Question 2 (5 points)
Direct labor and materials are examples of?
Question 3 (5 points)
Fixed costs/(Revenues – Variable costs) equals _________________.
Question 4 (5 points)
The fixed costs at Harley Motors are $1 million annually. The main product has revenue of $8.50 per unit and $4.25 variable cost. (a) Determine the breakeven quantity per year.
Question 5 (5 points)
The fixed costs at Harley Motors are $1 million annually. The main product has revenue of $8.50 per unit and $4.25 variable cost. (b) Determine the annual profit if 350,000 units are sold.
Question 6 (5 points)
A call center in India used by U.S. and U.K. credit card holders has a capacity of 1,400,000 calls annually. The fixed cost of the center is $775,000 with an average variable cost of $2 and revenue of $3.50 per call.
(a) Find QBE.
Question 7 (5 points)
A call center in India used by U.S. and U.K. credit card holders has a capacity of 1,400,000 calls annually. The fixed cost of the center is $775,000 with an average variable cost of $2 and revenue of $3.50 per call.
(b) The center manager expects to dedicate the equivalent of 500,000 of the 1,400,000 capacity to a new product line. This is expected to increase the center’s fixed cost to $900,000, of which 50% will be allocated to the new product line. Determine the average revenue per call necessary to make 500,000 calls the breakeven point for only the new product.
Question 8 (5 points)
An engineering firm can lease a measurement system for $1000 per month or purchase one for $15,000. The leased system will have no monthly maintenance cost, but the purchased one will cost $80 per month. At an interest rate of 0.5% per month, how many months must the system be required to break even?
Question 9 (5 points)
Jeremy is evaluating the operational costs of the manufacturing processes for specific components of a wireless home security system. The same components are produced at plants in New York (NY) and Los Angeles (LA). The records for the last 3 years from NY report a fixed cost of $400,000 per year and a variable cost of $95 per unit in year 1, decreasing by $3 per unit per year. The LA reports indicate a fixed cost of $750,000 per year and a variable cost of $50 per unit, increasing by $4 per unit per year. If the trends continue, how many units must be produced in year 4 for the two processes break even?
Question 10 (5 points)
Machine A has a fixed cost of $40,000 per year and a variable cost of $60 per unit. Machine B has an unknown fixed cost, but with this process 200 units can be produced each month at a total variable cost of $2000. If the total costs of the two machines break even at a production rate of 2000 units per year, what is the fixed cost of machine B?
Question 11 (5 points)
Convert $10,000 present dollars into then-current dollars of year 10 if the inflation rate is 7% per year.
Question 12 (5 points)
Convert $10,000 future dollars in year 10 into constant-value dollars (not equivalent dollars) of today if the inflation-adjusted (market) interest rate is 11% per year and the inflation rate is 7% per year.
Question 13 (5 points)
Ford Motor Company announced that the price of its F-150 pickup trucks is going to increase by only the inflation rate for the next 2 years. If the current price of a truck is $21,000 and the inflation rate is expected to average 2.8% per year, what is the expected price of a comparably equipped truck 2 years from now?
Question 14 (5 points)
Calculate the inflation-adjusted interest rate when the annualized inflation rate is 27% per year (Caracas, 2004) and the real interest rate is 4% per year.
Question 15 (5 points)
What market interest rate per quarter would be associated with a quarterly inflation rate of 5% and a real interest rate of 2% per quarter?
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