The Chocolate Factory’s fixed costs are $1.5 million annually. The main product
ID: 1118045 • Letter: T
Question
The Chocolate Factory’s fixed costs are $1.5 million annually. The main product (The Deluxe Chocolate Box) has revenue of $10.00 per unit and $4.00 variable cost. Based on this information, the general manager knows that the breakeven quantity point per year is:
Question 22 options:
250,000 units
107,142 units
150,000 units
200,000 units
A consulting aerospace engineer at Aerospatial estimated AW values for a presently owned, highly accurate steel rivet inserter based on company records of similar equipment.
If Retained This
AW Value,
Number of Years
$/Year
1
–62,000
2
–50,000
3
–47,000
4
–53,000
When you convert $20,000 present dollars into then-current dollars of year 7 if the inflation rate is 10% per year, the result is equal to:
Solution calculated with inflation factor with 6 decimal places.
Question 20 options:
$55,180
$22,000
$38,974
$19,487
A challenger has ESL = 2 years and AWC = $-49,000 per year. If the consultant must recommend a replace/retain decision today, should the company purchase the challenger? The MARR is 15% per year.
Question 21 options:
Recommendation now is to retain the defender for 3 years, then replace.
Recommendation now is to retain the defender for 5 years, then replace.
Recommendation now is to retain the defender for 2 years, then replace.
Recommendation now is to replace for the challenger.
When the fixed cost (FC) decreases but the revenue per unit (r) and the variable cost per unit (v) remain constant, then:
Question 17 options:
The break-even quantity increases.
The break-even point stays in the same place.
The break-even quantity decreases.
The break-even point moves to right.
Two systems are under consideration. The relevant costs for each system are known or estimated (see table below). Use an interest rate of 18% per year to determine the minimum resale price (RV) needed to make the challenger a better economic choice now.
Calculations based on interest factors with 5 decimal places.
Question 16 options:
RV= $609,794
RV= $297,079
RV= $284,108
RV= $382,060
Based on the data below, the economic service life (ESL) of the asset is equal to:
Question 15 options:
ESL= 4 years
ESL= 3 years
ESL= 5 years
ESL= 2 years
Calculate the conventional B/C ratio for the following cash flow estimates at a discount rate of 10% per year.
Item
Cash Flow
PW of benefits, $
3,800,000
AW of disbenefits, $/year
50,000
First cost, $
2,200,000
M&O costs, $/year
350,000
Life of project, years
15
**The answers presented below were calculated using the appropriate factors from interest tables including all their decimal places**
Question 13 options:
B/C= 1.47
B/C= 1.34
B/C= 0.70
B/C= 0.66
The benefit/cost methods is used primarily to evaluate projects and to select from alternatives in the private sector.
Question 3 options:
250,000 units
107,142 units
150,000 units
200,000 units
A consulting aerospace engineer at Aerospatial estimated AW values for a presently owned, highly accurate steel rivet inserter based on company records of similar equipment.
If Retained This
AW Value,
Number of Years
$/Year
1
–62,000
2
–50,000
3
–47,000
4
–53,000
When you convert $20,000 present dollars into then-current dollars of year 7 if the inflation rate is 10% per year, the result is equal to:
Solution calculated with inflation factor with 6 decimal places.
Question 20 options:
$55,180
$22,000
$38,974
$19,487
A challenger has ESL = 2 years and AWC = $-49,000 per year. If the consultant must recommend a replace/retain decision today, should the company purchase the challenger? The MARR is 15% per year.
Question 21 options:
Recommendation now is to retain the defender for 3 years, then replace.
Recommendation now is to retain the defender for 5 years, then replace.
Recommendation now is to retain the defender for 2 years, then replace.
Recommendation now is to replace for the challenger.
When the fixed cost (FC) decreases but the revenue per unit (r) and the variable cost per unit (v) remain constant, then:
Question 17 options:
The break-even quantity increases.
The break-even point stays in the same place.
The break-even quantity decreases.
The break-even point moves to right.
Two systems are under consideration. The relevant costs for each system are known or estimated (see table below). Use an interest rate of 18% per year to determine the minimum resale price (RV) needed to make the challenger a better economic choice now.
Calculations based on interest factors with 5 decimal places.
Question 16 options:
RV= $609,794
RV= $297,079
RV= $284,108
RV= $382,060
Based on the data below, the economic service life (ESL) of the asset is equal to:
Question 15 options:
ESL= 4 years
ESL= 3 years
ESL= 5 years
ESL= 2 years
Calculate the conventional B/C ratio for the following cash flow estimates at a discount rate of 10% per year.
Item
Cash Flow
PW of benefits, $
3,800,000
AW of disbenefits, $/year
50,000
First cost, $
2,200,000
M&O costs, $/year
350,000
Life of project, years
15
**The answers presented below were calculated using the appropriate factors from interest tables including all their decimal places**
Question 13 options:
B/C= 1.47
B/C= 1.34
B/C= 0.70
B/C= 0.66
The benefit/cost methods is used primarily to evaluate projects and to select from alternatives in the private sector.
Question 3 options:
True False Current System New System Remaining life, (years) Current market value, (S) AOC, (S per year) Future salvage, (S) AW New System, (S per year) 50,000 -100,000 0 195,000Explanation / Answer
22.
Breakeven point = Fixed cost / (Selling price - Unit variable cost)
= 1500000/(10 - 4)
= 1500000/6 = 250,000 units
Hence option (a) 250,000 units
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