Exam
Name___________________________________
SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.
Answer the question.
1) Minuteman Manufacturing is considering upgrading a piece of equipment. If a certain 1)
upgrade helps reduce operating costs by $80 per hour of use, and the upgraded
equipment will be used on average 7 hours per day, what is the expected annual savings
of upgrading the equipment over its remaining life of 8 years? What other factors do
you need to take into consideration to justify the decision to upgrade the equipment?
Assume 360 working days in a year.
2) You are given $7700 as a graduation gift and you are looking into two high interest 2)
investment options. The first option is a bond with a maturity date three years from
now that offers 12.25 % per year interest, payable annually. The interest can be
withdrawn only at the end of year 3. Another option is a tax-free market savings
account that offers 11.5 % per year interest, and the funds can be withdrawn any time
after 2 years. Which is a better alternative on the basis of total interest paid at the end of
year 3? Discuss other factors, in addition to interest rates, that should be taken into
consideration to justify your investment decision.
3) Linda is considering using solar power for her new house. The solar panel that she is 3)
looking into contains four cells and can generate 80 milliwatts per square inch for 6
hours on an average day. Assume that all appliances she wants to power with solar
electricity consume on average 900 watts per hour. The solar panel she is looking into
costs around $73 per square feet plus additional costs of $600 for accessories and
installation and will last for 6 years. Alternatively, she can purchase from the power
grid at 44 cents per 100 watt-hours per day. Should Linda use the solar power system?
4) Tahiti Manufacturing recently purchased a new machine. The maintenance contractor 4)
recommended that this model should receive maintenance every 3,000 -6,000 hours of
operation. If each maintenance check costs $220 and the machine is expected to provide
30,000 hours of service, what is the total savings of scheduling maintenance every 6,000
hours over 3,000 hours?
5) A company is considering two types of water heaters. The associated costs are shown 5)
below. The estimated annual cost of operation for oil heaters equals 365 x 41045/EF x
Fuel Cost per Btu. The estimated annual cost of operation for electric heaters equals 365
x 12.03/EF x Electricity Cost per kWh. How much money could be saved each year if
the company used an oil heater?
Alternative Electricity Oil
Price of water heater $39,000 $36,000
EF 2.05 1.7
$0.0000064/Bt
Fuel cost $0.095 /kWh u
Annual maintenance costs $1000 $500
1
,Answer Key
Testname: UNTITLED1
1) $201,600
Examples of other factors to be taken under consideration include the cost of the upgrade, the salvage value of the
upgraded equipment, etc.
2) 1st option: Interest = $3190.55
2nd option: Interest = $2973.71
The 1st option is better on the basis of interest paid.
Other factors that should be taken under consideration include whether the fund is left in the 2nd option at the end
of year 2, the tax rate, other investment opportunities that the fund can be invested in after the end of year 2 that
would yield higher return, etc.
3) The solar panel costs = $23,412.50
In the course of 6 years, the cost of electricity from the power grid = $208,137.60
Linda should use the solar power system.
4) $1100
5) $647.08
2
,Exam
Name___________________________________
SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.
Answer the question.
1) A $38,000 coil winding and unwinding machine is estimated to provide additional 1)
value to production by $15 per unit. When the machine is operated at 58 units per hour,
it needs to be cooled down after 4 hours of operation and receive minor maintenance for
15 minutes. When the machine is operated at 118 units per hour, it needs to be cooled
down after 5 hours of operation and receive minor maintenance for 30 minutes. The
production line runs 8 hours per day. If each maintenance check costs $625 and the
machine has a useful life of 80,000 hours of operations, at what speed should the
machine should be operated?
2) You are deciding between three types of water heaters. The associated costs are shown 2)
below. The annual cost of operation for gas and oil heaters is estimated by 365 x
41045/EF x Fuel Cost per Btu, and the annual cost of operation for electric water heaters
is estimated by 365 x 12.03/EF x Electricity Cost per kWh. The selected heater will be
used for only one year and then sold at the market value. Which alternative should be
selected?
Alternative Electric Gas Oil
Price of water heater $28,000 $23,000 $25,000
EF 2.0 0.57 0.75
Fuel cost $0.1/kWh $0.00001/Btu $0.00001/Btu
Annual maintenance costs $3000 $2200 $2500
Market value $25,200 $20,700 $22,500
3) A garment manufacturing company makes 380,000 articles per year. Each article takes 3)
95 minutes of direct labor at the rate of $9.00 per hour. The overhead costs are $7.50 per
direct labor hour. The average price of the finished product is $80 per article. A new
machine will reduce the direct labor hour by 15 minutes per article. What is the
maximum amount the company should pay for the new machine if it wants to break
even by the end of the first year?
4) A local cable company has a fixed cost of $7400 per month and variable costs of $50 per 4)
month per subscriber. If the company charges on average $110 per month to its
customers, find the breakeven point in terms of subscribers per month for the company.
5) A company estimates its annual expenses, Y, in dollars from Y = 0.235 X 2 + 7X + 4 and 5)
annual revenue in dollars from 0.215 X 2 + 15 X, where X is annual units sold. Find the
value of X that gives maximum profit.
6) The annual fixed cost for an inspecting and profiling web controller manufacturing 6)
company are $44,000 , and the variable costs are $38 per unit. If the selling price per unit
is p = 495 - 0.57X, what is the company's range of profitable demand?
1
, 7) The annual fixed cost for a light fixture manufacturing company are $38,000 , and the 7)
variable costs are $40 per unit. If the selling price per unit is p = 485 - 1.395 X, what is
the optimum demand for a light fixture?
8) An accounting and management consulting firm charge -out rate is $112 per hour. The 8)
maximum output is 214,000 hours per year. The fixed cost is $610,000 per year and the
variable cost is $ 62 per standard service hour. What is the breakeven point in
percentage of total capacity?
9) A headhunter company has fixed costs of $57,000 per month and variable costs of $1000 9)
per customer account. The company currently charges $1150 per month for each
account and has 38,000 accounts. It wants to raise the monthly fee to $1160.55 to cover
enhanced features such as a new web interface and a newly acquired database, which
increases the variable cost by 9 percent. What is the new breakeven point in number of
accounts?
10) The cost for operating a commercial truck is knv 1/2, where k is a constant of 10)
proportionally, v is velocity in miles per hours, and n is the trip length in miles. It is
estimated that at 85 mph, the average cost of operation is $52 per mile. The truck owner
wants to minimize the cost of operation, which needs to balance against the cost of
delays and unscheduled maintenance, which is assumed to be $10 per hour. What is the
optimum velocity needed to minimize the total costs?
11) A manufacturing company leases a machine for $31,000 per year. Each unit produced 11)
costs $36 in labor and $65 in materials. To break even, 21,000 units must be sold. What
is the price of the product?
12) A manufacturing plant is planning to replace outdated equipment with more 12)
energy-efficient and environmental-friendly equipment. Two models are under
consideration. Model A is sold for $159,000 and can produce at an optimum speed of 78
unit/hour. Model B is sold for the same price, but can produce at an optimum speed of
76 unit/hour. Model A requires 6 hours of maintenance for every 4300 units produced,
while Model B requires 5 hours of maintenance for every 3300 units. The maintenance
cost for both models is $100 per hour. The variable operating cost is $340 per hour for
Model A and $290 per hour for Model B. Due to obsolete parts, there is a sunk cost of
$2700 for model A and $1900 for Model B . If the price of the product is $150 per unit
and the company expects to sell 145,000 units each year, which model should be
selected?
2
Name___________________________________
SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.
Answer the question.
1) Minuteman Manufacturing is considering upgrading a piece of equipment. If a certain 1)
upgrade helps reduce operating costs by $80 per hour of use, and the upgraded
equipment will be used on average 7 hours per day, what is the expected annual savings
of upgrading the equipment over its remaining life of 8 years? What other factors do
you need to take into consideration to justify the decision to upgrade the equipment?
Assume 360 working days in a year.
2) You are given $7700 as a graduation gift and you are looking into two high interest 2)
investment options. The first option is a bond with a maturity date three years from
now that offers 12.25 % per year interest, payable annually. The interest can be
withdrawn only at the end of year 3. Another option is a tax-free market savings
account that offers 11.5 % per year interest, and the funds can be withdrawn any time
after 2 years. Which is a better alternative on the basis of total interest paid at the end of
year 3? Discuss other factors, in addition to interest rates, that should be taken into
consideration to justify your investment decision.
3) Linda is considering using solar power for her new house. The solar panel that she is 3)
looking into contains four cells and can generate 80 milliwatts per square inch for 6
hours on an average day. Assume that all appliances she wants to power with solar
electricity consume on average 900 watts per hour. The solar panel she is looking into
costs around $73 per square feet plus additional costs of $600 for accessories and
installation and will last for 6 years. Alternatively, she can purchase from the power
grid at 44 cents per 100 watt-hours per day. Should Linda use the solar power system?
4) Tahiti Manufacturing recently purchased a new machine. The maintenance contractor 4)
recommended that this model should receive maintenance every 3,000 -6,000 hours of
operation. If each maintenance check costs $220 and the machine is expected to provide
30,000 hours of service, what is the total savings of scheduling maintenance every 6,000
hours over 3,000 hours?
5) A company is considering two types of water heaters. The associated costs are shown 5)
below. The estimated annual cost of operation for oil heaters equals 365 x 41045/EF x
Fuel Cost per Btu. The estimated annual cost of operation for electric heaters equals 365
x 12.03/EF x Electricity Cost per kWh. How much money could be saved each year if
the company used an oil heater?
Alternative Electricity Oil
Price of water heater $39,000 $36,000
EF 2.05 1.7
$0.0000064/Bt
Fuel cost $0.095 /kWh u
Annual maintenance costs $1000 $500
1
,Answer Key
Testname: UNTITLED1
1) $201,600
Examples of other factors to be taken under consideration include the cost of the upgrade, the salvage value of the
upgraded equipment, etc.
2) 1st option: Interest = $3190.55
2nd option: Interest = $2973.71
The 1st option is better on the basis of interest paid.
Other factors that should be taken under consideration include whether the fund is left in the 2nd option at the end
of year 2, the tax rate, other investment opportunities that the fund can be invested in after the end of year 2 that
would yield higher return, etc.
3) The solar panel costs = $23,412.50
In the course of 6 years, the cost of electricity from the power grid = $208,137.60
Linda should use the solar power system.
4) $1100
5) $647.08
2
,Exam
Name___________________________________
SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.
Answer the question.
1) A $38,000 coil winding and unwinding machine is estimated to provide additional 1)
value to production by $15 per unit. When the machine is operated at 58 units per hour,
it needs to be cooled down after 4 hours of operation and receive minor maintenance for
15 minutes. When the machine is operated at 118 units per hour, it needs to be cooled
down after 5 hours of operation and receive minor maintenance for 30 minutes. The
production line runs 8 hours per day. If each maintenance check costs $625 and the
machine has a useful life of 80,000 hours of operations, at what speed should the
machine should be operated?
2) You are deciding between three types of water heaters. The associated costs are shown 2)
below. The annual cost of operation for gas and oil heaters is estimated by 365 x
41045/EF x Fuel Cost per Btu, and the annual cost of operation for electric water heaters
is estimated by 365 x 12.03/EF x Electricity Cost per kWh. The selected heater will be
used for only one year and then sold at the market value. Which alternative should be
selected?
Alternative Electric Gas Oil
Price of water heater $28,000 $23,000 $25,000
EF 2.0 0.57 0.75
Fuel cost $0.1/kWh $0.00001/Btu $0.00001/Btu
Annual maintenance costs $3000 $2200 $2500
Market value $25,200 $20,700 $22,500
3) A garment manufacturing company makes 380,000 articles per year. Each article takes 3)
95 minutes of direct labor at the rate of $9.00 per hour. The overhead costs are $7.50 per
direct labor hour. The average price of the finished product is $80 per article. A new
machine will reduce the direct labor hour by 15 minutes per article. What is the
maximum amount the company should pay for the new machine if it wants to break
even by the end of the first year?
4) A local cable company has a fixed cost of $7400 per month and variable costs of $50 per 4)
month per subscriber. If the company charges on average $110 per month to its
customers, find the breakeven point in terms of subscribers per month for the company.
5) A company estimates its annual expenses, Y, in dollars from Y = 0.235 X 2 + 7X + 4 and 5)
annual revenue in dollars from 0.215 X 2 + 15 X, where X is annual units sold. Find the
value of X that gives maximum profit.
6) The annual fixed cost for an inspecting and profiling web controller manufacturing 6)
company are $44,000 , and the variable costs are $38 per unit. If the selling price per unit
is p = 495 - 0.57X, what is the company's range of profitable demand?
1
, 7) The annual fixed cost for a light fixture manufacturing company are $38,000 , and the 7)
variable costs are $40 per unit. If the selling price per unit is p = 485 - 1.395 X, what is
the optimum demand for a light fixture?
8) An accounting and management consulting firm charge -out rate is $112 per hour. The 8)
maximum output is 214,000 hours per year. The fixed cost is $610,000 per year and the
variable cost is $ 62 per standard service hour. What is the breakeven point in
percentage of total capacity?
9) A headhunter company has fixed costs of $57,000 per month and variable costs of $1000 9)
per customer account. The company currently charges $1150 per month for each
account and has 38,000 accounts. It wants to raise the monthly fee to $1160.55 to cover
enhanced features such as a new web interface and a newly acquired database, which
increases the variable cost by 9 percent. What is the new breakeven point in number of
accounts?
10) The cost for operating a commercial truck is knv 1/2, where k is a constant of 10)
proportionally, v is velocity in miles per hours, and n is the trip length in miles. It is
estimated that at 85 mph, the average cost of operation is $52 per mile. The truck owner
wants to minimize the cost of operation, which needs to balance against the cost of
delays and unscheduled maintenance, which is assumed to be $10 per hour. What is the
optimum velocity needed to minimize the total costs?
11) A manufacturing company leases a machine for $31,000 per year. Each unit produced 11)
costs $36 in labor and $65 in materials. To break even, 21,000 units must be sold. What
is the price of the product?
12) A manufacturing plant is planning to replace outdated equipment with more 12)
energy-efficient and environmental-friendly equipment. Two models are under
consideration. Model A is sold for $159,000 and can produce at an optimum speed of 78
unit/hour. Model B is sold for the same price, but can produce at an optimum speed of
76 unit/hour. Model A requires 6 hours of maintenance for every 4300 units produced,
while Model B requires 5 hours of maintenance for every 3300 units. The maintenance
cost for both models is $100 per hour. The variable operating cost is $340 per hour for
Model A and $290 per hour for Model B. Due to obsolete parts, there is a sunk cost of
$2700 for model A and $1900 for Model B . If the price of the product is $150 per unit
and the company expects to sell 145,000 units each year, which model should be
selected?
2
