M6 In the short run, a firm should expand the use of a variable input until a. Its marginal product is zero. b. Its marginal revenue product is zero. c. Its marginal revenue product is at a maximum. d. Its marginal revenue product equals the input’s marginal cost. e. None of the above answers is correct. M7 Firm X sells output at P = $4 per unit and pays labor a wage of $20 per hour. The marginal product of labor is given by: MPL = 30 - .1L. The profit-maximizing quantity of labor is: a. L = 100 hours. b. L = 180 hours. c. L = 250 hours. d. L = 300 hours. e. L = 320 hours. M8 In the long run, do firms face trade-offs in how they produce? f. No, they have fully adjusted to all relevant factors; there are no more trade-offs. g. No, their options to modify production are limited. h. Yes, but the trade-offs only involve fixed inputs. i. Yes, because they have the maximum flexibility to trade off inputs. j. Yes, but only when there is a major change in technology. M9 In the long run, the firm produces a given level of output at least cost by a. Equating the ratios of marginal products to input prices across all inputs. b. Ensuring equality of marginal products across inputs. c. Using a greater proportion of the cheaper input. d. Intensively applying more and more labor to its fixed plant. e. None of these answers is correct. M10: Which of the following is likely to be a cause of increasing returns to scale? a. A change to production methods not feasible at low levels of output. b. Increased specialization of labor. c. A one-time fall in labor costs. d. Answers a and b are both correct. e. Answers a, b, and c are all correct. M11 Under constant returns to scale, a. A given percentage change in one input implies an equal change in total output. b. A given percentage change in all inputs implies constant marginal products for all inputs. c. A given percentage change in all inputs causes an equal percentage change in output. d. The production function varies linearly with all inputs. e. A constant level of output is achieved with various combinations of inputs. M12 In the long-run, a profit-maximizing firm produces such that a. The marginal products of all inputs are zero. b. The ratios of marginal products to input prices are equal across all inputs. c. Each input’s marginal revenue product equals the input’s marginal cost. d. Marginal products are equal for all inputs. e. Both b and c are correct. M13 The slope of an isoquant is referred to as the a. Marginal efficiency of production. b. Marginal product of each input. c. Marginal rate of technical substitution. d. Marginal rate of factor efficiency. e. Ratio of input prices.

QUESTION 5

1. The owner of a leased property conveys possession of the property to the tenant providing them with uninterrupted us of the property without interference from the owner. This is known as

   		consideration
   		quiet enjoyment
   		sole use
   		tenant improvement

QUESTION 6

1. _________ property leases contain a clause that indicates the purpose for which a space may be used.

   		residential
   		commercial
   		rural
   		suburban

QUESTION 7

1. For apartment leases, what is the industry standard for the lease term?

   		6 months
   		1 year
   		2 years
   		there is no industry standard

QUESTION 8

1. The _______ is the amount a landlord agrees to spend to build out or refurbish the space to meet the needs of the tenant's business.

   		tenant concessions
   		owner consideration
   		tenant improvement allowance
   		expense stop

QUESTION 9

1. Rent for U.S. commercial properties is typically quoted as a(n)

   		dollar amount per month
   		dollar amount per year
   		monthly cost per square foot
   		Annual cost per square foot

QUESTION 10

1. The amount paid by retail tenants in percentage leases regardless of the level of the sales generated by the tenant's business is

   		flat rent
   		base rent
   		percentage rent
   		graduated rent

QUESTION 11

1. Shopping center leases often include a clause that ties total rent payments to the tenant's sales revenue. This type of rent is known as

   		flat rent
   		base rent
   		percentage rent
   		graduated rent

QUESTION 12

1. Rent that has specified increases over the term of the lease is called

   		flat rent
   		base rent
   		percentage rent
   		graduated rent

QUESTION 13

1. A lease in which the owner pays all of the property's operating expenses is called a

   		net lease
   		gross lease
   		net net lease
   		triple net lease

QUESTION 14

1. A lease in which the tenant pays the property taxes and insurance is called a

   		net lease
   		gross lease
   		net net lease
   		triple net lease

QUESTION 15

1. In which type of lease is the tenant responsible for all operating expenses?

   		net lease
   		gross lease
   		net net lease
   		triple net lease

QUESTION 16

1. Which of the following would typically be considered an operating expense controllable by the owner?

   		general maintenance
   		property taxes
   		insurance payments
   		utility expenses

QUESTION 17

1. Lease clauses that reduce the cost of the lease to the tenant and therefor provide an incentive for the tenant to lease the space are called

   		common area clauses
   		concessions
   		alterations
   		assignments

QUESTION 18

1. When ALL of a tenant's rights and obligations are transferred to another party, what has occurred?

   		sublease
   		lease option
   		lease renewal
   		lease assignment

QUESTION 19

1. Lease clause that gives the tenant the right, but not the obligation, to renew the lease.

   		cancelation option
   		renewal option
   		expansion option
   		lease option

QUESTION 20

1. Lease clause that obligates the property owner to find space for the tenant to expand the size of their leased space is called a(n):

   		cancelation option
   		renewal option
   		expansion option
   		lease option

We are evaluating a project that costs $769,000, has an 10-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 87,000 units per year. Price per unit is $44, variable cost per unit is $20, and fixed costs are $782,073 per year. The tax rate is 32 percent, and we require a 15 percent return on this project.

Requirement 1: Break-Even

(a) Calculate the accounting break-even point. (Do not round your intermediate calculations.)

(b) What is the degree of operating leverage at the accounting break-even point? (Do not round your intermediate calculations.) (Click to select)

Requirement 2: Base-Case & NPV Sensitivity

(a) Calculate the base-case operating cash flow. (Do not round your intermediate calculations.) (Click to select)

(b) Calculate the base-case NPV. (Do not round your intermediate calculations.) (Click to select)

(c) What is the sensitivity/elasticity of NPV to changes in the sales figure? Recall from your economics class that an elasticity measures a percentage change in one variable due to a percentage change in another. So simply increase sales quantity by 1 percent, calculate the new NPV, and then calculate the percentage change in the NPV. (Do not round your intermediate calculations.) (Click to select)

(d) Based on this sensitivity, what is the change in NPV (in dollars) if there is a 9 percent decrease in projected sales? (Do not round your intermediate calculations.) (Click to select)

Requirement 3: Sensitivity of OCF

(a) In addition to NPV, we can calculate the sensitivity of other things, such as OCF. What is the sensitivity of base-case OCF to changes in the variable cost? Estimate the sensitivity by increasing variable costs by 10%. (Do not round your intermediate calculations.) (Click to select)

(b) Based on this sensitivity, estimate the change in OCF (in dollars) given a 7% decrease in the variable costs? (Do not round your intermediate calculations.) (Click to select)

Wescott Company has three divisions: A, B, and C. The company has a hurdle rate of 8 percent. Selected operating data for the three divisions are as follows:

Wescott is considering an expansion project in the upcoming year that will cost $5.3 million and return $477,000 per year. The project would be implemented by only one of the three divisions.

Required:
1. Compute the ROI for each division. (Do not round your intermediate calculations. Round your percentage answer to 2 decimal places, (i.e. 0.1234 should be entered as 12.34%.))

Division A:

Division B:

Division C:

2. Compute the residual income for each division. (Loss amounts should be indicated by a minus sign.)

Division A:

Division B:

Division C:

3. Rank the divisions according to the ROI and residual income of each.

Division A:

Division B:

Division C:

4-a. Compute the return on investment on the proposed expansion project. (Round your percentage answer to 2 decimal places, (i.e. 0.1234 should be entered as 12.34%.))

4-b. Is this an acceptable project?

Yes or No

5. Without any additional calculations, state whether the proposed project would increase or decrease each division’s ROI.

Division A:

Division B:

Division C:

6. Compute the new ROI and residual income for each division if the project was implemented within that division. (Loss amounts should be entered with a minus sign. Enter your ROI percentage answers to 2 decimal places, (i.e., 0.1234 should be entered as 12.34%.))

ROI & Residual Income (Loss) for each division:

Division A:

Division B:

Division C:

Wescott Company has three divisions: A, B, and C. The company has a hurdle rate of 8 percent. Selected operating data for the three divisions are as follows:

Wescott is considering an expansion project in the upcoming year that will cost $7.2 million and return $653,000 per year. The project would be implemented by only one of the three divisions.


Required:
1. Compute the ROI for each division. (Do not round your intermediate calculations. Round your percentage answer to 2 decimal places, (i.e. 0.1234 should be entered as 12.34%.))

Division A ___??____%

Division B____???__%

Division C____???___%

2. Compute the residual income for each division. (Loss amounts should be indicated by a minus sign.)
Division A _____??

Division B ______???

Division C______???


3. Rank the divisions according to the ROI and residual income of each.
Division A

Division B

Division C


4-a. Compute the return on investment on the proposed expansion project. (Round your percentage answer to 2 decimal places, (i.e. 0.1234 should be entered as 12.34%.))
Return on investment of proposed expansion project ???%

4-b. Is this an acceptable project?

5. Without any additional calculations, state whether the proposed project would increase or decrease each division’s ROI.
Division A: increase or decrease
Division B: increase or decrease
Divsion C: increase or decrease
6. Compute the new ROI and residual income for each division if the project was implemented within that division. (Loss amounts should be entered with a minus sign. Enter your ROI percentage answers to 2 decimal places, (i.e., 0.1234 should be entered as 12.34%.))

Division A ??% Residual income? (Loss)

Division B ??% Residual income? (Loss)

Division C ??% Residual Income? (Loss)

Eaton Corporation, based in Cleveland, is a global manufacturer of highly engineered products that serve industrial vehicle, construction, commercial, aerospace, and semiconductor markets. It frequently subcontracts work to other manufacturers, depending on whether Eaton’s facilities are fully occupied. Suppose Eaton is about to make some final decisions regarding the use of its manufacturing facilities for the coming year.

The following are the costs of making part ML7X, a key component of an emissions control system:

                                                                                                         Total Cost for

                                                                                                         50,000 Units                   Cost per Unit                                                            Direct material                                 $   400,000                              $ 8

                        Direct labor                                            300,000                               6

                        Variable factory overhead                      150,000                               3

                        Fixed factory overhead                           300,000                                 6

                        Total manufacturing costs                  $1,150,000                            $23

Another manufacturer has offered to sell the same part to Eaton for $20 each. The fixed overhead consists of depreciation, property taxes, insurance, and supervisory salaries. All the fixed overhead would continue if Eaton bought the component except that the cost of $100,000 pertaining to some supervisory and custodial personnel could be avoided.

                        Required

Assume that the capacity now used to make parts will become idle if the parts are purchased. Should Eaton buy or make the parts? Show computations.

Assume that capacity now used to make parts will either (a) be rented to a nearby manufacturer for $65,000 for the year or (b) be used to make oil filters that will yield a profit contribution of $200,000. Should Eaton buy or make part ML7X? Show computations.

Monkey Business, an import business, builds special-order yachts. They decide to build one for a customer for at a cost $2,500,000. It will take 2 years (they start building in June 1, 2007) to build with total costs of $1,900,000: costs of $320,000 in 2007; $1,200,000 in 2008; and the remainder in 2009 (assume they stick to budget). The customer puts a deposit down of $500,000 and pays the remainder in 4 installments, each due every 6 months. For each year (2007, 2008, and 2009) compute the revenue expense, and gross profits reported for this construction project. Assume they do not have a written contract but based on this customer having purchased several yachts in the past, they believe he will pay for the boat in a timely manner. Show all your work.

SAS Computers owns a patent on a computer processor. The processor was developed and capitalized at a cost of €2,100,000 in the beginning of 2015. It was expected to be economically useful for 7 years and have no residual value. At the beginning of 2018, a new processor was developed, making the old processor worth €900,000 (independent appraiser) with €200,000 total cost to sell. The present value of the processor’s future cash flows, given the development of the newer processor, is estimated to be €870,000. At this point, it is expected to have a useful life of 4 years with no residual value. Is the processor impaired in 2018? If it is impaired, prepare the to record the loss. Also prepare the journal entry for amortization in 2018. Show your work.

he council wants to construct the facilities that will maximize expected daily usage by the residents of the community subject to land and cost llimitations. The usage, cost, and land data for each facility are listed below. The community has $240,000 construction budget and 24 arces of land. Because the swimming pool and tennis center must be built on the same part ot the land parcel, however, only one of these two facilities can be constructed. Formulate an optimization mode to assist the council in making its decision. Q1)Write out any constraints necessary for this problem in terms of the decision variables defined above. Q2) A very inluential citizens group has made it clear that it strongly prefers the athletic fielld to the gynnasim; thus the council will not approve the gymnasium unless the athletic field is also approved. How can the model be modified to incorporate this condition? Q3) The mayor has deicded that no more than three of the facilities may be constructed wiht funds from this year's budget. How can the model be modified to incorporate this comdition? Please use Solver(EXCEL) to define Q2 and Q3

The records for Botox Company show this data for 2010 and 2011:

- For 2010, Botox recorded a probable and estimable contingent liability due to a lawsuit. The range for the loss is $700,000 to $1,000,000. In 2011, the lawsuit is settled and Botox pays the actual loss of $850,000.

- Gross profit on a two-year construction contract begun in 2010 was recorded at $350,000 for 2010 and $600,000 for 2011. Cash received was $50,000 in 2010 and $500,000 in 2011.

- An officer of Botox Company passed away during 2011. Life insurance proceeds from a key officer life insurance policy was $200,000.

- Botox earns $600 per month on a municipal bond investment throughout 2010 and 2011.

- Machinery was acquired in January 2010 for $300,000. Straight-line depreciation over a five-year life (no salvage value) is used. For tax purposes, Tuesday may deduct 30% of the cost in 2010 and 25% of the cost in 2011, with the remainder of the cost being depreciated at 15% per year for the three years 2012-2014.

- Pretax financial income is $1,350,000 in 2010 and $1,500,000 in 2011. The tax rate is 25% for all years.

- Botox Company has no beginning balances of deferred tax assets or liabilities.

(a) Prepare a schedule for 2010 and 2011 starting with pretax financial income and compute taxable income.

(b) Prepare the journal entry to record income taxes for 2011.

Wolsey Industries Inc. expects to maintain the same inventories at the end of 2016 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows:

It is expected that 21,400 units will be sold at a price of $160 a unit. Maximum sales within the relevant range are 26,000 units.

Income Statement

A. Prepare an estimated income statement for 2016. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries.

Additional Questions

B. What is the expected contribution margin ratio?

C. Determine the break-even sales in units and dollars. Start by using the contribution margin ratio (part B.) and then round your answers to the nearest whole number.

D. Construct a cost-volume-profit chart on your own paper. What is the break-even sales?

$

Final Questions

E. What is the expected margin of safety in dollars and as a percentage of sales? If applicable, use amounts previously computed and then round your answers to the nearest whole number.

F. Determine the operating leverage. Round to one decimal place.