In the book Essentials of Marketing Research, William R. Dillon, Thomas J. Madden, and Neil H. Firtle $(1993)$ present preexposure and postexposure attitude scores from an advertising study involving $10$ respondents. The data for the experiment are given in Table $10.3$. Assuming that the differences between pairs of postexposure and preexposure scores are normally distributed:

Table $10.3$

$$\begin{array}{llll} \text{Subject} & \text{Preexposure Attitudes}\ (A_{1}) & \text{Preexposure Attitudes}\ (A_{2}) & \text{Attitude Change}\ (d_{i}) \\ 1 &50& 53 &3 \\ 2 &25& 27 &2 \\ 3 &30 &38 &8\\ 4 &50 &55 &5\\ 5 &60 &61 &1\\ 6 &80 &85 &5\\ 7 &45 &45 &0\\ 8 &30 &31 &1\\ 9 &65 &72 &7\\ 10 &70& 78 &8\\ \end{array}$$

Set up the null and alternative hypotheses needed to attempt to establish that the advertisement increases the mean attitude score (that is, that the mean postexposure attitude score is higher than the mean preexposure attitude score).

You recently received a job with a company that manufactures an automobile antitheft device. To conduct an advertising campaign for the product, you need to make a claim about the number of automobile thefts per year. Since the population of various cities in the United States varies, you decide to use rates per 10,000 people. (The rates are based on the number of people living in the cities.) Your boss said that last year the theft rate per 10,000 people was 44 vehicles. You want to see if it has changed. The following are rates per 10,000 people for 36 randomly selected locations in the United States. Suppose $\sigma=30.3$.

$$\begin{array}{rrrrrr}55 & 42 & 125 & 62 & 134 & 73 \\ 39 & 69 & 23 & 94 & 73 & 24 \\ 51 & 55 & 26 & 66 & 41 & 67 \\ 15 & 53 & 56 & 91 & 20 & 78 \\ 70 & 25 & 62 & 115 & 17 & 36 \\ 58 & 56 & 33 & 75 & 20 & 16\end{array}$$

Using this information, reply to these questions.

4. Which probability distribution would you use?

Internet Sites Collecting User Information. The Pew Internet & American Life project conducted a survey that included several questions about how Internet users feel about search engines and other websites collecting information about them and using this information either to shape search results or target advertising to them. In one question, participants were asked, "If a search engine kept track of what you search for, and then used that information to personalize your future search results, how would you feel about that?" Respondents could indicate either "Would not be okay with it because you feel it is an invasion of your privacy" or "Would be okay with it, even if it means they are gathering information about you." Joint probabilities of responses and age groups are summarized in the following table.

$$\begin{array}{lcr} \text { Age } & \text { Not Okay } & \text { Okay } \\ 18-29 & .1485 & .0604 \\ 30-49 & .2273 & .0907 \\ 50+ & .4008 & .0723 \end{array}$$

d. Is the attitude about this practice independent of the age of the respondent? Why or why not?

Journals and selected accounts payable, accounts receivable, and general ledger accounts for Innovative Solutions are given in the Working Papers.

$$\begin{matrix} \text{Transactions:} & \text{}\\ \text{Dec.} & \text{1. Sold merchandise on account to Larry Simpson, \$ 4,780.00, plus sales tax. S395.}\\ & \text{2. Paid cash to Perkins Properties for rent, \$800.00. C5 18.}\\ & \text{3. The board of directors declared a dividend of \$ 0.20 per share; capital stock issued is 20,000 shares. M68.}\\ & \text{4. Received cash on account from Coastal Country Schools, \$ 814.80, less 2 \\\% sales discount. R289.}\\ & \text{5. Paid cash to Ulman Paper fupplies, \$ 169.00. C519.}\\ & \text{6. Paid cash on account to Jing Corporation for \$ 2,618.00, less 2\\\% discount. C520.}\\ & \text{7. Purchased merchandise on account from Wilson Metals, \$ 9,000.00, less a 60 \\\% trade discount. P315.}\\ & \text{8. Bought office supplies on account from Barger Office Supply, \$ 118.00. M69.}\\ & \text{9. Soid case's Signs for miscellanneous expense, \$ 42.00. C521.}\\ & \text{10. Sold merchandise on account to LaDonna Atkins, \$ 2,410.00 plus sales tax..S396.}\\ & \text{12. Paid cash to Daniel Promotions for advertising, \$ 590.00. C522.}\\ & \text{13. Paid cash to City Utilities for electric bill, \$ 347.50. C523.}\\ & \text{14. Purchased merchandise on account from Quitman Manufacturing, \$ 4,818.00. P316.}\\ & \text{15. Sold merchandise on account to Coastal County Schools, \$ 3,448.00. Coastal County Schools is exempt}\\ & \text{from sales tax. S397}\\ & \text{16. Granted credit to Larry Simpson for merchandise returned, \$ 229.00, plus sales tax, \$ 13.74 ; total, \$ 242.74}\\ & \text{CM21.}\\ & \text{17. Recorded cash and credit card sales. \$ 6,148.90, plus sales tax, $\$ 332.04$; total, \$ 6,480.94. TS49.}\\ & \text{18. Returned merchandise to Jing Corporation, \$ 54.00. DM8.}\\ & \text{2. Received cash on account from Joseph Greggs, \$ 2,219.15. R290.}\\ & \text{28. Paid cash for dividend declared December 3. C24.}\\ & \text{30. Paid cash to replenish the petty cash fund: advertising expense, \$ 49.00 ; miscellaneous, \$ 25.00 ;cash}\\ & \text{short, \$ 2.00. C525.}\\ \end{matrix}$$

Prove and rule the sales journal. Post the totals of the special columns to the general ledger.

Below are account balances of Ducks Company at the end of September.

$$\begin{array}{lrlr} \text{Accounts} & \text{Balances} & \text{Accounts} & \text{Balances}\\ \hline \text{Cash} & \text{$\$ 25,000$} & \text{Retained Earnings} & \text{$\$ 13,000$}\\ \text{Accounts Receivable} & \text{$14,000$} & \text{Dividends} & \text{$4,000$}\\ \text{Supplies} & \text{$7,000$} & \text{Service Revenue} & \text{$?$}\\ \text{Prepaid Insurance} & \text{$5,000$} & \text{Salaries Expense} & \text{$9,000$}\\ \text{Equipment} & \text{$28,000$} & \text{Insurance Expense} & \text{$8,000$}\\ \text{Accounts Payable} & \text{$7,000$} & \text{Advertising Expense} & \text{$1,100$}\\ \text{Salaries Payable} & \text{$4,000$} & \text{Supplies Expense} & \text{$10,000$}\\ \text{Utilities Payable} & \text{$1,100$} & \text{Entertainment Expense} & \text{$6,000$}\\ \text{Deferred Revenue} & \text{$9,000$} & \text{Utilities Expense} & \text{$1,100$}\\ \text{Common Stock} & \text{$29,000$} & \text{ } & \text{ }\\ \end{array}$$

Prepare a trial balance by placing amounts in the appropriate debit or credit column and determining the balance of the Service Revenue account.

Glades Sporting Goods Co. operates two divisions—the Winter Sports Division and the Summer Sports Division. The following income and expense accounts were provided from the trial balance as of December 31, 20Y8, the end of the fiscal year, after all adjustments, including those for inventories, were recorded and posted:

$$\begin{array}{lr} \text{Sales\text{\textemdash} Winter Sports Division. . . . . . . . . . . . . . . . . . . . . . . . . . . .} & \$12,600,000\\ \text{Sales\text{\textemdash} Summer Sports Division. . . . . . . . . . . . . . . . . . . . . . . . . . .} & 16,300,000\\ \text{Cost of Goods Sold\text{\textemdash} Winter Sports Division . . . . . . . . . . . . . . . . } &7,560,000\\ \text{Cost of Goods Sold\text{\textemdash} Summer Sports Division . . . . . . . . . . . . . . . } &9,454,000\\ \text{Sales Expense\text{\textemdash} Winter Sports Division . . . . . . . . . . . . . . . . . . . . } &2,016,000\\ \text{Sales Expense\text{\textemdash} Summer Sports Division . . . . . . . . . . . . . . . . . . . } &2,282,000\\ \text{Administrative Expense\text{\textemdash} Winter Sports Division . . . . . . . . . . . . } &1,260,000\\ \text{Administrative Expense\text{\textemdash} Summer Sports Division . . . . . . . . . . . } &1,450,700\\ \text{Advertising Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . } &578,000\\ \text{Transportation Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . } &265,660\\ \text{Accounts Receivable Collection Expense. . . . . . . . . . . . . . . . . . . .} & 174,000\\ \text{Warehouse Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . } &1,540,000 \end{array}$$

The bases to be used in allocating expenses, together with other essential information, are as follows:

a. Advertising expense—incurred at headquarters, charged back to divisions on the basis of usage: Winter Sports Division, $252,000; Summer Sports Division,$326,000.

b. Transportation expense—charged back to divisions at a charge rate of $7.40 per bill of lading: Winter Sports Division, 17,200 bills of lading; Summer Sports Division, 18,700 bills of lading.

c. Accounts receivable collection expense—incurred at headquarters, charged back to divisions at a charge rate of$6.00 per invoice: Winter Sports Division, 11,500 sales invoices; Summer Sports Division, 17,500 sales invoices.

d. Warehouse expense—charged back to divisions on the basis of floor space used in storing division products: Winter Sports Division, 102,000 square feet; Summer Sports Division, 118,000 square feet.

Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Provide supporting calculations for service department charges.

Merline Manufacturing makes its product for $75 per unit and sells it for$150 per unit. The sales staff receives a 10% commission on the sale of each unit. Its December income statement follows.

$$\begin{array}{c} \textbf{MERLINE MANUFACTURING}\\ \textbf{Income Statement}\\ \textbf{For Month Ended December 31, 2019}\\ \end{array}$$

$$\begin{array}{lc} \text{Sales}&&&&&&&&&&&&\text{\$2,250,000}\\[5pt] \text{Cost of goods sold}&&&&&&&&&&&&\underline{\text{\hspace{5pt}1,125,000}}\\[5pt] \text{Gross profit}&&&&&&&&&&&&\text{\hspace{5pt}1,125,000}\\[5pt] \text{Operating Expenses}\\[5pt] \qquad\text{Sales commissions (10\\\%)}&&&&&&&&&&&&\text{\hspace{15pt}225,000}\\[5pt] \qquad\text{Advertising}&&&&&&&&&&&&\text{\hspace{15pt}250,000}\\[5pt] \qquad\text{Store rent}&&&&&&&&&&&&\text{\hspace{20pt}30,000}\\[5pt] \qquad\text{Administrative salaries}&&&&&&&&&&&&\text{\hspace{20pt}45,000}\\[5pt] \qquad\text{Depreciation-Office equipment}&&&&&&&&&&&&\text{\hspace{20pt}50,000}\\[5pt] \qquad\text{Other expenses}&&&&&&&&&&&&\underline{\text{\hspace{20pt}10,000}}\\[5pt] \qquad\text{Total expenses}&&&&&&&&&&&&\underline{\text{\hspace{15pt}610,000}}\\[5pt] \text{Net income}&&&&&&&&&&&&\underline{\underline{\text{\$\hspace{10pt}515,000}}}\\[5pt] \end{array}$$

Management expects December’s results to be repeated in January, February, and March of 2020 without any changes in strategy. Management, however, has an alternative plan. It believes that unit sales will increase at a rate of 10% each month for the next three months (beginning with January) if the item’s selling price is reduced to $125 per unit and advertising expenses are increased by 15% and remain at that level for all three months. The cost of its product will remain at$75 per unit, the sales staff will continue to earn a 10% commission, and the remaining expenses will stay the same.

Required

1. Prepare budgeted income statements for each of the months of January, February, and March that show the expected results from implementing the proposed changes. Use a three-column format, with one column for each month.

Analysis Component

2. Is net income for March expected to increase with the proposed strategy changes?

A partial list of Frend Hotel’s costs is provided below.
a. Champagne for guests. b. Cost to mail a customer survey.
c. Training for hotel restaurant servers.
d. Cost to replace lobby furniture.
e. Cost of soaps and shampoos for rooms.
f. Cost of food.
g. Wages of desk clerks.
h. Cost to paint lobby.
i. Cost of advertising in local newspaper.
j. Cost of laundering towels and bedding.
k. Wages of kitchen employees.
l. Guest room telephone costs for long-distance calls.
m. Cost of room mini-bar supplies.
n. Utility cost.
o. Cost of valet service.
p. General maintenance supplies.
q. Wages of maids.
r. Salary of the hotel president.
s. Depreciation of the hotel.
t. Cost of new carpeting.
u. Wages of bellhops.
v. Wages of convention setup employees.
w. Pay per view movie rental costs (in rooms).
$\textsf{\textcolor{#4257b2}{Instructions}}$
$1$.What would be Frend’s most logical definition for the final cost object?
$2$.Identify whether each of the costs is to be classified as direct or indirect. Define direct costs in terms of a hotel guest as the cost object.

Kajal Chauhan owns a service business called Deters Duplicating, which uses the following accounts.

$$\begin{matrix} \text{Accounts Receivable-J. Chin} & \text{Postage Expense}\\ \text{Accounts Receivable-A. Karn} & \text{Charitable Expense}\\ \text{Accounts Payable-River Company} & \text{Rent Expense}\\ \text{Accounts Payable-Sharma Supply} & \text{Insurance Expense}\\ \text{Kajal Chauhan, Capital} & \text{Supplies}\\ \text{Kajal Chauhan, Drawing} & \text{Sales}\\ \text{Prepaid Insurance} & \text{Cash}\\ \text{Advertising Expense}\\ \end{matrix}$$

1. Prepare a chart of accounts similar to the one described in this chapter. Arrange any accounts receivable, accounts payable, or expense accounts in alphabetical order. Use 3-digit account numbers and number the accounts within a division by 10s. 2. Two new accounts, Delivery Expense and Telephone Expense, are to be added to the chart of accounts prepared in Part 1. Assign account numbers to the two new accounts. 3. Using the forms in the Working Papers, open the Prepaid Insurance and the Postage Expense accounts.

Deela Fashions operates three departments: Men’s, Women’s, and Accessories. Departmental operating income data for the third quarter of 2012 are as follows:

$$\begin{array}{c} \text{DEELA FASHIONS}\\ \text{Income Statement}\\ \text{For the quarter ended September 30, 2012}\\ \end{array}$$

$$\begin{array}{l|r|r|r|r} \hline &\text{Men's}&\text{Women's}&\text{Accessories}&\text{Total}\\ \hline \text{Sales revenue}&\$108,000&\$55,000&\$100,000&\$263,000\\ \text{Variable expenses}&58,000&30,000&92,000&180,000\\ \text{Fixed expenses}&26,000&21,000&26,000&73,000\\ \text{Total expenses}&84,000&51,0000&118,000&253,000\\ \text{Operating income (loss)}&\$24,000&\$4,000&\$(18,000)&\$10,000\\ \hline \end{array}$$

Assume that the fixed expenses assigned to each department include only direct fixed costs of the department:

• Salary of the department’s manager
• Cost of advertising directly related to that department. If Deela Fashions drops a department, it will not incur these fixed expenses.

Requirement

1. Under these circumstances, should Deela Fashions drop any of the departments? Give your reasoning.

Internet Sites Collecting User Information. The Pew Internet & American Life project conducted a survey that included several questions about how Internet users feel about search engines and other websites collecting information about them and using this information either to shape search results or target advertising to them. In one question, participants were asked, "If a search engine kept track of what you search for, and then used that information to personalize your future search results, how would you feel about that?" Respondents could indicate either "Would not be okay with it because you feel it is an invasion of your privacy" or "Would be okay with it, even if it means they are gathering information about you." Joint probabilities of responses and age groups are summarized in the following table.

$$\begin{array}{lcr} \text { Age } & \text { Not Okay } & \text { Okay } \\ 18-29 & .1485 & .0604 \\ 30-49 & .2273 & .0907 \\ 50+ & .4008 & .0723 \end{array}$$

c. Given a respondent says she or he is not okay with this practice, what is the probability the respondent is $50+$ years old?

Guardian Insurance Agency adjusts its accounts monthly but closes them only at the end of the calendar year. Below are the adjusted balances of the revenue and expense accounts on September 30 of the current year and at the ends of two earlier months:

$$\begin{array}{|cc} & & \textbf{Sept.30} & \textbf{Aug.31} &\textbf{June30}\\ \text {Commissions earned} & \cdots\cdots\cdots\cdots\cdots\cdots\cdots\cdots & \$144,000 & \$128,000 & \$90,000\\ \text { Advertising expense } & \cdots\cdots\cdots\cdots\cdots\cdots\cdots\cdots & 28,000 & 23,000 & 15,000\\ \text { Salaries expense } & \cdots\cdots\cdots\cdots\cdots\cdots\cdots & 36,000 &32,000& 24,000 \\ \text {Rent expense} & \cdots\cdots\cdots\cdots\cdots\cdots\cdots\cdots & 22,500 & 20,000 & 15,000\\ \text {Depreciation expense} &\cdots\cdots\cdots\cdots\cdots\cdots\cdots &2,700 &2,400 & 1,800\\ \end{array}$$

c. Assume that Guardian adjusts and closes its accounts at the end of each month. Briefly explain how you then would determine the revenue and expenses that would appear in each of the three columns of the income statement prepared in part a.

You recently received a job with a company that manufactures an automobile antitheft device. To conduct an advertising campaign for the product, you need to make a claim about the number of automobile thefts per year. Since the population of various cities in the United States varies, you decide to use rates per 10,000 people. (The rates are based on the number of people living in the cities.) Your boss said that last year the theft rate per 10,000 people was 44 vehicles. You want to see if it has changed. The following are rates per 10,000 people for 36 randomly selected locations in the United States. Suppose $\sigma=30.3$.

$$\begin{array}{rrrrrr}55 & 42 & 125 & 62 & 134 & 73 \\ 39 & 69 & 23 & 94 & 73 & 24 \\ 51 & 55 & 26 & 66 & 41 & 67 \\ 15 & 53 & 56 & 91 & 20 & 78 \\ 70 & 25 & 62 & 115 & 17 & 36 \\ 58 & 56 & 33 & 75 & 20 & 16\end{array}$$

Using this information, reply to these questions.

3. What assumption must be met before the hypothesis test can be conducted?

shows a list of expenses involved in the production of custom, professional lacrosse sticks. C. If the cost is a manufacturing overhead cost, state whether it is indirect materials, indirect labor, or another type of manufacturing overhead.

$$\begin{array}{l} \textbf{Expenses Invvolved in Lacrosse Stick Production} \end{array}$$

$$\begin{array}{lcccc} \textbf{Lacrosse Stick}&\textbf{Manufacturing or}&\textbf{if Manufacturing: Direct }&\textbf{if Overhead: Indirect}\\ \textbf{Production}&\textbf{Sales \&}&\textbf{Materials, Direct Labor, or}&\textbf{Materials, Indirect Labor,}\\ \textbf{Costs}&\textbf{Administration}&\textbf{Overhead?}&\textbf{ or Other?}\\ &\textbf{Cost}\\ \hline \text{Carbon, fiberglass}\\ \text{Administrative building rent}\\ \text{Accountant salary}\\ \text{Factory building depreciatiom}\\ \text{Strings for the pocket}\\ \text{Advertising}\\ \text{Produciton supervisor salary}\\ \text{Paint for sticks}\\ \text{Research and development costs}\\ \text{Wages of person who strings the sticks}\\ \text{Cutting machine depreciatiom}\\ \text{Human resources salaries}\\ \text{Factory maintenance}\\ \end{array}$$