall Decor) and the profits on framed prints 50/50. The following additional terms were also agreed to: †¢ â€Å"Profits† are defined as the store selling price less the ABC cost. †¢ Stores do not share the profits from related products with Wall Decor. †¢ Wall Decor will not seek to sell unframed and framed print items through anyone other than Greetings. †¢ Wall Decor will work to decrease costs. †¢ Greetings stores will not seek suppliers of prints other than Wall Decor. †¢ Stores will keep the selling price of framed prints as it was before the change in transfer price. On average, stores will decrease the selling price of unframed prints to $20, with an expected increase in volume to 100,000 prints. Analyze how Wall Decor and the stores benefited from this new agreement. In your analysis, first (a) compute the profits of the stores and Wall Decor using traditional amounts related to pricing, cost, and a 20% markup on Wall Decor costs. Next, (b) compute the profits of the stores and Wall Decor using the ABC cost and negoti- ated transfer price approach. Finally, (c) explain your findings, linking the overall profits for stores and Wall Decor. The following data apply to this analysis. (Round all calculations to three deci- mal places. ) Average selling price by stores before transfer pricing study Average selling price by stores after transfer pricing study Volume at traditional selling price Volume at new selling price Wall Decor cost (traditional) ABC cost Unframed Print $21 $20 80,000 100,000 $17. 36 $15. 258 Steel-Framed, No Matting $50 $50 15,000 15,000 $33. 48 $39. 028 Wood-Framed, with Matting $70 $70 7,000 7,000 $48. 10 $55. 328 3. Review the additional terms of the agreement listed in instruction 2 above. In each case, state whether the item is appropriate, unnecessary, ineffective, or potentially harmful to the overall company. case 4 ?Greet ings Inc. Greetings Inc. : Capital Budgeting Developed by Thomas L. Zeller, Loyola University Chicago, and Paul D. Kimmel, University of Wisconsin–Milwaukee THE BUSINESS SITUATION Greetings Inc. stores, as well as the Wall Decor division, have enjoyed healthy prof- itability during the last two years. Although the profit margin on prints is often thin, the volume of print sales has been substantial enough to generate 15% of Greetings’ store profits. In addition, the increased customer traffic resulting from the prints has generated significant additional sales of related non-print products. As a result, the company’s rate of return has exceeded the industry average during this two-year period. Greetings’ store managers likened the e-business leverage cre- ated by Wall Decor to a â€Å"high-octane† fuel to supercharge the stores’ profitability. This high rate of return (ROI) was accomplished even though Wall Decor’s venture into e-business proved to cost more than originally budgeted. Why was it a profitable venture even though costs exceeded estimates? Greetings stores were able to generate a considerable volume of business for Wall Decor. This helped spread the high e-business operating costs, many of which were fixed, across many unframed and framed prints. This experience taught top manage- ment that maintaining an e-business structure and making this business model successful are very expensive and require substantial sales as well as careful monitoring of costs. Wall Decor’s success gained widespread industry recognition. The business press ocumented Wall Decor’s approach to using information technology to in- crease profitability. The company’s CEO, Robert Burns, has become a frequent business-luncheon speaker on the topic of how to use information technology to offer a great product mix to the customer and increase shareholder value. From the outside looking in, all appears to be going very well for Greetings stores and Wall Decor. How ever, the sun is not shining as brightly on the inside at Greetings. The mall stores that compete with Greetings have begun to offer prints at very com- petitive prices. Although Greetings stores enjoyed a selling price advantage for a few years, the competition eventually responded, and now the pressure on sell- ing price is as intense as ever. The pressure on the stores is heightened by the fact that the company’s recent success has led shareholders to expect the stores to generate an above-average rate of return. Mr. Burns is very concerned about how the stores and Wall Decor can continue on a path of continued growth. Fortunately, more than a year ago, Mr. Burns anticipated that competitors would eventually find a way to match the selling price of prints. As a conse- quence, he formed a committee to explore ways to employ technology to further reduce costs and to increase revenues and profitability. The committee is com- prised of store managers and staff members from the information technology, CA-14 ?Greet ?ings ?cacaseses 14 Cases for Management Decision Making CA-15 marketing, finance, and accounting departments. Early in the group’s discussion, the focus turned to the most expensive component of the existing business model—the large inventory of prints that Wall Decor has in its centralized ware- house. In addition, Wall Decor incurs substantial costs for shipping the prints from the centralized warehouse to customers across the country. Ordering and maintaining such a large inventory of prints consumes valuable resources. One of the committee members suggested that the company should pursue a model that music stores have experimented with, where CDs are burned in the store from a master copy. This saves the music store the cost of maintaining a large inventory and increases its ability to expand its music offerings. It virtually guarantees that the store can always provide the CDs requested by customers. Applying this idea to prints, the committee decided that each Greetings store could invest in an expensive color printer connected to its online ordering system. This printer would generate the new prints. Wall Decor would have to pay a roy- alty on a per print basis. However, this approach does offer certain advantages. First, it would eliminate all ordering and inventory maintenance costs related to the prints. Second, shrinkage from lost and stolen prints would be reduced. Finally, by reducing the cost of prints for Wall Decor, the cost of prints to Greetings stores would decrease, thus allowing the stores to sell prints at a lower price than competitors. The stores are very interested in this option because it enables them to maintain their current customers and to sell prints to an even wider set of customers at a potentially lower cost. A new set of customers means even greater related sales and profits. As the accounting/finance expert on the team, you have been asked to per- form a financial analysis of this proposal. The team has collected the informa- tion presented in Illustration CA 4-1. Illustration CA 4-1 Information about the proposed capital investment project ?Available Data Cost of equipment (zero residual value) Cost of ink and paper supplies (purchase immediately) Annual cash flow savings for Wall Decor Annual additional store cash flow from increased sales Sale of ink and paper supplies at end of 5 years Expected life of equipment Cost of capital Amount $800,000 100,000 175,000 100,000 50,000 5 years 12% ?Instructions Mr. Burns has asked you to do the following as part of your analysis of the capital investment project. 1. Calculatethenetpresentvalueusingthenumbersprovided. Assumethatannualcash flows occur at the end of the year. 2. Mr. Burns is concerned that the original estimates may be too optimistic. He has sug- gested that you do a sensitivity analysis assuming all costs are 10% higher than ex- pected and that all inflows are 10% less than expected. 3. Identify possible flaws in the numbers or assumptions used in the analysis, and iden- tify the risk(s) associated with purchasing the equipment. . In a one-page memo, provide a recommendation based on the above analy- sis. Include in this memo: (a) a challenge to store and Wall Decor management and (b) a suggestion on how Greetings stores could use the computer connection for re- lated sales. case 5 Auburn Circular Club Pro Rodeo Roundup Developed by Jessica Johnson Frazier, Eastern Kentucky University, and Patricia H. Mounce, University of Central Arkansas THE BUSINESS SITUATION When Shelley Jones became president-elect of the Circular Club of Auburn, Kansas, she was asked to suggest a new fundraising activity for the club. After a consider- able amount of research, Shelley proposed that the Circular Club sponsor a profes- sional rodeo. In her presentation to the club, Shelley said that she wanted a fundraiser that would (1) continue to get better each year, (2) give back to the com- munity, and (3) provide the club a presence in the community. Shelley’s goal was to have an activity that would become an â€Å"annual community event† and that would break even the first year and raise $5,000 the following year. In addition, based on the experience of other communities, Shelley believed that a rodeo could grow in popularity so that the club would eventually earn an average of $20,000 annually. A rodeo committee was formed. Shelley contacted the world’s oldest and largest rodeo-sanctioning agency to apply to sponsor a professional rodeo. The sanctioning agency requires a rodeo to consist of the following five events: Bareback Riding, Bronco Riding, Steer Wrestling, Bull Riding, and Calf Roping. Because there were a number of team ropers in the area and because they wanted to include females in the competition, members of the rodeo committee added Team Roping and Women’s Barrels. Prize money of $3,000 would be paid to winners in each of the seven events. Members of the rodeo committee contracted with RJ Cattle Company, a live- stock contractor on the rodeo circuit, to provide bucking stock, fencing, and chutes. Realizing that osts associated with the rodeo were tremendous and that ticket sales would probably not be sufficient to cover the costs, the rodeo com- mittee sent letters to local businesses soliciting contributions in exchange for various sponsorships. Exhibiting Sponsors would contribute $1,000 to exhibit their products or services, while Major Sponsors would contribute $600. Chute Sponsors would cont ribute $500 to have the name of their business on one of the six bucking chutes. For a contribution of $100, individuals would be included in a Friends of Rodeo list found in the rodeo programs. At each performance the rodeo announcer would repeatedly mention the names of the businesses and in- dividuals at each level of sponsorship. In addition, large signs and banners with the names of the businesses of the Exhibiting Sponsors, Major Sponsors, and Chute Sponsors were to be displayed prominently in the arena. ?CA-16 case 5 Cases for Management Decision Making CA-17 A local youth group was contacted to provide concessions to the public and divide the profits with the Circular Club. The Auburn Circular Club Pro Rodeo Roundup would be held on June 1, 2, and 3. The cost of an adult ticket was set at $8 in advance or $10 at the gate; the cost of a ticket for a child 12 or younger was set at $6 in advance or $8 at the gate. Tickets were not date-specific. Rather, one ticket would admit an individual to one performance of his or her choice— Friday, Saturday, or Sunday. The rodeo committee was able to secure a location through the county supervisors board at a nominal cost to the Circular Club. The arrangement allowed the use of the county fair grounds and arena for a one- week period. Several months prior to the rodeo, members of the rodeo commit- tee had been assured that bleachers at the arena would hold 2,500 patrons. On Saturday night, paid attendance was 1,663, but all seats were filled due to poor gate controls. Attendance was 898 Friday and 769 on Sunday. The following revenue and expense figures relate to the first year of the rodeo. Illustration CA 5-1 Revenue and expense data, year 1 ?Receipts Contributions from sponsors $22,000 Receipts from ticket sales 28,971 Share of concession profits 1,513 Sale of programs 600 Total receipts Expenses Livestock contractor 26,000 Prize money 21,000 Contestant hospitality Sponsor signs for arena 1,900 Insurance 1,800 Ticket printing 1,050 Sanctioning fees 925 Entertainment 859 Judging fees 750 Port-a-potties 716 Rent 600 Hay for horses 538 Programs 500 Western hats to first 500 children 450 Hotel rooms for stock contractor 325 Utilities 300 Sand for arena 251 Miscellaneous fixed costs 105 Total expenses Net loss $53,084 ?3,341* ?61,410 $(8,326) *The club contracted with a local caterer to provide a tent and food for the contestants. The cost of the food was contingent on the number of contestants each evening. Information con- cerning the number of contestants and the costs incurred are as follows: Contestants Friday 68 Saturday 96 Sunday 83 Total Cost $ 998 1,243 1,100 $3,341 On Wednesday after the rodeo, members of the rodeo committee met to discuss and critique the rodeo. Jonathan Edmunds, CPA and President of the Circular Club, commented that the club did not lose money. Rather, Jonathan said, â€Å"The club made an investment in the rodeo. † CA-18 case 5 Cases for Management Decision Making Instructions Answer each of the following questions. . Do you think it was necessary for Shelley Jones to stipulate that she wanted a fundraiser that would (1) continue to get better each year, (2) give back to the com- munity, and (3) provide the club a presence in the community? Why or why not? 2. What did Jonathan Edmunds mean when he said the club had made an investment in the rodeo? 3. Is Jonathan’s comment concerning the investment consistent with Shelley’s idea that t he club should have a fundraiser that would (1) continue to get better each year, (2) give back to the community, and (3) provide the club a presence in the community? Why or why not? 4. What do you believe is the behavior of the rodeo expenditures in relation to ticket sales? 5. Determine the fixed and variable cost components of the catering costs using the high-low method. 6. Assume you are elected chair of the rodeo committee for next year. What steps would you suggest the committee take to make the rodeo profitable? 7. Shelley, Jonathan, and Adrian Stein, the Fundraising Chairperson, are beginning to make plans for next year’s rodeo. Shelley believes that by negotiating with local feed stores, innkeepers, and other business owners, costs can be cut dramatically. Jonathan agrees. After carefully analyzing costs, Jonathan has estimated that the fixed expenses can be pared to approximately $51,000. In addition, Jonathan estimates that variable costs are 4% of total gross receipts. After talking with business owners who attended the rodeo, Adrian is confident that funds solicited from sponsors will increase. Adrian is comfortable in budgeting revenue from sponsors at $25,600. The local youth group is unwilling to provide con- cessions to the audience unless they receive all of the profits. Not having the person- nel to staff the concession booth, members of the Circular Club reluctantly agree to let the youth group have 100% of the profits from the concessions. In addition, mem- bers of the rodeo committee, recognizing that the net income from programs was only $100, decide not to sell rodeo programs next year. Compute the break-even point in dollars of ticket sales assuming Adrian and Jonathan are correct in their assumptions. 8. Shelley has just learned that you are calculating the break-even point in dollars of ticket sales. She is still convinced that the Club can make a profit using the assumptions in number 7 above. (a) Calculate the dollars of ticket sales needed in order to earn a target profit of $6,000. (b) Calculate the dollars of ticket sales needed in order to earn a target profit of $12,000. 9. Are the facilities at the fairgrounds adequate to handle crowds needed to generate ticket revenues calculated in number 8 above to earn a $6,000 profit? Show calcula- tions to support your answers. 10. Prepare a budgeted income statement for next year using the estimated revenues from sponsors and other assumptions in number 7 above. In addition, use ticket sales based on the target profit of $12,000 estimated in 8(b). The cost of the livestock con- tractor, prize money, sanctioning fees, entertainment, judging fees, rent, and utilities will remain the same next year. Changes in expenses include the following: Members of the Club have decided to eliminate all costs related to contestant hospitality by soliciting a tent and food for the contestants and taking care of the â€Å"Contestant Hospitality Tent† themselves. The county has installed permanent restrooms at the arena, eliminating the need to rent port-a- potties. The rodeo committee intends to pursue arrangements to have hotel rooms, hay, and children’s hats provided at no charge in exchange for sponsorships. The cost of banners varies with the number of sponsors. Signs and More charged the Circular Club $130 for each Exhibiting Sponsor banner and $48 for each Major Sponsor banner. At this time there is no way to know whether additional sponsors will be Exhibiting Spon- sors or Major Sponsors. Therefore, for budgeting purposes you should increase the cost of the banners by the percentage increase in sponsor contributions. (Hint: Round ase 5 Cases for Management Decision Making CA-19 all calculations to three decimal places. ) By checking prices, the Circular Club will be able to obtain insurance providing essentially the same amount of coverage as this year for only $600. For the first rodeo the Club ordered 10,000 tickets. Realizing the con- straints on available seating, the Club is ordering only 5,000 tickets for next year, and th erefore its costs are reduced 50%. The sand for the arena for next year will be $300, and miscellaneous fixed costs are to be budgeted at $100. 11. A few members in the Circular Club do not want to continue with the annual rodeo. However, Shelley is insistent that the Club must continue to conduct the rodeo as an annual fundraiser. Shelley argues that she has spent hundreds of dollars on western boots, hats, and other items of clothing to wear to the rodeo. Are the expenses re- lated to Shelley’s purchases of rodeo clothing relevant costs? Why or why not? 12. Rather than hire the local catering company to cater the Contestant Hospitality Tent, members of the Circular Club are considering asking Shady’s Bar-B-Q to cater the event in exchange for a $600 Major Sponsor spot. In addition, The Fun Shop, a local party supply business, will be asked to donate a tent to use for the event. The Fun Shop will also be given a $600 Major Sponsor spot. Several members of the Club are opposed to this consideration, arguing that the two Major Sponsor spots will take away from the money to be earned through other sponsors. Adrian Stein has explained to the members that the Major Sponsor signs for the arena cost only $48 each. In ad- dition, there is more than enough room to display two additional sponsor signs. What would you encourage the Club to do concerning the Contestant Hospitality Tent? Would your answer be different if the arena were limited in the number of additional signs that could be displayed? What kind of cost would we consider in this situation that would not be found on a financial statement? case 6 Sweats Galore Developed by Jessica Johnson Frazier, Eastern Kentucky University, and Patricia H. Mounce, University of Central Arkansas THE BUSINESS SITUATION After graduating with a degree in business from Eastern University in Campus Town, USA, Michael Woods realized that he wanted to remain in Campus Town. After a number of unsuccessful attempts at getting a job in his disci- pline, Michael decided to go into business for himself. In thinking about his business venture, Michael determined that he had four criteria for the new business: 1. He wanted to do something that he would enjoy. 2. He wanted a business that would give back to the community. 3. He wanted a business that would grow and be more successful every year. 4. Realizing that he was going to have to work very hard, Michael wanted a business that would generate a minimum net income of $25,000 annually. While reflecting on the criteria he had outlined, Michael, who had been president of his fraternity and served as an officer in several other student organizations, realized that there was no place in Campus Town to have cus- tom sweatshirts made using a silk-screen process. When student organiza- tions wanted sweatshirts for their members or to market on campus, the offi- cers had to make a trip to a city 100 miles away to visit â€Å"Shirts and More. ’’ Michael had worked as a part-time employee at Shirts and More while he was in high school and had envisioned owning such a shop. He realized that a sweatshirt shop in Campus Town had the potential to meet all four of his crite- ria. Michael set up an appointment with Jayne Stoll, the owner of Shirts and More, to obtain information useful in getting his shop started. Because Jayne liked Michael and was intrigued by his entrepreneurial spirit, she answered many of Michael’s questions. In addition, Jayne provided information concerning the type of equipment Michael would need for his business and its average useful life. Jayne knows a competitor who is retiring and would like to sell his equipment. Michael can purchase the equipment at the beginning of 2011, and the owner is willing to give him terms of 50% due upon purchase and 50% due the quarter following the purchase. Michael decided to purchase the following equipment as of January 1, 2011. CA-20 case 6 Cases for Management Decision Making CA-21 Hand-operated press that applies ink to the shirt Light-exposure table Dryer conveyer belt that makes ink dry on the shirts Computer with graphics software and color printer Display furniture Used cash register Cost $7,500 1,350 2,500 3,500 2,000 500 Useful Life yrs. 10 yrs. 10 yrs. 4 yrs. 10 yrs. 5 yrs. Michael has decided to use the sweatshirt supplier recommended by Jayne. He learned that a gross of good-quality sweatshirts to be silk-screened would cost $1,440. Jayne has encouraged Michael to ask the sweatshirt supplier for terms of 40% of a quarter’s purchases to be paid in the quarter of purchase, with the re- maining 60% of the quarter’s purchases to be paid in the quarter following the purchase. Michael also learned from talking with Jayne that the ink used in the silk- screen process costs approximately $0. 75 per shirt. Knowing that the silk-screen process is somewhat labor-intensive, Michael plans to hire six college students to help with the process. Each one will work an average of 20 hours per week for 50 weeks during the year. Michael estimates to- tal annual wages for the workers to be $72,000. In addition, Michael will need one person to take orders, bill customers, and operate the cash register. Cary Sue Smith, who is currently Director of Student Development at Eastern University, has approached Michael about a job in sales. Cary Sue knows the officers of all of the student organizations on campus. In ad- dition, she is very active in the community. Michael thinks Cary Sue can bring in a lot of business. In addition she also has the clerical skills needed for the posi- tion. Because of her contacts, Michael is willing to pay Cary Sue $1,200 per month plus a commission of 10% of sales. Michael estimates Cary Sue will spend 50% of the workday focusing on sales, and the remaining 50% will be spent on clerical and administrative duties. Michael realizes that he will have difficulty finding a person skilled in com- puter graphics to generate the designs to be printed on the shirts. Jayne recently hired a graphics designer in that position for Shirts and More at a rate of $500 per month plus $0. 10 for each shirt printed. Michael believes he can find a uni- versity graphics design student to work for the same rate Jayne is paying her designer. Michael was fortunate to find a commercial building for rent near the uni- versity and the downtown area. The landlord requires a one-year lease. Although the monthly rent of $1,000 is more than Michael had anticipated paying, the building is nice, has adequate parking, and there is room for expansion. Michael anticipates that 75% of the building will be used in the silk-screen process and 25% will be used for sales. Michael’s fraternity brothers have encouraged him to advertise weekly in the Eastern University student newspaper. Upon inquiring, Michael found that a 3 3 ad would cost $25 per week. Michael also plans to run a weekly ad in the local newspaper that will cost him $75 per week. Michael wants to sell a large number of quality shirts at a reasonable price. He estimates the selling price of each customized shirt to be $16. Jayne has sug- gested that he should ask customers to pay for 70% of their purchases in the quarter purchased and pay the additional 30% in the quarter following the purchases. After talking with the insurance agent and the property valuation adminis- trator in his municipality, Michael estimates that the property taxes and insur- ance on the machinery will cost $2,240 annually; property tax and insurance on display furniture and cash register will total $380 annually. CA-22 case 6 Cases for Management Decision Making Jayne reminded Michael that maintenance of the machines is required for the silk-screen process. In addition, Michael realizes that he must consider the cost of utilities. The building Michael wants to rent is roughly the same size as the building occupied by Shirts and More. In addition, Shirts and More sells ap- proximately the same number of shirts Michael plans to sell in his store. Therefore, Michael is confident that the maintenance and utility costs for his shop will be comparable to the maintenance and utility costs for Shirts and More, which are as follows within the relevant range of zero to 8,000 shirts. Shirts Sold January 2,000 February 2,110 March 2,630 April 3,150 May 5,000 June 5,300 July 3,920 August 2,080 September 8,000 October 6,810 November 6,000 December 3,000 Maintenance Costs $1,716 1,720 1,740 1,740 1,758 1,818 1,825 1,780 1,914 1,860 1,855 1,749 Utility Costs $1,100 1,158 1,171 1,198 1,268 1,274 1,205 1,117 1,400 1,362 1,347 1,193 Michael estimates the number of shirts to be sold in the first five quarters, beginning January 2011, to be: First quarter, year 1 Second quarter, year 1 Third quarter, year 1 Fourth quarter, year 1 First quarter, year 2 8,000 10,000 20,000 12,000 18,000 Seeing how determined his son was to become an entrepreneur, Michael’s fa- ther offered to co-sign a note for an amount up to $20,000 to help Michael open his sweatshirt shop, Sweats Galore. However, when Michael and his father ap- proached the loan officer at First Guarantee Bank, the loan officer asked Michael to produce the following budgets for 2011. Sales budget Schedule of expected collections from customers Shirt purchases budget Schedule of expected payments for purchases Silk-screen labor budget Selling and administrative expenses budget Silk-screen overhead expenses budget Budgeted income statement Cash budget Budgeted balance sheet The loan officer advised Michael that the interest rate on a 12-month loan would be 8%. Michael expects the loan to be taken out as of January 1, 2011. Michael has estimated that his income tax rate will be 20%. He expects to pay the total tax due when his returns are filed in 2012. Instructions Answer the following questions. 1. Do you think it was important for Michael to stipulate his four criteria for the busi- ness (see page CA-21), including the goal of generating a net income of at least $25,000 annually? Why or why not? case 6 Cases for Management Decision Making CA-23 2. If Michael has sales of $12,000 during January of his first year of business, deter- mine the amount of variable and fixed costs associated with utilities and mainte- nance using the high-low method for each. 3. Using the format below, prepare a sales budget for the year ending 2011. SWEATS GALORE Sales Budget For the Year Ended December 31, 2011 Quarter 1 2 3 4 Year Expected unit sales Unit selling price x Budgeted sales revenue $ 4. Prepare a schedule of expected collections from customers. SWEATS GALORE Schedule of Expected Collections from Customers For the Year Ending December 31, 2011 Quarter 234 Accounts receivable 1/1/11 –0– First quarter Second quarter Third quarter Fourth quarter Total collections 5. Michael learned from talking with Jayne that the supplier is so focused on making quality sweatshirts that many times the shirts are not available for several days. She encouraged Michael to maintain an ending inventory of shirts equal to 25% of the next quarter’s sales. Prepare a shirt purchases budget for shirts using the format provided. SWEATS GALORE Shirt Purchases Budget For the Year Ended December 31, 2011 Quarter 1 2 3 4 Year Shirts to be silk-screened Plus: Desired ending inventory Total shirts required Less: Beginning inventory Total shirts needed Cost per shirt Total cost of shirt purchases 6. Prepare a schedule of expected payments for purchases. SWEATS GALORE Schedule of Expected Payments for Purchases For the Year Ended December 31, 2011 Quarter 1234 Accounts payable 1/1/11 –0– First quarter Second quarter Third quarter Fourth quarter Total payments CA-24 case 6 Cases for Management Decision Making 7. Prepare a silk-screen labor budget. SWEATS GALORE Silk-Screen Labor Budget For the Year Ended December 31, 2011 Quarter 2 3 4 Year Units to be produced Silk-screen labor hours per unit Total required silk-screen labor hours Silk-screen labor cost per hour Total silk-screen labor cost 8. Prepare a selling and administrative expenses budget for Sweats Galore for the year ending December 31, 2011. SWEATS GALORE Selling and Administrative Expenses Budget For the Year Ended December 31, 201 1 Quarter 1 2 3 4 Year Variable expenses: Sales commissions Total variable expenses Fixed expenses: Advertising Rent Sales salaries Office salaries Depreciation Property taxes and insurance Total fixed expenses Total selling and dministrative expenses 9. Prepare a silk-screen overhead expenses budget for Sweats Galore for the year end- ing December 31, 2011. SWEATS GALORE Silk-Screen Overhead Expenses Budget For the Year Ended December 31, 2011 Quarter 1 2 3 4 Year Variable expenses: Ink Maintenance Utilities Graphics design Total variable expenses Fixed expenses: Rent Maintenance Utilities Graphics design Property taxes and insurance Depreciation Total fixed expenses Total silk-screen overhead Direct silk-screen hours Overhead rate per silk-screen hour case 6 Cases for Management Decision Making CA-25 10. Using the information found in the case and the previous budgets, prepare a bud- geted income statement for Sweats Galore for the year ended December 31, 2011. SWEATS GALORE Budgeted Income Statement For the Year Ended December 31, 2011 Sales Cost of goods sold Gross profit Selling and administrative expenses Income from operations Interest expense Income before income taxes Income tax expense Net income 11. Using the information found in the case and the previous budgets, prepare a cash budget for Sweats Galore for the year ended December 31, 2011. SWEATS GALORE Cash Budget For the Year Ended December 31, 2011 Quarter 1234 Beginning cash balance Add: Receipts Collections from customers Total available cash Less: Disbursements Payments for shirt purchases Silk-screen labor Silk-screen overhead Selling and administrative expenses Payment for equipment purchase Total disbursements Excess (deficiency) of available cash over disbursements Financing Borrowings Ending cash balance 12. Using the information contained in the case and the previous budgets, prepare a bud- geted balance sheet for Sweats Galore for the year ended December 31, 2011. SWEATS GALORE Budgeted Balance Sheet December 31, 2011 Assets Cash Accounts receivable Sweatshirt inventory Equipment Less: Accumulated depreciation Total assets ? CA-26 case 6 Cases for Management Decision Making Liabilities and Owner’s Equity ? 13. (a) Accounts payable Notes payable Interest payable Taxes payable Total liabilities Michael Woods, Capital Total liabilities and owner’s equity Using the information contained in the case and the previous budgets, calculate the estimated contribution margin per unit for 2011. (Hint: Silk-screened labor and the taxes are both fixed costs. ) (b) Calculate the total estimated fixed costs for 2011 (including interest and taxes). c) Compute the break-even point in units and dollars for 2011. 14. (a) Michael is very disappointed that he did not have an income of $25,000 for his first year of budgeted operations as he had wanted. How many shirts would Michael have had to sell in order to have had a profit of $25

Test Bank: Introduction to Probability and Statistics

True/False Questions 1. The standard deviation of any normal random variable is always equal to one. Answer: False Type: Concept Difficulty: Easy 2. For any normal random variable, the probability that the random variable will equal one is always zero. Answer: True Type: Concept Difficulty: Medium 3. The graph of a standard normal random variable is always symmetric. Answer: True Type: Concept Difficulty: Easy 4. The formula will convert any normal distribution into the â€Å"standard normal distribution. † Answer: True Type: Concept Difficulty: Easy 5.Any normal random variable with standard deviation equal to one is a standard normal random variable. Answer: False Type: Concept Difficulty: Medium 6. The notation X – N(4, 32) indicates a normal distribution with mean 2 and standard deviation 3. Answer: False Type: Concept Difficulty: Easy 7. The total area under a normal curve is always equal to one. Answer: True Type: Concept Difficulty: Easy 8. The notation Z  œ N(0, 1) indicates a standard normal distribution. Answer: True Type: Concept Difficulty: Easy 9. The probability that a normal random variable will be within two standard deviations of its mean is approximately 0. 8. Answer: False Type: Concept Difficulty: Easy 10. The normal distribution is a continuous distribution. Answer: True Type: Concept Difficulty: Easy 11. The normal distribution can be used to approximate the binomial distribution when both np and n(1 – p) are at least five. Answer: True Type: Concept Difficulty: Easy 12. The normal distribution approximation to the binomial works best when n is large. Answer: True Type: Concept Difficulty: Easy 13. The formula can be used with both a normal and binominal distribution. Answer: True Type: Concept Difficulty: Easy Multiple Choice Questions 4. Find P(-2 < Z < 2). A)0. 9544 B)0. 4772 C)0. 9772 D)0. 6826 E)none of the above Answer: A Type: Computation Difficulty: Easy 15. Find P(-0. 5 < Z < 0. 5). A)0. 3830 B)0. 1915 C )0. 6515 D)0. 3085 E)none of the above Answer: A Type: Computation Difficulty: Easy 16. What is the probability that a standard normal variable will be between -0. 5 and 1. 00? A)0. 2857 B)0. 5328 C)0. 6687 D)0. 2500 E)none of the above Answer: B Type: Computation Difficulty: Easy 17. Find the probability that a standard normal random variable has a value greater than -1. 56. A)0. 0332 B)0. 0594 C)0. 9406D)0. 9668 E)none of the above Answer: C Type: Computation Difficulty: Easy 18. Let X be a normally distributed random variable with mean 100 and standard deviation 20. Find two values, a and b, symmetric about the mean, such that the probability of the random variable being between them is 0. 99. A)90. 5, 105. 9 B)80. 2, 119. 8 C)22, 78 D)48. 5, 151. 5 E)90. 1, 109. 9 Answer: D Type: Computation Difficulty: Medium 19. A professor grades his students on a normal distribution, with mean at 75 and standard deviation of 15. If there are 39 students in his class, about how many score bet ween 80 and 90? A)5B)21 C)8 D)13 E)none of the above Answer: C Type: Computation Difficulty: Hard 20. A calculator manufacturer performs a test on its calculators and finds their working life to be normally distributed, with a mean of 2,150 hours and a standard deviation of 450 hours. What should the manufacturer advertise as the life of the calculators so that 90% of the calculators are covered? A)2,555 B)1,947 C)1,410 D)1,745 E)1,574 Answer: E Type: Computation Difficulty: Hard 21. You have two stocks: A and B. The price of each stock is normally distributed. Stock A has a mean of 25 and a standard deviation of 3.Stock B also has a mean of 25, but the standard deviation is 5. If I buy stock A at $25 and sell it on a randomly chosen day in the future (without knowing its price then), what is the probability that I will make at least $2 on each share? Answer the same for stock B. A)0. 2514, 0. 1554 B)0. 2514, 0. 3446 C)0. 2486, 0. 1554 D)0. 2486, 0. 3446 E)none of the above Answer: B Type: Computation Difficulty: Hard 22. Find two values symmetric around a mean of 20 such that they include an area equal to 0. 75. (standard deviation = 5). A)16. 65, 23. 35 B)19. 25, 20. 75 C)16. 25, 23. 75 D)14. 25, 25. 75E)none of the above Answer: D Type: Computation Difficulty: Hard 23. A spark plug manufacturer believes that his plug lasts an average of 30,000 miles, with a standard deviation of 2,500 miles. What is the probability that a given spark plug of this type will last 37,500 miles before replacement? A)0. 0228 B)0. 0114 C)0. 0013 D)0. 0714 E)0. 0833 Answer: C Type: Computation Difficulty: Medium 24. Fluctuations in the exchange rate of dollars against the pound sterling over a short time period were approximated by a normal distribution with a mean of 2. 01 and a standard deviation of 0. 13.What is the probability that the rate on a particular day was more than 1. 90? A)0. 8461 B)0. 3023 C)0. 8023 D)0. 3461 E)none of the above Answer: C Type: Computation Difficult y: Medium 25. The average time it takes for a letter in the United States to reach from one place in the 48 contiguous states to another is 3. 2 days, with a standard deviation of 0. 85 days. What is the probability of a letter arriving at its destination no more than four days after mailing? Assume a normal distribution. A)0. 1736 B)0. 3264 C)0. 8264 D)0. 6736 E)0. 6528 Answer: C Type: Computation Difficulty: Medium 6. The contents of a particular bottle of shampoo marked as 150 ml are found to be 153 ml at an average, with a standard deviation of 2. 5 ml. What proportion of shampoo bottles contain less than the marked quantity? Assume a normal distribution. A)0. 2192 B)0. 1151 C)0. 4452 D)0. 0548 E)none of the above Answer: B Type: Computation Difficulty: Medium 27. The age of people in a town is normally distributed, with a mean of 34 years and a standard deviation of 11 years. Find two values for age that will give a symmetric 0. 95 probability interval. A)28. 78, 39. 23 B)32. 3 0, 66. 30 C)23. 55, 44. 45D)12. 44, 55. 56 E)15. 91, 51. 10 Answer: D Type: Computation Difficulty: Medium 28. The weight of apples in a farm is normally distributed, with a mean of 110 grams, and a standard deviation of 15 grams. Find the probability that an apple selected at random will weigh between 95 and 105 grams. A)0. 3413 B)0. 4706 C)0. 1293 D)0. 2108 E)0. 5294 Answer: D Type: Computation Difficulty: Medium 29. A grocery store has a mean accounts receivable of $264, with a standard deviation of $55. The accounts receivable are normally distributed. What proportion of all accounts will be greater than $275? A)0. B)0. 1 C)0. 4207 D)0. 0793 E)0. 0228 Answer: C Type: Computation Difficulty: Medium 30. A grocery store has a mean accounts receivable of $264, with a standard deviation of $55. The accounts receivable are approximately normally distributed. Find the value such that 45% of all the accounts exceed this value. That is, find x such that: P(X > x) = 0. 45. A)$257. 13 B)$3 54. 48 C)$270. 91 D)$309. 00 E)none of the above Answer: C Type: Computation Difficulty: Medium 31. The waist measurement of students in a college is normally distributed. The standard deviation is known to be five inches.It is found that 15% of the students have waist sizes less than 28 inches. What proportion of students will have waists between 30 and 35 inches? A)0. 3795 B)0. 2389 C)0. 1406 D)0. 0983 E)none of the above Answer: A Type: Computation Difficulty: Hard 32. The IQs of the employees of a company are normally distributed, with a mean of 127 and a standard deviation of 11. What is the probability that the IQ of an employee selected at random will be between 120 and 130? A)0. 2389 B)0. 3453 C)0. 1064 D)0. 1325 E)0. 4638 Answer: B Type: Computation Difficulty: Medium 33.The mean life of a computer disk drive is 2,000 hours, with a standard deviation of 140 hours. Assuming the life-time of the drives to be normally distributed, find the probability of a disk-drive lasting m ore than 1,800 hours? A)0. 4236 B)0. 9236 C)0. 8472 D)0. 5764 E)0. 2118 Answer: B Type: Computation Difficulty: Medium 34. The average bill for car repairs at a car service center is $196, with a standard deviation of $44. Assuming the bills to be normally distributed, find the probability of a bill exceeding $300. A)0. 4909 B)0. 0182 C)0. 9819 D)0. 1406 E)0. 0090 Answer: E Type: Computation Difficulty: Medium 35.The GMAT scores of students in a college are normally distributed with a mean of 520 and a standard deviation of 41. What proportion of students have a score higher than 600? A)0. 9744 B)0. 2372 C)0. 4774 D)0. 0255 E)none of the above Answer: D Type: Computation Difficulty: Medium 36. The probability that a normal random variable with mean zero and standard deviation one will equal the number 1. 00 is: A)1 B)0. 9 C)0. 3413 D)0. 1587 E)0 Answer: E Type: Concept Difficulty: Medium 37. Suppose that X is a normal random variable with mean 17 and standard deviation 10. The proba bility that the value of X will be between -2. and 36. 6 is: A)0 B)0. 90 C)a number very close to 1 D)0. 95 E)0. 99 Answer: D Type: Computation Difficulty: Medium 38. Suppose that X is a normal random variable with mean 10 and standard deviation 4. Then the probability that X will be greater than 12 is: A)0. 1587 B)0. 3085 C)0. 1915 D)0. 4772 E)none of the above Answer: B Type: Computation Difficulty: Medium 39. A normal random variable has a distribution that is: A)always symmetric B)never symmetric C)sometimes symmetric D)symmetric if the mean is positive E)symmetric if the variance is negative Answer: A Type: Concept Difficulty: Medium 0. The distribution of X, the number of cars sold per day, where X can be 0, 1, 2, 3, 4, or 5 is: A)sometimes normally distributed B)never normal C)always normal D)a uniform distribution E)none of the above Answer: B Type: Concept Difficulty: Medium 41. What is the probability that a normal random variable with mean 15 and standard deviation 5 will have a value of exactly 25? A)0. 0228 B)0. 0456 C)0. 9772 D)0 E)1 Answer: D Type: Concept Difficulty: Medium 42. If X is a normal random variable with mean 12 and standard deviation 2, then the probability that X will exceed 16 is? A)0. 4772 B)0. 0228 C)0. 9772 D)0 E)1 Answer: B Type: Computation Difficulty: Medium 43. If X is a normal random variable with mean 15 and standard deviation 10, then the probability that X will have a negative value is: A)0. 0668 B)0. 432 C)0. 9332 D)0. 8664 E)none of the above Answer: A Type: Computation Difficulty: Medium 44. If X is a normally distributed random variable with mean 16 and variance 64, the probability that the random variable will have a value between 0. 32 and 31. 68 is: A)0. 99 B)0. 90 C)0. 85 D)1 E)0. 95 Answer: E Type: Computation Difficulty: Medium 45.For a normally distributed random variable with mean zero and standard deviation five, the probability that its value will be greater than -5 is: A)0. 4772 B)0. 9544 C)0. 3413 D)0. 8 413 E)none of the above Answer: D Type: Computation Difficulty: Medium 46. What is the probability that a standard normal random variable is between -0. 4 and 1. 4? A)0. 3413 B)0. 4254 C)0. 5746 D)0. 2638 E)none of the above Answer: C Type: Computation Difficulty: Easy 47. All of the following are characteristics of the normal distribution, except: A)symmetric about the mean B)bell-shaped curve C)total area under the curve is always oneD)it is a discrete distribution E)probability that x is equal to any specific value is zero Answer: D Type: Computation Difficulty: Medium 48. Find two values symmetric about a mean of 100, standard deviation of 10, such that they include an area equal to 0. 95. A)90, 110 B)80. 4, 119. 6 C)98. 04, 101. 96 D)70, 130 E)none of the above Answer: B Type: Computation Difficulty: Medium 49. A tire manufacturer believes its tires will last an average of 48,000 miles, with standard deviation of 2,000 miles. What is the probability that one of these tires, cho sen at random, will last at least 50,000 miles?A)0. 6587 B)0. 3413 C)0. 1587 D)0. 4772 E)none of the above Answer: C Type: Computation Difficulty: Medium 50. Suppose that an instructor gives an exam. This instructor wants to give those students in the top 2. 5% an A on this exam. What will the cutoff be for an A, if the average score on this exam is 80, with a standard deviation of 5? A)about 80 B)about 90 C)about 85 D)about 86 E)none of the above Answer: B Type: Computation Difficulty: Hard Use the following to answer questions 51-54: LittleAir operates a fleet of regional jets on a contract basis for a major air carrier.LittleAir's jets seat only 50 passengers, but because passengers' travel plans often change, LittleAir books up to 60 reservations for a typical flight. Booked passengers have a â€Å"no-show† probability of 0. 25. 51. Suppose LittleAir loses money if the number of passengers on a flight is less than 40. What is the probability that a randomly selected Littl eAir flight will have fewer than 40 passengers? A)0. 0367 B)0. 0505 C)0. 0681 D)0. 0901 E)0. 1492 Answer: B Type: Computation Difficulty: Medium 52. What is the probability that a randomly selected LittleAir flight will be overbooked (i. . , have more passengers show up than there are seats available)? A)0. 1170 B)0. 0901 C)0. 0681 D)0. 0505 E)0. 0367 Answer: D Type: Computation Difficulty: Medium 53. What is the probability that a randomly selected LittleAir flight will be full? A)0. 1170 B)0. 0901 C)0. 0681 D)0. 0505 E)0. 0367 Answer: B Type: Computation Difficulty: Medium 54. Suppose LittleAir gives compensation vouchers to any passenger who is denied a seat on an overbooked flight. Because these vouchers are valuable (> $200), management would like to keep the number of them on-hand at a minimum.How many vouchers should be held at the gate such that there are enough for at least 99% of all situations? A)1 voucher B)2 vouchers C)3 vouchers D)4 vouchers E)5 vouchers Answer: C Type : Computation Difficulty: Hard Use the following to answer questions 55-57: The ski season at a popular resort destination lasts 120 days. Experience has shown that the probability of snow on any given day is 0. 55 and is independent of whether or not there was snow on the previous day. 55. What is the probability of there being more than 60 days of snow in any given year? A)0. 7967 B)0. 8438 C)0. 8643D)0. 8830 E)0. 8997 Answer: B Type: Computation Difficulty: Medium 56. What is the probability of there being fewer than 55 days of snow in any given year? A)0. 0409 B)0. 0268 C)0. 0217 D)0. 0174 E)0. 0139 Answer: D Type: Computation Difficulty: Medium 57. Suppose a particular hotel at this destination breaks even or makes money so long as there are at least 50 days of snow but no more than 70 days of snow. What is the probability of the hotel's losing money in any given year? A)0. 8438 B)0. 7955 C)0. 7944 D)0. 7664 E)0. 7657 Answer: B Type: Computation Difficulty: Hard 58.If, for a bi nomially distributed random variable n*p = 5 and n*(1-p) = 5, then a _____________ distribution with a mean equal to _____ and a standard deviation equal to _____ typically can be used. A)Normal; ; B)Normal; ; C)Exponential; ; D)Exponential; ; E)Hypergeometric; ; Answer: A Type: Concept Difficulty: Easy Short Answer Questions Use the following to answer questions 59-67: If x ~ N(40, 32): 59. Find p(X ; 37) Answer: 0. 8413 Type: Computation Difficulty: Medium 60. Find p(X ; 47) Answer: 0. 0099 Type: Computation Difficulty: Medium 61. Find p(42 ; X ; 47) Answer: 0. 415 Type: Computation Difficulty: Medium 62. Find p(X ; 41) Answer: 0. 3707 Type: Computation Difficulty: Medium 63. Find p(36 ; X ; 41) Answer: 0. 5375 Type: Computation Difficulty: Medium 64. Find p(36 ; X ; 39) Answer: 0. 2789 Type: Computation Difficulty: Medium 65. Find x1 such that: p(X ; xl) = 0. 0475 Answer: 45 Type: Computation Difficulty: Medium 66. Find xl such that: p(40 ; X ; xl) = 0. 3770 Answer: 43. 48 Type: Computation Difficulty: Medium 67. Find x1 such that: p(X ; x1) = 0. 0154 Answer: 33. 52 Type: Computation Difficulty: MediumUse the following to answer questions 68-69: There are two shipping routes between a plant and a distribution point. The average time by route A is 220 minutes with a standard deviation of 20 minutes. The average time and standard deviation by route B are 200 and 40, respectively. Assume the distributions of trips can be approximated by normal curves. 68. What proportion of route B trips takes longer than the average route A trip? Answer: 0. 3085 Type: Computation Difficulty: Medium 69. 95% of route A trips take between what two values that are equidistant from the mean? Answer: [180. 8, 259. 2] Type: Computation Difficulty: MediumUse the following to answer questions 70-73: The amount dispensed into bottles by a machine in a ketchup plant is supposed to be normally distributed with a mean of 10 ounces and a standard deviation of 0. 5 ounce. If the machine is working properly, what is the probability that a single bottle chosen at random from the assembly line will have: 70. More than 11 ounces or less than 9. 5 ounces? Answer: 0. 1815 Type: Computation Difficulty: Medium 71. Between 9. 5 and 11 ounces? Answer: 0. 8185 Type: Computation Difficulty: Medium 72. What would you think if a single bottle chosen at random had less than . 5 ounces? Answer: p(x ; 8. 5) = 0. 0013, so we might conclude the machine is operating improperly. Type: Computation Difficulty: Medium 73. Between what two values symmetric about the mean would you expect to find 99% of the bottles filled by the machine, if it is operating properly? Answer: [8. 712, 11. 288] Type: Computation Difficulty: Medium 74. If the contents of bottles coming off a production line are normally distributed with a mean of 16 ounces and a variance of 0. 625, what's the probability of choosing a bottle at random and finding its contents to be less than 15. 1 ounces? Answer: 0. 2676 Type: Com putation Difficulty: Medium 75. A seed packet says that 90% of lettuce seedlings should be between 2 and 2. 5 inches high after 5 weeks. Assuming an average height of 2. 25 inches (and a normal distribution), what's the standard deviation of heights of 5-week-old seedlings? Answer: 0. 1520 Type: Computation Difficulty: Medium Use the following to answer questions 76-78: If the distribution of heights of mature poppy plants is normal, with a mean of 16 inches and a standard deviation of 3 inches, what proportion of the poppies will be: 76.Between 10 and 20 inches? Answer: 0. 8854 Type: Computation Difficulty: Medium 77. Less than 9 inches? Answer: 0. 0099 Type: Computation Difficulty: Medium 78. More than 24 inches? Answer: 0. 0038 Type: Computation Difficulty: Medium 79. You are interested in the incomes of your customers. A random sample of customer incomes yields a mean income of $35,000 with a standard deviation of $4,421. A) Determine what percent of the population would have a salary above $38,000. B) What income range that is symmetric about the mean would include 95% of your customers? Answer:A) 24. 83% have incomes above $35,000. B) 95% of your customers have an income between $26,330 and $43,670. Type: Computation Difficulty: Medium 80. Half of all mutual funds of a particular class charge up-front administration fees. Assuming that a random sample of 60 of these mutual funds is taken, calculate: A) The mean and standard deviation of the normal approximation of the binomial. B) The probability that no more than 40 of the mutual funds sampled charge an up-front administration fee. Answer: A) Mean = 30, standard deviation = 3. 873 B) Prob(# charging fee = 40) = 0. 9966Type: Computation Difficulty: Medium 81. The owner of a 100-room hotel has discovered that his reservations team has booked 110 reservations for an upcoming weekend. Experience has shown that 10% of reservations are â€Å"no shows. † How likely is this hotel to be overbooked (i. e. , have more guests arrive than there are rooms available) for this particular weekend? Answer: 0. 3156 Type: Computation Difficulty: Medium 82. Harry Highroller likes to bet on the roulette wheel when he is in Las Vegas. Roulette wheels in Las Vegas typically have 38 spaces: 18 of them are red; 18 are black; and 2 are green.Harry's â€Å"strategy† is simple: He bets $2 on every spin, he always bets on red, and he always plays exactly 100 spins. If red comes up, Harry wins $2. If either black or green comes up, Harry loses $2. Suppose Harry has decided to play his usual strategy tonight. A) What are the mean and standard deviation of the normal approximation of the binomial in this instance? B) What is the probability that, after 100 plays, Harry will be ahead (i. e. , have more money than he started with)? Answer: A) Mean = 47. 37 and standard deviation = 4. 993 B) 0. 2643 Type: Computation Difficulty: Medium

The Pattern Of Juvenile Delinquency Is Strain Theory

Another relevant theory in regards to the pattern of juvenile delinquency is Strain Theory. In 1938, Robert Merton developed the theory of Strain to describe how social structures within society may pressure citizens (low socioeconomic status) to commit crimes. Merton felt that too much pressure to achieve goals, such as financial well-being, led to behaviors such as selling drugs. Merton’s theory relates to juvenile delinquency in that adolescents might experience overwhelming stress or pressure in their peer groups to have more money, to fit in, or to be influential. These social stressors will perpetuate delinquency because the teens will want to participate in criminal activity to solve such problems. In 1992, Robert Agnew†¦show more content†¦There are two types of strain theory—objective strain and subjective strain. Objective strain results from events that have become stressful such as the passing of a family member (Huck, Spraitz, Bowers, Morris, 201 7). Subjective strain is what an individual sees as stressful for their own self (Huck, Spraitz, Bowers, Morris, 2017). Latinos in the United States are growing at a fast rate. According to the 2007 United States Census Bureau, Latinos comprise about 14.7% of the population. Latinos have socio-cultural differences that have impacted research. For an example, there are only certain geographical locations where the majority of Latinos are located (Rodriguez Belshaw, 2010). The educational levels for Latinos are lower and the amount of income Latinos bring in is also substantially lower. Latinos also share different traditional values such as familism, respect, honor, brotherhood, and gender role differences (Rodriguez Belshaw, 2010). The social and cultural differences of Latinos may lead them to encounter a different set of stressors that can affect the juvenile delinquency of the Latino population (Rodriguez Belshaw, 2010). A study conducted by Mazerolle and Maash using data fro m the National Youth Survey examined if the stresses that Latinos experience on account of exposure to delinquent peers or values affect deviant behavior of Latino Youths (Rodriguez Belshaw, 2010). The study argued that theShow MoreRelatedThe Relationship Between Social Class and Delinquency Essays1498 Words   |  6 Pagespreconceived notions regarding the relationship between social class and delinquency. A common assumption is that lower-class juveniles are more likely to engage in delinquent behavior than their higher-class counterparts. Criminologists have performed a large number of studies examining the socio-demographic characteristics of delinquents, which often yielded contradictory results. When analyzing the extent and trend of juvenile delinquency in the United States conclusions can be drawn from estimates derivedRead MoreThe General Strain Theory And Juvenile Delinquency1715 Words   |  7 PagesIntroduction The general strain theory is an established theory that provides a basic understanding relating to different elements leading to specific criminal behaviors. The theory has been of importance in trying to map criminal patterns among individuals involved in criminal behavior, thereby creating a platform for their rehabilitation. The general strain theory has had a close connection to juvenile delinquency, as it creates a platform where psychologists can define some of the key factorsRead MoreCauses Of Juvenile Delinquency. Authors John Hagan And1601 Words   |  7 PagesCauses of Juvenile Delinquency Authors John Hagan and Bill McCarthy of Cambridge University offer an insight between the relationship between juveniles and their participation to criminal activities. 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Along with the juvenile having similar facial characteristics, which some believe also predisposes them to criminal behavior (Palmerin, 2012). 2. Rational choice theory states that the person will make sensible and reasonableRead MoreThe Chicago School Of Sociology1624 Words   |  7 Pagesin rich and intriguing detail particular events and processes from their experience of being immersed with actual participants and getting to know their situated life patterns and belief systems† (â€Å"The Chicago School†, n.d.). 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