According to Gartner Inc., the largest share of the worldwide PC market is held by Hewlett-Packard with 18.4%. Suppose that a market researcher believes that Hewlett Packard holds a higher share of the market in the northern region of Europe. To verify this theory, he randomly selects 428 people who purchased a personal computer in the last month in the northern region of Europe. Eighty-four of these purchases were Hewlett-Packard computers. Using a 1% level of significance, test the market researcher’s theory. What is the probability of making a Type I error? If the market share is really 0.21 in the north-west region of Europe, what is the probability of making a Type II error?

Bern Fly Rod Company

Bern Fly Rod Company is a small manufacturer of high-quality graphite, fly-fishing rods. It sells its products to fly-fishing shops throughout the United States and Canada. Bern began as a small company with four salespeople, all family members of the owner. Due to the high popularity and recent growth in fly-fishing, Bern now employs a sales force of sixteen and for the first time employs nonfamily members. The salespeople travel around the country giving fly-casting demos of their new models. Once the sales orders are generated, inventory availability is determined and, if necessary, the salesperson sends the order directly to the manufacturing department for immediate production. Sales staff compensation is tied directly to their sales figures. Bern’s financial statements for the December year-end reflect unprecedented sales, 35 percent higher than last year. Further, sales for December account for 40 percent of all sales. Last year, December sales accounted for only 20 percent of all sales.

Required:

Analyze the above situation and assess any potential internal control issues and exposures. Discuss some preventive measures this firm may wish to implement.