Economics

Question 1 (5 points)

 

At QBE for a project, _______________________.

Question 1 options:

There is an indifference to accept or reject the project

Both accept and reject the project

Reject the project

Accept the project

Question 2 (5 points)

 

Direct labor and materials are examples of?

Question 2 options:a) 

Fixed Costs

b) 

Variable Cost per Unit

c) 

Variable Costs

d) 

Profit per unit

Question 3 (5 points)

 

Fixed costs/(Revenues - Variable costs) equals _________________.

Question 3 options:a) 

Variable Cost per Unit

b) 

QBE

c) 

Total Costs

d) 

Total Profit

Question 4 (5 points)

 

The fixed costs at Harley Motors are $1 million annually. The main product has revenue of $8.50 per unit and $4.25 variable cost. (a) Determine the breakeven quantity per year.

Question 4 options:a) 

125,296 units

b) 

235,294 units

c) 

294,175 units

d) 

335,250 units

Question 5 (5 points)

 

The fixed costs at Harley Motors are $1 million annually. The main product has revenue of $8.50 per unit and $4.25 variable cost. (b) Determine the annual profit if 350,000 units are sold.

Question 5 options:a) 

At 350,000 units; profit = $123,500

b) 

At 350,000 units; profit = $650,075

c) 

At 350,000 units; profit = $487,500

d) 

At 350,000 units; profit = $1,088,500

Question 6 (5 points)

 

A call center in India used by U.S. and U.K. credit card holders has a capacity of 1,400,000 calls annually. The fixed cost of the center is $775,000 with an average variable cost of $2 and revenue of $3.50 per call.

(a) Find QBE.

Question 6 options:a) 

525,000 calls per year

b) 

516,667 calls per year

c) 

522,672 calls per year

d) 

521,350 calls per year

Question 7 (5 points)

 

A call center in India used by U.S. and U.K. credit card holders has a capacity of 1,400,000 calls annually. The fixed cost of the center is $775,000 with an average variable cost of $2 and revenue of $3.50 per call.

(b) The center manager expects to dedicate the equivalent of 500,000 of the 1,400,000 capacity to a new product line. This is expected to increase the center’s fixed cost to $900,000, of which 50% will be allocated to the new product line. Determine the average revenue per call necessary to make 500,000 calls the breakeven point for only the new product.

Question 7 options:a) 

Avg. revenue = $2.90 per call

b) 

Avg. revenue = $4.35 per call

c) 

Avg. revenue = $2.50 per call

d) 

Avg. revenue = $3.15 per call

Question 8 (5 points)

 

An engineering firm can lease a measurement system for $1000 per month or purchase one for $15,000. The leased system will have no monthly maintenance cost, but the purchased one will cost $80 per month. At an interest rate of 0.5% per month, how many months must the system be required to break even?

Question 8 options:a) 

n is approximately 9 months

b) 

n is approximately 21 months

c) 

n is approximately 12 months

d) 

n is approximately 17 months

Question 9 (5 points)

 

Jeremy is evaluating the operational costs of the manufacturing processes for specific components of a wireless home security system. The same components are produced at plants in New York (NY) and Los Angeles (LA). The records for the last 3 years from NY report a fixed cost of $400,000 per year and a variable cost of $95 per unit in year 1, decreasing by $3 per unit per year. The LA reports indicate a fixed cost of $750,000 per year and a variable cost of $50 per unit, increasing by $4 per unit per year. If the trends continue, how many units must be produced in year 4 for the two processes break even?

Question 9 options:a) 

14,584 units

b) 

10,584 units

c) 

13,584 units

d) 

12,584 units

Question 10 (5 points)

 

Machine A has a fixed cost of $40,000 per year and a variable cost of $60 per unit. Machine B has an unknown fixed cost, but with this process 200 units can be produced each month at a total variable cost of $2000. If the total costs of the two machines break even at a production rate of 2000 units per year, what is the fixed cost of machine B?

Question 10 options:a) 

$140,000 per year

b) 

$160,000 per year

c) 

$130,000 per year

d) 

$150,000 per year

Question 11 (5 points)

 

Convert $10,000 present dollars into then-current dollars of year 10 if the inflation rate is 7% per year.

Question 11 options:a) 

$19,762

b) 

$19,672

c) 

$19,627

d) 

$19,276

Question 12 (5 points)

 

Convert $10,000 future dollars in year 10 into constant-value dollars (not equivalent dollars) of today if the inflation-adjusted (market) interest rate is 11% per year and the inflation rate is 7% per year.

Question 12 options:a) 

$0

b) 

$503.42

c) 

$5083.49

d) 

$15155.23

Question 13 (5 points)

 

Ford Motor Company announced that the price of its F-150 pickup trucks is going to increase by only the inflation rate for the next 2 years. If the current price of a truck is $21,000 and the inflation rate is expected to average 2.8% per year, what is the expected price of a comparably equipped truck 2 years from now?

Question 13 options:a) 

$22,192

b) 

$25,192

c) 

$12,192

d) 

$15,192

Question 14 (5 points)

 

Calculate the inflation-adjusted interest rate when the annualized inflation rate is 27% per year (Caracas, 2004) and the real interest rate is 4% per year.

Question 14 options:a) 

29.08% per year

b) 

32.08% per year

c) 

31.08% per year

d) 

30.08% per year

Question 15 (5 points)

 

What market interest rate per quarter would be associated with a quarterly inflation rate of 5% and a real interest rate of 2% per quarter?

Question 15 options:a) 

6.5% per quarter

b) 

8.3% per quarter

c) 

10.1% per quarter

d) 

7.1% per quarter