CarryALL, Inc., makes and sells small cargo trailers to individuals and small businesses. Since its opening in 1990, it has allocated indirect costs (IDC) to its three manufacturing plants based on direct materials cost per unit. Each plant builds different models and sizes. Because of advances in automation and materials, Judy, the CFO, plans to use build-time per unit as the new basis. Build-time is the average number of work-hours to complete a trailer. However, she initially wants to determine what the allocation would have been this year had the build-time basis been used prior to the incorporation of new technology and materials. The data shown below represents average costs and times. Use this data and the bases indicated to determine the allocation rates and IDC allocation of $1,000,000 for this year for the three bases.$

$$\begin{array}{lcccc} \text { Plant } & \text { New York } & \text { Virginia } & \text { Tennessee } & \text { Total } \\ \hline \text { Direct material cost, } & 20,000 & 12,700 & 18,600 & 51,300 \\ \text { \$ per unit } & & & & \\ \text { Previous build-time } & 400 & 415 & 580 & 1395 \\ \text { per unit, work-hours } & & & & \\ \text { New build-time per } & 425 & 355 & 480 & 1260\\ \text { unit, work-hours } & & & & \\ \hline \end{array}$$

$

Ragan, Inc., was formed nine years ago by brother and sister Carrington and Genevieve Ragan. The company manufactures and installs commercial heating, ventilation, and cooling (HVAC) units. Ragan, Inc., has experienced rapid growth because of a proprietary technology that increases the energy efficiency of its units. The company is equally owned by Carrington and Genevieve. The original partnership agreement between the siblings gave each 50,000 shares of stock. In the event either wished to sell stock, the shares first had to be offered to the other at a discounted price.

 Although neither sibling wants to sell, they have decided they should value their holdings in the company. To get started, they have combined the information about their main competitors in the table below.

 Expert HVAC Corporation’s negative earnings per share were the result of an accounting write-off last year. Without the write-off, earnings per share for the company would have been $1.10. The ROE for Expert HVAC is based on net income excluding the writeoff.

 In the previous year, Ragan, Inc., had an EPS of$3.15 and paid a dividend to Carrington and Genevieve of $45,000 each. The company also had a return on equity of 17%. The siblings believe that 14% is an appropriate required return for the company.

QUESTION

After discussing the stock value with Josh, Carrington and Genevieve agree that they would like to increase the value of the company stock. Similar to many small business owners, they want to retain control of the company, so they do not want to sell stock to outside investors. They also feel that the company’s debt is at a manageable level and do not want to borrow more money. How can they increase the price of the stock? Are there any conditions under which this strategy would not increase the stock price?

What kind of survey (mail, telephone, interview, web, direct observation) would you recommend that a small laundry and dry cleaning business use for each of the following purposes, and why?

To estimate the proportion of residents in the same zip code who spend more than $\$20$ a month on dry cleaning.

For each of the following stock investments, find (a) the total purchase price, (b) the total dividend amount, (c ) the capital gain or loss, (d) the total return, and (e) the percentage return. Ignore broker and SEC fees.

$$\begin{array}{c|c|c|} \small\text{ Number of } & \small\text{ Purchase Price} & \small\text{Dividend} &\small\text{Sale Price} \\ \small\text{Shares} & \small\text{ per Share} & \small\text{per Share} &\small\text{per Share} \\ \hline 40 & \$20.00 & \$2.00 & \$44.00 \end{array}$$

You start a small bee-keeping business, spending $\$ 500$ for equipment and bees. You figure it will cost $\$ 1.25$ per pound to collect, clean, bottle, and label the honey. How many pounds of honey must you produce before your average cost per pound is $\$ 1.79$?

Levon Helm was a kind of one-man mortgage broker. He would drive around Tennessee looking for homes that had second mortgages, and if the criteria were favorable, he would offer to buy the second mortgage for "cash on the barrelhead." Helm bought low and sold high, making sizable profits. Being a small operation, he employed one person, Cindy Patterson, who did all his bookkeeping. Patterson was an old family friend, and he trusted her so implicitly that he never checked up on the ledgers or the bank reconciliations. At some point, Patterson started "borrowing" from the business and concealing her transactions by booking phony expenses. She intended to pay it back someday, but she got used to the extra cash and couldn't stop. By the time the scam was discovered, she had drained the company of funds that it owed to many of its creditors. The company went bankrupt, Patterson did some jail time, and Helm lost everything.

Requirements

1. What was the key control weakness in this case?
2. Many small businesses cannot afford to hire enough people for adequate separation of duties. What can they do to compensate for this?

A study reported in the Journal of Small Business Management concluded that selfemployed individuals do not experience higher job satisfaction than individuals who are not self-employed. In this study, job satisfaction is measured using 18 items, each of which is rated using a Likert-type scale with 1–5 response options ranging from strong agreement to strong disagreement. A higher score on this scale indicates a higher degree of job satisfaction. The sum of the ratings for the 18 items, ranging from 18–90, is used as the measure of job satisfaction. Suppose that this approach was used to measure the job satisfaction for lawyers, physical therapists, cabinetmakers, and systems analysts. The results obtained for a sample of 10 individuals from each profession follow.

$$\begin{matrix} \text{Lawyer} & \text{Physical Therapist} & \text{Cabinetmaker} & \text{Systems Analyst}\\ \hline \text{44} & \text{55} & \text{54} & \text{44}\\ \text{42} & \text{78} & \text{65} & \text{73}\\ \text{74} & \text{80} & \text{79} & \text{71}\\ \text{42} & \text{86} & \text{69} & \text{60}\\ \text{53} & \text{60} & \text{79} & \text{64}\\ \text{50} & \text{59} & \text{64} & \text{66}\\ \text{45} & \text{62} & \text{59} & \text{41}\\ \text{48} & \text{52} & \text{78} & \text{55}\\ \text{64} & \text{55} & \text{84} & \text{76}\\ \text{38} & \text{50} & \text{60} & \text{62}\\ \end{matrix}$$

At the $\alpha =$ .05 level of significance, test for any difference in the job satisfaction among the four professions.

Solve. Find the cost per mile to the nearest cent.

$$\begin{array}{|c c c c c c c c c c c|} \hline \small\textbf{(Total Daily Cost}& + & \small\textbf{Total Mileage Cost} & +& \small\textbf{Gasoline Cost} & = & \small\textbf{Total Cost)} & \div & \small\textbf{Miles} & = & \small\textbf{Cost per}\\ & & & & & & & &\small\textbf{Driven} & & \small\textbf{Mile}\\ \hline (\$60.00 & + & \$45.00 & + & \$11.88 & = & \$116.88) & \div & 300 & = & ? \\ \hline \end{array}$$

What are the benefits of a free enterprise economy?

We often think of the American free enterprise economy as having several distinct "players" that ensure its success. These players include entrepreneurs, consumers, and the government. How do you fit in? How does the system benefit you? As a student, you may find that you need extra spending money to cover your school and your living expenses. You may begin thinking about becoming an entrepreneur by creating a small business that will earn you money. You may also decide to look into getting a job. Or you may visit your school's financial aid office to see if there is some form of government student aid, such as a loan, grant, or work-study program.

Answer the following questions:

2. What type of part-time job might I like that is available near my school?

Anna's Yogurt Shop is classic example of a small business. The shop has one location, one cash register, and one owner. The shop's floor plan is typical of businesses in this market. The yogurt machines are located just behind a glass enclosed counter containing an assortment of toppings. Customers place their orders at the right side of the counter, drift to their left to make their topping selections, and check out at the left end of the counter. In most cases, a single employee serves a customer from order to check out.

A basic principle for preventing fraud is to segregate the duties of custody, authority, and reporting. No one employee should be responsible for two or more of these duties. At Anna's Yogurt Shop, employees have access to (custody) the yogurt and toppings and sell (authority) these items to customers.

Owner Anna Sue Preston is fully aware that this lack of segregation of duties places her business at risk. Employees are very familiar with the pricing of the shop's limited menu. Rather than using the cash register, employees could calculate the total sales amount in their head. The money taken from the customer could go in the employee's pocket rather than the cash register. This type of fraud is known as skimming. Despite this risk, Anna Sue believes that the one-on-one service provided by her employees enhances the friendly atmosphere that has made her shop a local landmark.

Anna Sue contracts with a local janitorial service to clean the store each morning. Unknown to shop employees, the janitorial service has also been instructed to measure the amount of yogurt in the machines. The daily difference in the starting and ending ounces of yogurt indicates how much yogurt was actually sold. For example, selling ten small cones should use 60 ounces of yogurt.

Anna Sue has asked you to perform an analysis to determine if any of her employees are skimming sales. She has provided you with data for the past four months. The data include the quantity sales of each menu item, the names of the two employees working that day, and the actual ounces of yogurt used as determined by the janitorial service. As a result of product spills a 2.0% difference between the actual and expected ounces of yogurt used is considered acceptable.

INSTRUCTIONS

The Tableau workbook FA_CH04. Contains two charts that compare the actual and expected ounces of yogurt used. Read the caption above each chart to gain an understanding of the data presented. Use the charts to answer the following questions:

2. Examine the Average worksheet. How does your analysis of this chart change your conclusions based on the Totals worksheet?

Mark Denton cosigned a $101,250 loan issued by the First Interstate Bank (FIB) in Missoula, Montana, to Denton’s friend Eric Anderson. Denton’s business assets—a mini-warehouse operation—secured the loan. On his own, Anderson obtained a$260,000 U.S. Small Business Administration (SBA) loan from FIB at the same time. The purpose of both loans was to buy logging equipment so that Anderson could start a business. Two years after the loan was made, the business failed. As a consequence, FIB repossessed and sold the equipment and applied the proceeds to the SBA loan. FIB then asked Denton to pay the other loan’s outstanding balance ($98,460), plus interest. When Denton refused, FIB initiated proceedings to obtain his business assets. Denton filed a suit in a Montana state court against FIB. He claimed, in part, that Anderson’s equipment was the collateral for the loan that FIB was attempting to collect from Denton.

(a) Denton’s assets served as the security for Anderson’s loan because Anderson had nothing to offer. When the loan was obtained, Dean Gillmore, FIB’s loan officer, explained to them that if Anderson defaulted, the proceeds from the sale of the logging equipment would be applied to the SBA loan first. Under these circumstances, is it fair to hold Denton liable for the unpaid balance of Anderson’s loan? Why or why not?

After a great deal of experimentation, two Atlantic Institute of Technology senior physics majors determined that when a bottle of French champagne is shaken several times, held upright, and uncorked, its cork travels according to

$$s(t)=-16 t^2+40 t+3,$$

where s is its height (in feet) above the ground t seconds after being released. (a) How high will it go? (b) How long is it in the air?

Presented below are five independent situations.

(b) Al Bolt, a college student looking for summer employment, opened a bait shop in a small shed at a local marina.

Instructions

In each case, explain what form of organization the business is likely to take—sole proprietorship, partnership, or corporation. Give reasons for your choice.

The windows of your physics laboratory are left open on a night when the temperature outside drops well below freezing. A steel ruler and a wooden ruler were left on the window sill, and when you arrive in the morning they are both very cold. The coefficient of linear expansion of wood is about $5 \times 10^6 \text{~K}^{-1}$. Which ruler should you use to make the most accurate length measurements? Explain your answer.