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Exam Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Bill just paid off his truck, which lowers his monthly overhead by $360. What is the BEP$ with the lower fixed cost? A) $1 150 B) $1 225 C) $1 175 D) $1 250 Answer: D Explanation: A) B) C) D) 1)

Larry's Lock and Key is a locksmith operation which replaces automobile ignitions on the highway. The average cost per ignition is $140 and the profit per unit is $180. The cost to keep a locksmith on the road is $3600 per week. 2) If Larry wants to make a profit of $4500 in a week with one of his trucks, how many ignitions must this technician replace? A) 45 B) 203 C) 148 D) 103 Answer: A Explanation: A) B) C) D) 3) 2)

3) Which of the following is an example of a deterministic modeling technique? A) forecasting model B) simulation modeling C) queuing model D) linear programming Answer: D Explanation: A) B) C) D)

Larry's Lock and Key is a locksmith operation which replaces automobile ignitions on the highway. The average cost per ignition is $140 and the profit per unit is $180. The cost to keep a locksmith on the road is $3600 per week. 4) How much revenue must be generated by each of Larry's trucks before a profit can be made? A) $8800 B) $6400 C) $7560 D) $7200 Answer: B Explanation: A) B) C) D) 4)

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5) Deterministic models assume that A) all relevant input data are known with certainty. B) all parameters can be closely estimated. C) all variables can be determined. D) all variables can be controlled. Answer: A Explanation: A) B) C) D)

5)

6) Acquiring input data is part of A) model solution C) model interpretation Answer: D Explanation: A) B) C) D)

B) model testing D) model formulation

6)

Let

x = number of units sold VC = variable cost per unit FC = fixed cost per unit

7) An equation to determine the sale price (P) needed to break-even is A) P = (FC + VC)/x. B) P = - VC + FC/x. C) P = VC + FC/x. D) P = FC + VC/x. Answer: C Explanation: A) B) C) D)

7)

8) The following activity must be undertaken during the interpretation stage of the decision modeling process: A) decision on whether or not to include a certain parameter in the model. B) obtaining data from a supplier. C) verification that a computer routine is working as predicted. D) studying potential changes to the value of some input data. Answer: D Explanation: A) B) C) D)

8)

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9) Which of the following variables is considered random or probabilistic? A) historical stock prices B) last year's advertising budget C) last week's sales data D) future interest rates Answer: D Explanation: A) B) C) D)

9)

10) Bill's Birdhouses makes decorative birdhouses for gardens. Bill sells birdhouses for $25 at craft shows, but the cost of materials to make them is really only $13. He figures that his overhead to keep his business running is about $960 per month. How many birdhouses does Bill need to sell before he will show a profit? A) 86 B) 80 C) 76 D) 84 Answer: B Explanation: A) B) C) D)

10)

11) Bill would like to show a profit of $900 per month so he can quit his day job. Given that his fixed costs no longer include the cost of the truck payment, how many birdhouses would he have to sell to realize this profit? A) 137 B) 125 C) 129 D) 134 Answer: B Explanation: A) B) C) D)

11)

12) Probabilistic models are models where A) some variables may be unknown. B) only parameters are unknown. C) all variables must be unknown. D) both variables and parameters are unknown. Answer: A Explanation: A) B) C) D)

12)

13) The three major steps (in order) involved in decision modeling are A) formulation, solution, implementation. B) formulation, development, solution. C) formulation, interpretation, solution. D) formulation, solution, interpretation. Answer: D Explanation: A) B) C) D)

13)

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14) Decision models are A) schematic models. C) mathematical models. Answer: C Explanation: A) B) C) D)

B) scale models. D) physical models.

14)

Larry's Lock and Key is a locksmith operation which replaces automobile ignitions on the highway. The average cost per ignition is $140 and the profit per unit is $180. The cost to keep a locksmith on the road is $3600 per week. 15) Given the above information, how many ignitions must a technician replace per week just to break even? A) 55 B) 20 C) 125 D) 90 Answer: B Explanation: A) B) C) D) 15)

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 16) The heuristic approach is an alternative option to the standard decision modeling process that provides only good - not necessarily optimal - solutions. Answer: True Explanation: False 16)

17) If a decision model has one variable with a certain/deterministic input value and another variable with a random/probabilistic input, then the outcome of this model which is based on both variables will be probabilistic. Answer: True Explanation: False

17)

18) Sensitivity analysis is critical if management and user support are to be obtained for successful implementation of the decision modeling process. Answer: True Explanation: False

18)

19) The Goal Seek feature in Excel permits the modeler to specify a goal or target for a specific cell, and allows Excel to manipulate another cell to achieve the target. Answer: True Explanation: False

19)

20) Decision models generally result in solutions which are flexible, economical, easy to understand, and easy to use. Answer: True Explanation: False

20)

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21) Since probabilistic models assume that some relevant input data are not known with certainty, decisions based on the results of these models cannot be trusted. Answer: True Explanation: False

21)

22) Problem definition, or development of a concise statement of the problem, is the most challenging part of formulation. Answer: True Explanation: False

22)

23) Parameters, which are measurable quantities, cannot be stochastic in nature. Answer: True Explanation: False

23)

24) The solution to a decision model can always be trusted to yield the best and most accurate results for the problem it was designed to solve. Answer: True Explanation: False

24)

25) Variables and parameters are categorized as controllable and uncontrollable. Answer: True Explanation: False

25)

26) The use of decision models prevents managers from using more "intuitive" approaches to decision making. Answer: True Explanation: False

26)

27) When a model has been proven to yield trustworthy results, it is easier to convince management to implement the solutions it derives. Answer: True Explanation: False

27)

28) The terms operations research, management analysis, and decision modeling are commonly used interchangeably. Answer: True Explanation: False

28)

29) "If I am to trust this model on inventory control works, I'd like to have our manager in charge of that department participate in its development". This vice- president is justified in making this request. Answer: True Explanation: False

29)

30) The break- even point (BEP) is a mathematical function that helps managers find the volume of production necessary to cover all the company's costs before any profits can be made. Answer: True Explanation: False

30)

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ESSAY. Write your answer in the space provided or on a separate sheet of paper. 31) Two machines can do the same work, but cost different amounts of money, both to purchase and to operate. Machine 1 costs $58 000 to purchase. The cost to operate it for one year includes the following: operating expense, $9600; maintenance, $6000; taxes, $1100; and insurance, $500. Machine 2 costs $78 625 to purchase. The corresponding expenses are operating expense, $7400, maintenance, $4000, taxes, $1400, and insurance, $650.
a. b. At what useful life are these two machines equivalent? If we believe that either machine will last for twelve years, which machine should be purchased?

Answer: a. Machines are equivalent at 5.5 years. b. At 12 years choose machine two (save $24 375). (see spreadsheet 1.15)
Sheldon McIver and his wife are considering early retirement 9 years from now. They feel that since their kids will no longer be living with them, all they'd require as a "nest egg" would be $600 000 to live comfortably for at least 25 years. The McIvers already have $500 000 in net equity. They believe they can save $8500 at the end of every year until retirement.

32) Assuming they would invest this money in the stock market, how much annual interest would they need to earn every year in order to meet their retirement target? Answer: 6.57% (see spreadsheet 1.26) 33) A lobster catcher spends $12 500 per month to maintain a lobster boat. He plans to catch an average of 20 days per month during lobster season. For each day, he must allow approximately $95 for fuel and ice for the boat. If his packaging and distribution costs are $2.00 per kilogram of lobster, and if lobster sells for $6.00 per kilogram: a. How many kilograms of lobster must he catch per day to break even? b. Suppose the catcher wants to put away money to sustain himself through inclement weather and off-season expenses. He decides that he would like to save $10 000 per month. How much lobster should he plan to catch to make this plan possible? Answer: a. To break even, catch 180 kg per day. b. To save ($10 000/20) = $500, catch 305 kg/day. (see spreadsheet 1.10) 34) Three types of manufacturing equipment for engine gaskets are under consideration. Their fixed costs and resulting variable costs per unit are shown in the table below. Equipment A $4000 $1.90 Equipment B $7000 $1.40 Equipment C $12 000 $1.00

Fixed Cost Variable Cost/Unit a. b. c. d.

At what volume of production would Equipment A and Equipment B cost the same? Establish this break- even point for Equipments B and C. Suppose the volume anticipated was 8000 units. Which equipment should be purchased? Suppose the volume anticipated was 12 900 units. Which equipment should then be purchased?

Answer: a. A and B break even at 6000. b. B and C break even at 12 500. c. At 8000 units, choose B. d. At 12 900 units, choose C. (see spreadsheet 1.19) 6

Sheldon McIver and his wife are considering early retirement 9 years from now. They feel that since their kids will no longer be living with them, all they'd require as a "nest egg" would be $600 000 to live comfortably for at least 25 years. The McIvers already have $500 000 in net equity. They believe they can save $8500 at the end of every year until retirement.

35) After carefully studying his budgeted retirement plan again, Sheldon realized he was not too realistic with his estimates. He would need to increase his retirement goal by an extra $100 000. What would his return on investment be after 9 years? Assume the market interest rate is 5%. Answer: The McIvers would require extra savings of $9638 ($18 138 - $8500). (see spreadsheet 1.29) 36) An office manager is deciding between two different plans for the copy equipment. He can either lease the copier outright at $450 per month, or pay the leasing company $0.03 per copy at the end of the month. If he leases the machine, he calculates that supplies will run approximately $2 per every thousand copies. If he pays per copy, the supplies will be included.
a. b. c. If he anticipates 20 000 copies per month, should he lease or pay per copy? Estimate the cost of this plan. What would the volume have to be to change this decision?

Answer: a. b. c.

Lease the machine outright: monthly costs are $490 (less than $600). $490 Both systems cost the same for 16 333 copies per month. So, if there are fewer than 16 333 copies per month, pay per copy. If there are more than 16 333 copies per month, lease the machine. (see spreadsheet 1.9)

Sheldon McIver and his wife are considering early retirement 9 years from now. They feel that since their kids will no longer be living with them, all they'd require as a "nest egg" would be $600 000 to live comfortably for at least 25 years. The McIvers already have $500 000 in net equity. They believe they can save $8500 at the end of every year until retirement.

37) Since historically the stock market hasn't been paying more than 5% in the last few years, the McIvers' perspective of early retirement doesn't seem realistic. At the rate of 5%, how many years would it take them to retire? Answer: 9.94 years (see spreadsheet 1.27)

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38) Consider the loan repayment schedule below. $5000 is borrowed at 6% interest and is to be repaid by the end of five years. At the end of each year, a payment is made, always the same amount. The payment is applied first to debt service, with the remainder applied to the principal. What is the amount of the payment?
(a) (b) Debt at Beginning of Year $5000 (c) Interest for Year [6% × (b)] $300 (d) Debt at End of Year [(b) + (c)] $5300 (e) (f) Total End of Year Payment

Year 1 2 3 4 5 6

Principal Payment

Payment Amt

$0

Answer: The uniform payment amount is $1186.98. (see spreadsheet 1.20) The Widget Manufacturing Company must replace a widget machine, and is evaluating the capabilities of two systems. A requirement of management is that the machine chosen must be paid for during the first year of operation. The first machine under consideration, Machine A, would cost $65 000, and has the capacity to make up to 10 000 widgets per year, with a variable cost of $22 per widget. The second machine, Machine B, can produce widgets in almost half the time, would cost $72 000, but the variable cost is only $17 per widget. Widgets sell for $32. 39) a. Find the break- even point in terms of Widgets for each machine. b. Find the break-even point in terms of dollars for each machine. c. If the Widget Company is anticipating a demand of 5500 units in the next year, which machine should be chosen? d. If the demand is anticipated at 7500 units, would a different system be chosen? Answer: a. BEPA = 6500, BEPB = 4800 b. BEP$A = $208 000, BEP$B = $153 600 c. Choose B, because with A you lose $10 000. ProfitB = $10 500 d. Choose B, because there will be more profit ($40 500 as opposed to $10 000). (see spreadsheet 1.6)
Ace Tennis Club has a total of 400 playing members, each paying $150 per semester to play. In addition to monies from membership fees, the club receives a government grant from the local municipality to sustain its activity. The first semester budget is $120 000; the club grant will be $480 000. 280 of the players have been members of the club for 3 years or more.

40) By how much will the club have to raise fees to keep from having a shortfall? Answer: The new membership fee will have to be $180 or, the fee will have to be increased by $30 per semester. (see spreadsheet 1.2)

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41) Leslie is considering buying a franchise for a national chain of custom-made window shades. The window shades cost an average of $75.00 for her to make, and on each one she sells she makes an average of $12.50 profit. The franchise would cost $15 000 per year, but this would cover all of the expenses normally considered overhead.
a. At these rates, how many shades would Leslie have to sell per year to break even? b. She would like to give up her current job and sell window shades full time. To do so, she would have to show a profit of at least $30 000. How many window shades would she have to sell under this scenario?

Answer: a. To break even, sell 1200 shades per year. b. To profit $30 000, sell 3600 shades per year. (see spreadsheet 1.13) The Widget Manufacturing Company must replace a widget machine, and is evaluating the capabilities of two systems. A requirement of management is that the machine chosen must be paid for during the first year of operation. The first machine under consideration, Machine A, would cost $65 000, and has the capacity to make up to 10 000 widgets per year, with a variable cost of $22 per widget. The second machine, Machine B, can produce widgets in almost half the time, would cost $72 000, but the variable cost is only $17 per widget. Widgets sell for $32. 42) Suppose an additional Machine A is installed to make Junior Widgets. The selling price for these devices is $12 per unit, with a variable price of $8. Calculate: a. b. c. the BEP the BEP$ the profit (if any) at 24 000 units

Answer: a. BEP = 16 250 b. BEP$ = $195 000 c. $31 000 (see spreadsheet 1.8) 43) A new homeowner is debating between installing a solar or a gas water heater. The gas water heater should last 20 years and will cost $345 to purchase. The estimated fuel use, based on a family of four is $450 per year. The solar water heater is more expensive: the equipment costs $1900 to purchase and install. Additionally, the homeowner estimates that the annual fuel cost will be $60 in electricity to run the pump and to heat the water on cloudy days. He also estimates $75 for annual maintenance. He does not know how many years the solar water heater will last, but he estimates that the equipment should last at least 10 years. a. How many years would the solar water heater have to last to break even with the costs of the gas water heater? b. What is the cost of both systems at the break-even point? c. If the solar water heater lasts for 20 years, how much will the homeowner have saved? Answer: a. The break even point between the two systems is 4.94 years. b. At 4.94 years, both systems cost $2566. c. The difference in costs between the two systems at 20 years is $4745. (see spreadsheet 1.12)

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Ace Tennis Club has a total of 400 playing members, each paying $150 per semester to play. In addition to monies from membership fees, the club receives a government grant from the local municipality to sustain its activity. The first semester budget is $120 000; the club grant will be $480 000. 280 of the players have been members of the club for 3 years or more.

44) Another suggestion is to increment the cost of membership fees for all members depending upon the number of years they have been members in the club, in addition to introducing special seniority benefits. The 115 new members would pay a base rate of $150 plus a premium (a) to be determined ($150 + a). The 105 one-year members would pay 150 + 1.5a, the 95 two-year members would pay 150 + 2a, and the 85 senior members (3 or more years) would pay 150 + 2.5a. This director believes that such a plan would be more fair to all the members, and would eliminate the shortfall with the least amount of difficulty. What is the value of the premium (a), and how much membership fee will each type of member pay? Answer: a = $18; new=$168, 1-y=$177, 2-y=$186, senior=$194 (see spreadsheet 1.5) 45) Erroll is the manager of a hotel in downtown Toronto. He wants to verify if his cleaning services offered to guests are breaking even. A cleaning maid costs the hotel $1750 per month. There are several variable monthly expenses associated with cleaning a room, such as cleaning supplies, $0.60, cleaning equipment, $1.00, guest supplies, $0.40, courtesy materials, $0.25, and entertainment offers to guests, $1.00. How many rooms must a maid clean to break even if the revenue share per room to cover these cleaning expenses is $20? Answer: Clean 104 rooms to break even. (see spreadsheet 1.14)
Sheldon McIver and his wife are considering early retirement 9 years from now. They feel that since their kids will no longer be living with them, all they'd require as a "nest egg" would be $600 000 to live comfortably for at least 25 years. The McIvers already have $500 000 in net equity. They believe they can save $8500 at the end of every year until retirement.

46) Initially, the McIvers thought they might need to postpone their retirement plans by 5 more years. However, after talking to a financial planner, they found out they could beat the market rate after all and could earn a minimum consistent 8% on their investment. If the McIvers implemented their new plan to work for 14 more years at the new market rate of 8% would they achieve their goal of earning a further $100 000 using their current savings? Answer: Yes (see spreadsheet 1.30) 47) Sheldon insists on retiring after 9 more years of work. Given the historic market interest rate is around 5%, how much more money would they need to save at the end of each year to meet this retirement goal? Answer: $569 (see spreadsheet 1.28)

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Shipping Unlimited is studying the viability of setting up a new plant in Brampton, Ontario. Shipping produces boxes of a particular dimension that suit many companies in the food industry. Budgeting studies indicate that fixed costs would be around $125 000 for a facility that would suit their needs. Variable costs to produce one set of 20 boxes would be $8.50. They hope to be able to sell each set for as much as $15.00. 48) Shipping found out that its closest competitor has lowered its price for an equivalent set of boxes to $14 per set. In order to stay competitive, Shipping felt it would need to lower its fixed costs even more from its present budgeted amount. Dave agreed and indicated that he'd be able to negotiate a better leasing agreement in London by reducing the plant's budget from $24 000 a year to $18 000. Would this savings in its fixed cost budget be enough to allow Shipping to match its competitor's price? Assume the production restriction of 10 000 units still applies. Answer: No, there is still a shortfall of $7 000. (see spreadsheet 1.25) 49) After further investigation, Dave realized that production levels in excess of 10 000 units would not be realistic given the locations they've been investigating. Given the best case scenario for the lowest cost structure (see question 23), by how much should Shipping increase its price to match this production level limitation? Answer: $0.30 (see spreadsheet 1.24) 50) A child was born on 1980 January 02. On January 1st of the following year, his parents began a savings account with a particular sum of money. On the eve of the child's second birthday, they added to this account twice the original sum of money. The account was always increased by the original sum of money, multiplied by the child's current age, and by 6% interest, paid on December 31st of each year. On the eve of the child's 22nd birthday, his parents transferred ownership of this account to their son. The account contained exactly $100 000. How much was the original sum of money? (Hint: The parents made exactly 21 deposits.) Answer: $265 (see spreadsheet 1.11) Shipping Unlimited is studying the viability of setting up a new plant in Brampton, Ontario. Shipping produces boxes of a particular dimension that suit many companies in the food industry. Budgeting studies indicate that fixed costs would be around $125 000 for a facility that would suit their needs. Variable costs to produce one set of 20 boxes would be $8.50. They hope to be able to sell each set for as much as $15.00. 51) How many sets should Shipping sell to break even? Answer: 19 231 sets (see spreadsheet 1.21) The ThinkBig Company currently manufactures a product which sells for $1.30. The fixed costs associated with this operation are $18 000; the variable costs are $0.65 per unit on a volume of 35 000 units per month. They are considering new equipment which will increase the fixed costs to $26 000 and the variable costs to $0.75, but the demand is expected to increase to 55 000 units, so this option may be attractive. 52) Should ThinkBig make this investment? Why or Why not? Answer: Do not buy the new equipment: Profit will decrease by $500. (see spreadsheet 1.17)

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The Widget Manufacturing Company must replace a widget machine, and is evaluating the capabilities of two systems. A requirement of management is that the machine chosen must be paid for during the first year of operation. The first machine under consideration, Machine A, would cost $65 000, and has the capacity to make up to 10 000 widgets per year, with a variable cost of $22 per widget. The second machine, Machine B, can produce widgets in almost half the time, would cost $72 000, but the variable cost is only $17 per widget. Widgets sell for $32. 53) At what volume would the Widget Manufacturing Company in the above question be indifferent to a choice between the two systems? (Hint: The costs will be the same.) Answer: At 1400 units, both machines are the same. (see spreadsheet 1.7) Shipping Unlimited is studying the viability of setting up a new plant in Brampton, Ontario. Shipping produces boxes of a particular dimension that suit many companies in the food industry. Budgeting studies indicate that fixed costs would be around $125 000 for a facility that would suit their needs. Variable costs to produce one set of 20 boxes would be $8.50. They hope to be able to sell each set for as much as $15.00. 54) Dave Loughton, Production & Operations Management (POM) director for Shipping, conducted some investigation into their manufacturing processes and concluded that Shipping could save at least $2.20 in their variable costs if they changed equipment suppliers and put more advanced machinery in the new plant. a. Assuming Dave would still favour Brampton over London, what would Shipping's break- even point be now? b. What would their break- even point be if they had chosen London? Answer: a. 14 368 sets b. 10 345 sets (see spreadsheet 1.23) 55) Two brothers want to open a small neighbourhood bakery, where they will specialize in loaves of bread. They have carefully estimated their fixed costs to be $135 000 per year. This includes a salary of $42 500 for each brother. The facility they will use is a former pizza kitchen. One problem is that there is limited capacity, so there will be an upper limit on the number of loaves of bread they can produce. Baking 6 days a week, the brothers believe they can produce 150 loaves per day. The cost to them for each loaf is $0.65. They believe they will be able to sell all the bread they can bake. They plan to bake 312 days during the year. a. Given these projections, how much will the brothers have to charge per loaf to stay in business? b. Suppose they are willing to take a much lower salary to get their business started. If they each agreed to take only $30 000 per year, how much would they have to charge for their bread? Answer: a. Charge $3.53 per loaf. b. Charge $2.79 per loaf. (see spreadsheet 1.16) 56) Keith's Bakery sells pies for $6.00 each. The bakery incurs a daily fixed cost of $500 which includes salaries and rental. The variable cost per pie is $2.50. Compute the number of pies (X) that must be baked daily in order to break even. a. Model the problem mathematically without using Goal Seek. b. Use Goal Seek to compute the number of pies (X) that must be baked daily in order to break even if the variable cost per pie increases to $3.00. Answer: a. BEP = 143. b. Keith's new BEP point is 167 pies. (see spreadsheet 1.1)

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Ace Tennis Club has a total of 400 playing members, each paying $150 per semester to play. In addition to monies from membership fees, the club receives a government grant from the local municipality to sustain its activity. The first semester budget is $120 000; the club grant will be $480 000. 280 of the players have been members of the club for 3 years or more.

57) Sensing resistance from members to the idea of raising fees, one of the club's directors suggested that senior members could pay less, $120 per semester, if non-senior members pay more. What would the non-senior member fee be if Ace wanted to continue to plan for a $120 000 budget? Answer: Charge non- senior members $320. (see spreadsheet 1.3) Shipping Unlimited is studying the viability of setting up a new plant in Brampton, Ontario. Shipping produces boxes of a particular dimension that suit many companies in the food industry. Budgeting studies indicate that fixed costs would be around $125 000 for a facility that would suit their needs. Variable costs to produce one set of 20 boxes would be $8.50. They hope to be able to sell each set for as much as $15.00. 58) If Shipping sets up a plant in London, Ontario, instead, they would be able to bring their fixed costs down to $90 000. Given this new information, what should their production level be now to break even? Answer: 13 846 sets (see spreadsheet 1.22)
Ace Tennis Club has a total of 400 playing members, each paying $150 per semester to play. In addition to monies from membership fees, the club receives a government grant from the local municipality to sustain its activity. The first semester budget is $120 000; the club grant will be $480 000. 280 of the players have been members of the club for 3 years or more.

59) Another director believes that the most Ace can charge non-senior members for membership fees is $200, but also feels that $120 for senior members is appropriate. She suggests that another solution might be to cap non-senior member fees at $200, and attempt to recruit more non- senior members to make up the shortfall. Under this plan, how many members will need to be recruited? Answer: Recruit 72 more members for a total of 192 non-senior members. (see spreadsheet 1.4) The ThinkBig Company currently manufactures a product which sells for $1.30. The fixed costs associated with this operation are $18 000; the variable costs are $0.65 per unit on a volume of 35 000 units per month. They are considering new equipment which will increase the fixed costs to $26 000 and the variable costs to $0.75, but the demand is expected to increase to 55 000 units, so this option may be attractive. 60) The ThinkBig Company is now ready to purchase the new equipment. Two changes to the above plan include a price change to $1.45 per unit, and a revised demand forecast to 45 000 units. Given these circumstances, should the investment be made? Answer: Recommend to add new equipment and increase selling price. Profit will increase by $750. (see spreadsheet 1.18)

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Answer Key Testname: C1
1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11) 12) 13) 14) 15) 16) 17) 18) 19) 20) 21) 22) 23) 24) 25) 26) 27) 28) 29) 30) 31) D A D B A D C D D B B A D C B FALSE TRUE FALSE TRUE TRUE FALSE TRUE FALSE FALSE FALSE FALSE TRUE FALSE TRUE TRUE a. Machines are equivalent at 5.5 years. b. At 12 years choose machine two (save $24 375). (see spreadsheet 1.15) 6.57% (see spreadsheet 1.26) a. To break even, catch 180 kg per day. b. To save ($10 000/20) = $500, catch 305 kg/day. (see spreadsheet 1.10) a. A and B break even at 6000. b. B and C break even at 12 500. c. At 8000 units, choose B. d. At 12 900 units, choose C. (see spreadsheet 1.19) The McIvers would require extra savings of $9638 ($18 138 - $8500). (see spreadsheet 1.29)

32) 33)

34)

35)

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Answer Key Testname: C1
36) a. b. c. Lease the machine outright: monthly costs are $490 (less than $600). $490 Both systems cost the same for 16 333 copies per month. So, if there are fewer than 16 333 copies per month, pay per copy. If there are more than 16 333 copies per month, lease the machine. (see spreadsheet 1.9) 9.94 years (see spreadsheet 1.27) The uniform payment amount is $1186.98. (see spreadsheet 1.20) a. BEPA = 6500, BEPB = 4800 b. BEP$A = $208 000, BEP$B = $153 600 c. Choose B, because with A you lose $10 000. ProfitB = $10 500 d. Choose B, because there will be more profit ($40 500 as opposed to $10 000). (see spreadsheet 1.6) The new membership fee will have to be $180 or, the fee will have to be increased by $30 per semester. (see spreadsheet 1.2) a. To break even, sell 1200 shades per year. b. To profit $30 000, sell 3600 shades per year. (see spreadsheet 1.13) a. BEP = 16 250 b. BEP$ = $195 000 c. $31 000 (see spreadsheet 1.8) a. The break even point between the two systems is 4.94 years. b. At 4.94 years, both systems cost $2566. c. The difference in costs between the two systems at 20 years is $4745. (see spreadsheet 1.12) a = $18; new=$168, 1-y=$177, 2-y=$186, senior=$194 (see spreadsheet 1.5) Clean 104 rooms to break even. (see spreadsheet 1.14) Yes (see spreadsheet 1.30) $569 (see spreadsheet 1.28) No, there is still a shortfall of $7 000. (see spreadsheet 1.25) $0.30 (see spreadsheet 1.24) $265 (see spreadsheet 1.11) 19 231 sets (see spreadsheet 1.21) Do not buy the new equipment: Profit will decrease by $500. (see spreadsheet 1.17) At 1400 units, both machines are the same. (see spreadsheet 1.7)

37) 38) 39)

40) 41)

42)

43)

44) 45) 46) 47) 48) 49) 50) 51) 52) 53)

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Answer Key Testname: C1
54) a. 14 368 sets b. 10 345 sets (see spreadsheet 1.23) 55) a. Charge $3.53 per loaf. b. Charge $2.79 per loaf. (see spreadsheet 1.16) 56) a. BEP = 143. b. Keith's new BEP point is 167 pies. (see spreadsheet 1.1) 57) Charge non-senior members $320. (see spreadsheet 1.3) 58) 13 846 sets (see spreadsheet 1.22) 59) Recruit 72 more members for a total of 192 non-senior members. (see spreadsheet 1.4) 60) Recommend to add new equipment and increase selling price. Profit will increase by $750. (see spreadsheet 1.18)

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