Perform an incremental analysis of the two finalist projects using the data provided below.

The company uses a MARR of 10% and depreciates its assets using 7-year MACRS. The company’s effective income tax rate is 25%.

Project 1: Milling machines Equipment cost: Two (2) machines that each cost $380,000 including trade-in allowance and sales tax. The total cost of the freight and handling is expected to be $25,000. The total cost to install the machines is $30,000. Total testing and startup costs to place the machines into service are estimated to be $32,000. Useful life: 8 years. It is estimated that the machines can be sold for a total of $105,000 at the end of the project.

Each machine requires one operator at a time at a rate of $32.00 per hour. The plant operates 4080 hours per year. Total maintenance labor costs are estimated to be 20% of operating hours at $22.00 per hour. Total annual direct materials are estimated at $290,000. Manufacturing overhead exclusive of depreciation is expected to be an additional $270,000 per year.

Revenues are expected to be $1,025,000 each year as a result of this project. The project would run for 8 years.

Project 2: Painting Line Equipment cost: $315,000 including trade-in allowance and sales tax. The total cost for freight and handling is expected to be $15,000. The total cost to install the line is $35,000. Testing and startup costs to place the line in service are estimated to be $24,000. Useful life: 8 years. It is estimated that the line can be sold for a total of $70,000 at the end of the project.

The line requires one operator at a time a rate of $30.00 per hour and one helper at a time at a rate of $19.75 per hour. The plant operates 4080 hours per year. Total annual direct materials are estimated at $150,000. Maintenance labor costs are estimated to be 20% of operating hours at $19.00 per hour. Manufacturing overhead exclusive of depreciation is expected to be $220,000 per year.

Revenues are expected to be $635,000 for the first year as a result of the project and are expected to increase by 2% each year throughout the project. The project would run for 8 years.

Plastics, Inc. and Joe's Canoe Shack both operate businesses located on the river. Plastics, Inc. dumps pollution into the river, which results in fewer canoe rentals for Joe. The marginal cost of cleaning up the pollution is $20,000 for Plastics, Inc. Joe estimates a reduction in pollution will lead to a marginal benefit of $13,000.

a. If Joe owns the rights to the river, which of the following is the most likely outcome?

Below is a set of projects aimed at cleaning up a city's recreational areas. Determine whether the city should undertake the cleanup effort. Assume the city has enough money in its budget to undertake all projects.

• Plastics will use its property rights to continue polluting.

• Plastics will pay Joe $17000 to pollute.

• Joe will pay Plastics $17000 not to pollute.

• Joe will enforce his property rights and not allow Plastics to pollute.

b. If Plastics, Inc. owns the rights to the river, which of the following is the most likely outcome?

• Joe will enforce his property rights and not allow Plastics to pollute.

• Joe will pay Plastics $17000 not to pollute.

• Plastics will use its property rights to continue polluting.

• Plastics will pay Joe $17000 to pollute.

ABC hotel has 200 rooms and has a policy to determine its room rates based on consumers capacity to pay. For example busniess clients pay $1,200 per night and group tours $900 per night. The incremental cost of servicing a room is worked out at $110 per room. On average, most guest stay for three (3) nights. Rooms division manager is trying to establish if four (4) week advance reservation should be taken for a group booking of 40 rooms and three (3) nights of 7th , 8th and 9th June 2018. According to the reservation record, 80 rooms for the three (3) nights of 7th , 8th , and 9th , June 2018 are already booked by various business clients, and the historical trends of the past four (4) years suggest that 90% of the remaing 120 rooms would be sold to other busniess clients. Your are required to a) Prepare a detailed recommendation document explaining the important facts and figures to support if the group tour booking of 40 rooms for three (3) nights, of 7th , 8th and 9th June 2018 should be accepted or rejected while considering the revenue maximisation, effect of revpar, incremental and relevant cost in preparing the recommendation documents b) In the highly competitive environment, tourism and hospitality busniess can aspire to optimise revenue for the long term survival. Discuss various pricing strategies and their effect on tourism and hospitality businesses as a whole focus on the pricing strategy in tourism and hospitality business and highlight their strengths and weaknesses as reported in the published literature.

Reflect on the concepts and differences between benefit, marginal benefit, cost, and marginal cost. We have applied these ideas to several scenarios: tax rates, how many employees should a firm hire, and how many years of education should an individual pursuit. Outside of the examples we have discussed, describe an application of the ideas of marginal benefit/cost to a situation in your personal or professional life. Clearly explain the difference between total benefit and marginal benefit and total cost and marginal cost in the context of your example.

5. Leontief...again Suppose that a firm’s fixed proportion production function is given by q(k, l) = min(5k, l)

(a) Calculate the firm’s long-run total, average, and marginal cost functions.

(b) Suppose that k is fixed at 10 in the short run. Calculate the firm’s short-run total, average, and marginal cost functions.

(c) Suppose v = 1 (cost of capital) and w = 3 (cost of labor). Calculate this firm’s long-run and short-run average and marginal cost curves.

In a perfectly competitive industry, the market price is $25. A firm is currently producing 10,000 units of output, its average total cost is $28, its marginal cost is $20, and its average variable cost is $20. Given these facts, explain whether the following statements are true or false:

a. The firm is currently producing at the minimum average variable cost

b. The firm should produce more output to maximize its profit

c. Average total cost will be less than $28 at the level of output that maximizes the firm's profit.

Annual manufacturing cost data (1000s) for four product lines are as follows:

Rank the product lines from lowest to highest in terms of manufacturing cost per unit. Total indirect costs of $10,8 million are allocated based on total direct cost. (Please show work)

The crop seed market for commercially produced plants such as corn, cotton, soybean, canola, etc. used to be close to perfectly competitive before the 90s. As will be explained in the next question this market got less and less competitive since then.

For this question, consider a seed producer in Washington State in 1985 selling corn seeds. Suppose this company is making economic losses.

a. How does the price of corn seeds compare to the average total cost and the average variable cost of producing corn seeds in the short run? Draw the cost curves (average total cost, average variable cost, and the marginal cost) of this representative firm and the price of corn seeds to illustrate its situation in the short run?

b. Now suppose there is a positive demand shock for corn (ie: demand for corn increases) and so the price of corn seeds goes up. The corn seed producer in part-a begins making an economic profit. Draw the cost curves (average total cost, average variable cost, and the marginal cost) of this representative firm and the price of corn seeds to illustrate its new situation?

c. Now that the corn seed producer from part-a is making a profit, what will happen to the corn seed market in the long run? What will happen to the economic profit of an individual corn seed producer? What will happen the quantity supplied by each firm in this market (increase, decrease or ambiguous change?) and the total quantity supplied in the market?

On the basis of the following data, determine the value of the inventory at the lower of cost or market. Assemble the data in the form illustrated in Exhibit 9.

Periodic Inventory by Three Methods; Cost of Merchandise Sold

The units of an item available for sale during the year were as follows:

There are 80 units of the item in the physical inventory at December 31. The periodic inventory system is used.

Determine the inventory cost and the cost of merchandise sold by three methods. Round interim calculations to one decimal and final answers to the nearest whole dollar.