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Assignment:

 

Complete the following problems. You must show your work on the math problems to get full credit. Every student is responsible for completing their own responses to the following problems.

 

1. Identify which of the following costs are fixed and which are variable:

   a. Property taxes on a factory building

   b. Sales commission

   c. Heat and air conditioning for a plant

   d. Regular maintenance on machinery and equipment

   e. Factory fire insurance

   f. Basic raw materials used in production

   g. Salaries paid to design engineers

   h. Electricity for machinery and equipment in a plant

   i. Property taxes on an administrative building

   j. Wages paid to temporary workers

 

2. Identify the following costs into either being product cost or period cost:

   a. Fire insurance premium paid on factory buildings

   b. Electric bill for the warehouse operation

   c. Material handling cost related to production

   d. Salary paid for plant manager

   e. Salary paid for engineers

   f. Leasing expense for forklift trucks in warehouse operation

   g. Wages incurred in producing products

   h. Income taxes paid

   i. Interest expenses on borrowed funds

   j. Raw material costs

 

3. Identify the following costs as being either variable or fixed in respect to volume or level of activity:

   a. Sugar used in ice cream production

   b. Electricity for heating and cooling the factory building

   c. Electricity for operation of machines

   d. Janitorial and custodial salaries

   e. Lubricants used for machines

   f. Paint shop superintendent’s salary

   g. Rent on a factory building

   h. Labor costs in assembling a product

   i. RFID (Radio-frequency identification) units embedded in the final product during shipping

   j. CPU chips used in notebook production

 

4. A company in its first year of operation expects the following financial results from a project:

Sales revenue: $500,000

Variable costs: $155,000

Fixed costs: $80,000

Compute the break-even point in units sold if the company expects to produce and sell 15,000 units.

 

Assignment:

 

Complete the following problems. You must show your work on the math problems to get full credit. Every student is responsible for completing their own responses to the following problems.

 

1. A machine costing $35,000 to buy and $5,000 per year to operate will save mainly labor expenses in packaging over six years. The anticipated salvage value of the machine at the end of seven years is $5,000.

   a. If a 10% return on investment (rate of return) is desired, what is the minimum required annual savings in labor from this machine?

   b. If the service life is six years instead of seven, what is the minimum required annual savings in labor for the firm to realize a 10%           return on investment?

   c. If the annual operating cost increases by 15%, from $5,000 to $5,750, what would the minimum required annual savings to get the         10% return on investment?

 

2. A company is looking at purchasing new vehicles to enhance their fleet. Which of the following vehicles would be the best in terms of lowest annual cost if the interest rate = 12% if the vehicles had a service life of 3 years? 4 years? 5 years?

     Vehicle          Initial Cost        Annual Operating Cost        Salvage Value

          A               $20,000                      $5,000                             $2,000

          B               $25,000                      $3,500                             $2,500

          C               $30,000                      $2,000                             $3,250

          D               $35,000                      $1,000                             $4,000

 

 

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