Bravo Community Hospital is a nonprofit hospital operated by the county. The hospital’s administrator is considering a proposal to open a new outpatient clinic in the nearby city of New Castle. The administrator has made the following estimates pertinent to the proposal.

1. Construction of the clinic building will cost $840,000 in two equal installments of $420,000, to be paid at the end of 20x0 and 20x1. The clinic will open on January 2, 20x2. All staffing and operating costs begin in 20x2.
2. Equipment for the clinic will cost $105,000, to be paid in December of 20x1.
3. Staffing of the clinic will cost $720,000 per year.
4. Other operating costs at the clinic will be $138,000 per year.
5. Opening the clinic is expected to increase charitable contributions to the hospital by $210,000 per year.
6. The clinic is expected to reduce costs at Allegheny Community Hospital. Annual cost savings at the hospital are projected to be $920,000.
7. A major refurbishment of the clinic is expected to be necessary toward the end of 20x5. This work will cost $135,000.
8. Due to shifting medical needs in the county, the administrator doubts the clinic will be needed after 20x9.
9. The clinic building and equipment could be sold for $210,000 at the end of 20x9.
10. The hospital’s hurdle rate is 12 percent.

Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.)

Required:

1. 1-3. Fill in the following table to compute the net present value of the proposed outpatient clinic.

2. 4. Should the administrator recommend to the hospital's trustees that the clinic be built? YES OR NO

Fill in the following table to compute the net present value of the proposed outpatient clinic. (Negative amounts should be indicated by a minus sign. Round your "Discount factors" to 3 decimal places.)

Required information [The following information applies to the questions displayed below.] Washington County’s Board of Representatives is considering the construction of a longer runway at the county airport. Currently, the airport can handle only private aircraft and small commuter jets. A new, long runway would enable the airport to handle the midsize jets used on many domestic flights. Data pertinent to the board’s decision appear below. Cost of acquiring additional land for runway $ 82,500 Cost of runway construction 280,000 Cost of extending perimeter fence 19,908 Cost of runway lights 45,000 Annual cost of maintaining new runway 22,500 Annual incremental revenue from landing fees 57,500 In addition to the preceding data, two other facts are relevant to the decision. First, a longer runway will require a new snowplow, which will cost $180,000. The old snowplow could be sold now for $18,000. The new, larger plow will cost $16,000 more in annual operating costs. Second, the County Board of Representatives believes that the proposed long runway, and the major jet service it will bring to the county, will increase economic activity in the community. The board projects that the increased economic activity will result in $94,000 per year in additional tax revenue for the county. In analyzing the runway proposal, the board has decided to use a 10-year time horizon. The county’s hurdle rate for capital projects is 18 percent. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) In analyzing the runway proposal, the board has decided to use a 10-year time horizon. The county’s hurdle rate for capital projects is 18 percent. The County Board of Representatives believes that if the county conducts a promotional effort costing $28,000 per year, the proposed long runway will result in substantially greater economic development than was projected originally. However, the board is uncertain about the actual increase in county tax revenue that will result. Required: Suppose the board builds the long runway and conducts the promotional campaign. What would the increase in the county’s annual tax revenue need to be in order for the proposed runway’s internal rate of return to equal the county’s hurdle rate of 18 percent? (Round intermediate and final answer to the nearest dollar amount.)

Fender Construction Company receives a contract to construct a building over a period of 3 years for a price of $700,000. The contract represents a single performance obligation that will be satisfied over time. Information relating to the performance of the contract is summarized as follows:

Required:

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EBIT Sensitivity   Stewart Industries sells its finished product for $9.88 per unit. Its fixed operating costs are $20,500​, and the variable operating cost per unit is $5.97.

a. Calculate the​ firm's earnings before interest and taxes​ (EBIT) for sales of 12,000 units.

b. Calculate the​ firm's EBIT for sales of 11,000 and 13,000 ​units, respectively.

c. Calculate the percentage changes in sales​ (from the 12,000​-unit base​ level) and associated percentage changes in EBIT for the shifts in sales indicated in part ​(b​).

d. On the basis of your findings in part ​(c​),

comment on the sensitivity of changes in EBIT in response to changes in sales.

Hardhat has a contract to construct a $5,000,000 bridge at an estimated cost of $4,000,000. The

contract is to start in 2016 and will be completed in 2018. Below is the data for 2016-18:

2016                          2017                         2018

Costs to date                                               1,000,000 2,900,000                 4,100,000

Est. costs to complete                              3,000,000                 1,200,000 -

Progress billings during year                   900,000                    2,400,000                 1,700,000

Cash collected during year                      750,000                    2,250,000                 2,000,000

Compute the percentage of completion, and record the journal entries to recognize revenue,

expenses, and gross profit for 2016-18 using the percentage of completion method (Do not

record journal entries for costs incurred, progress billings, and cash collected during 2016-18)?

1. If wage decreases relative to the price capital, then the effects of this on the demand for capital is inconclusive.

   True

   False

1.5 points   

QUESTION 19

1. Assume that labor and capital are imperfect substitutes. Then the marginal rate of technical substitution (MRTS) of an isoquant is decreasing.

   True

   False

1. According to the substitution effect, an increase in the wage will increase the marginal cost of production, leading to an increase in output.

   True

   False

1.5 points   

QUESTION 16

1. If demand for labor is inelastic, then the percentage change in wage is less than the percentage change in employment.

   True

   False

1.5 points   

QUESTION 17

1. The initial effect from technological change is to reduce the demand for labor.

   True

   False

The owner of Brooklyn Restaurant is disappointed because the restaurant has been averaging 7,500 pizza sales per​ month, but the restaurant and wait staff can make and serve 10,000 pizzas per month. The variable cost​ (for example,​ ingredients) of each pizza is$1.55.Monthly fixed costs​ (for example,​ depreciation, property​ taxes, business​ license, and​ manager's salary) are $12,000 per month. The owner wants cost information about different volumes so that some operating decisions can be made.

Read the requirements

Requirement 1. Use the chart below to provide the owner with the cost information. Then use the completed chart to help you answer the remaining questions. ​(Enter total variable costs to the nearest dollar. Enter costs per​ pizza, price per​ pizza, and profit per pizza to the nearest​ cent.)

2.

Requirement 2. From a cost​ standpoint, why do companies such as

Brooklyn

Restaurant want to operate near or at full​ capacity?

Companies want to run at full capacity to better utilize the resources they spend on ▼(average, fixed ,variable costs.) The more units they​ produce, the▼( higher, lower )the▼( average fixed ,average variable, fixed, variable) cost per unit.

Requirement 3. The owner has been considering ways to increase the sales volume. The owner thinks that 10,000 pizzas could be sold per month by cutting the selling price per pizza from $6.25 a pizza to $5.75.

How much extra profit​ (above the current​ level) would be generated if the selling price were to be​ decreased? (Hint: Find the​ restaurant's current monthly profit and compare it to the​ restaurant's projected monthly profit at the new sales price and​ volume.)

Identify the profit formula and compute the monthly profit at the current and the new volume.

Lovell Computer Parts Inc. is in the process of setting a selling price on a new component it has just designed and developed. The following cost estimates for this new component have been provided by the accounting department for a budgeted volume of 52,000 units.

Per Unit Total Direct materials $45

Direct labor $21

Variable manufacturing overhead $15

Fixed manufacturing overhead $624,000

Variable selling and administrative expenses $17

Fixed selling and administrative expenses $468,000

Lovell Computer Parts management requests that the total cost per unit be used in cost-plus pricing its products. On this particular product, management also directs that the target price be set to provide a 26% return on investment (ROI) on invested assets of $1,000,000.

Compute the markup percentage and target selling price that will allow Lovell Computer Parts to earn its desired ROI of 26% on this new component. & Assuming that the volume is 41,600 units, compute the markup percentage and target selling price that will allow Lovell Computer Parts to earn its desired ROI of 26% on this new component.

Lovell Computer Parts Inc. is in the process of setting a selling price on a new component it has just designed and developed. The following cost estimates for this new component have been provided by the accounting department for a budgeted volume of 50,000 units.

Lovell Computer Parts management requests that the total cost per unit be used in cost-plus pricing its products. On this particular product, management also directs that the target price be set to provide a 25% return on investment (ROI) on invested assets of $1,000,000.

1.Compute the markup percentage and target selling price that will allow Lovell Computer Parts to earn its desired ROI of 25% on this new component.

2. Assuming that the volume is 41200 units, compute the markup percentage and target selling price that will allow Lovell computer parts to ear its desired ROI of 25% on this new component.

Question 2 25 Marks

The percentage of completion method (based on costs) is used to calculate profit on contracts, but only once contracts are 30% or completed or more.

REQUIRED:

2.1 Discuss the difference between the Work Certified Method and the Percentage of C0mpletion method. (6)

2.2 Calculate the profit/loss that can be brought into account for the financial period under review for each of the contracts in the records of Ovitoto Concrete Investment Cc. (19 . the table to use is below