1-ABC Taxi has an average fixed cost of $8,000 a year for each car. Each mile dr
ID: 3331397 • Letter: 1
Question
1-ABC Taxi has an average fixed cost of $8,000 a year for each car. Each mile driven has variable cost $.40 and collect fares of $.60. How many miles a year does each car have to travel before making profit?
Refer to the above problem:
What is average cost when each car drives 50,000 miles? If ABC taxi service likes to reduce this Average cost by 10% how many miles it needs to drive.
2-a. ABC company is contemplating adding a new line of product, which will require leasing new equipment for a monthly payment of $12,000. Variable costs would be $15.00 per product, and selling price per product is $40. What would be profit or loss if business sell 600 of these products?
b. If 800 quantity of products can be sold, and a profit target is $10,000, what price should be charged for each product?
3-A company produces two products: Product A and B. Which product will be more profitable?
(use information from the following table)
Product A Product B
Annual Sales (unit) 1,800 4,500
Unit cost (VC) $680 $900
Fixed Cost $200,000 $300,000
Selling Price $760 $1,000
4-Several years ago John bought an endowment insurance policy that is about to mature. He has the option of receiving $20,000 now or $40,000 in 10 years’ time. Because he has retired and pays no income tax, he could invest the money with interest rate expected to remain at 10% a year for the foreseeable future. Which option should he take?
This Problem is from the textbook. Problem 8.6 (page 197)
5-On February 28, 2 a bank offered a $10,000 certificate of deposit (CD) for 4 years at 3.50% interest. How much money you will have after 4 years if interest is compounded
Annually
Semiannually
Quarterly
6-Find the present value of $10,000 due in the future under each of the following conditions:
6% interest rate, semiannual compounding, discounted back 4 years
6% interest rate, quarterly compounding, discounted back 4 years
7-You borrow $90,000 and promised to pay back $100,000 at the end of 4 years. What is the interest rate (compounded annually)?
8- Project Y has initial cost of $10,000, and the discount rate for each project is 12%. Expected cash flow is given below for project:
Year Project Y
1 2,000
2 2,500
3 3,000
3,000
Calculate NPV for this project.
Explanation / Answer
We are allowed to do 1 question at a time. Post again for second question.
2) ABC company is contemplating adding a new line of product, which will require leasing new equipment for a monthly payment of $12,000. Variable costs would be $15.00 per product, and selling price per product is $40. What would be profit or loss if business sell 600 of these products?
Ans: Revenue = 40 * 600 = 24000
Cost = 12000 + 15 * 600 = 21000
Profit = 24000 - 21000 = $3000
b) If 800 quantity of products can be sold, and a profit target is $10,000, what price should be charged for each product?
Ans: 10000 = 800 * x - 12000 - 15 * 800
'x' is the selling price
x = 34000/800 = $42.5
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