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MAT540 Homework Week 1 Page 1 of 3 MAT540 Week 1 Homework Chapter 1 1. The Retread Tire Company recaps tires. The fixed annual cost of the recapping...
Chapter 11. The Retread Tire Company recaps tires. The fixed annual cost of the recapping operation is$65,000. The variable cost of recapping a tire is $7.5. The company charges$25 to recap a tire.a. For an annual volume of 15, 000 tire, determine the total cost, total revenue, and profit.b. Determine the annual break-even volume for the Retread Tire Company operation.2. Evergreen Fertilizer Company produces fertilizer. The company’s fixed monthly cost is $25,000,and its variable cost per pound of fertilizer is $0.20. Evergreen sells the fertilizer for $0.45 perpound. Determine the monthly break-even volume for the company.3. If Evergreen Fertilizer Company in problem 2 changes the price of its fertilizer from $0.45 perpound to $0.55 per pound, what effect will the change have on the break-even volume?4. If Evergreen Fertilizer Company increases its advertising expenditure by $10,000 per year, whateffect will the increase have on the break-even volume computed in problem 2?5. Annie McCoy, a student at Tech, plans to open a hot dog stand inside Tech’s football stadiumduring home games. There are 6 home games scheduled for the upcoming season. She must pay theTech athletic department a vendor’s fee of $3,000 for the season. Her stand and other equipmentwill cost her $3,500 for the season. She estimates that each hot dog she sells will cost her $0.40. shehas talked to friends at other universities who sell hot dogs at games. Based on their informationand the athletic department’s forecast that each game will sell out, she anticipates that she will sellapproximately 1,500 hot dogs during each game.a. What price should she charge for a hot dog in order to break even?b. What factors might occur during the season that would alter the volume sold and thus thebreak-even price Annie might charge?6. The college of business at Kerouac University is planning to begin an online MBA program. Theinitial start-up cost for computing equipment, facilities, course development and staff recruitmentand development is $400,000. The college plans to charge tuition of $20,000 per student per year.However, the university administration will charge the college $10,000 per student for the first 100students enrolled each year for administrative costs and its share of the tuition payments.a. How many students does the college need to enroll in the first year to break-even?b. If the college can enroll 80 students the first year, how much profit will it make?
