# word

Topics: Variance, Costs, Variable cost Pages: 4 (973 words) Published: April 22, 2015
﻿MAT540
Week 1 Homework
Chapter 1
1. The Retread Tire Company recaps tires. The fixed annual cost of the recapping operation is \$55,000.The variable cost of recapping a tire is \$8.The company charges \$21 to recap a tire. a. For an annual volume of 10,000 tires, determine the total cost, total revenue, and profit. TC=Cf+VCv = 55000 + 10000*8=55000+80000=\$135000

Vp=V*P=10 000*21=\$210 000
Z=VP-TC=210 000 – 135 000=\$75 000
b. Determine the annual break-even volume for the Retread Tire Company operation. V=Cf/(P-Cv)=55000/(21-8)=4230.77
2. Evergreen Fertilizer Company produces fertilizer. The company’s fixed monthly cost is \$30,000, and its variable cost per pound of fertilizer is \$0.16. Evergreen sells the fertilizer for \$0.40 per pound. Determine the monthly break-even volume for the company. Cf \$30 000

Cv \$0.16
P \$0.40
V=30 000/(0.40-0.16)=125 000
3. If Evergreen Fertilizer Company in Problem 2 changes the price of its fertilizer from \$0.40 per pound to \$0.60 per pound, what effect will the change have on the break-even volume? V=30 000/(0.60-0.16)=68181.82 change with 56818.18

4. If Evergreen Fertilizer Company increases its advertising expenditures by \$14,000 per year, what effect will the increase have on the break-even volume computed in Problem 2? 48 000/0.24=200 000, which is 75 000 increase

5. Annie McCoy, a student at Tech, plans to open a hot dog stand inside Tech’s football stadium during home games. There are seven home games scheduled for the upcoming season. She must pay the Tech athletic department a vendor’s fee of \$2,500 for the season. Her stand and other equipment will cost her \$3,100 for the season. She estimates that each hot dog she sells will cost her \$0.35. She has talked to friends at other universities who sell hot dogs at games. Based on their information and the athletic department’s forecast that each game will sell out, she anticipates that she will sell approximately 2,000 hot dogs during each game. a. What...