Prepare a 12- to 15-slide PowerPoint^® presentation with speaker notes requesting initial funding of $500,000 to start and run a start-up company. The proposed start-up company could be an existing business model (coffee shop, pet store, etc.) or could be something entirely new and exciting.

Title Page

Table of Contents

Executive Summary

Information about the Industry

Marketing Plan

Competitor Analysis

3 Year Income Statement (Profit & Loss) Projections

Include your assumptions for why and how you will achieve your sales growth and what significant expenses and investments you expect to incur to achieve your revenue goals.

3 Year Proposed Funding Schedule (Sources and uses of the funds received.)

Break-Even Analysis

Academic and Business References

Review the following scenarios and assumption, and explain how it impacts your decision to expand:

After Year 3, the investors are interested in your company expanding internationally to possibly outsource labor or to reduce manufacturing costs. What countries would you expand to first, and why? What factors would you need to consider in making this decision?

What is the corporate tax rate in the countries you are considering expanding your business to, and how will that affect your decision to expand globally? (Use OECD Database or another resource to determine the corporate tax rate).

The investors want to see a decision tree detailing the decisions you would make if you received $300K now and $200K at the end of three years instead of $500K up front.

The investors would like your team to provide advantages and disadvantages of using debt financing versus selling company stock to raise capital for growth.

Briefly explain the venture capital process. Does it make sense for your company to raise funds through venture capital?

1. Cover-to-Cover Company is a manufacturer of shelving for books. The company has compiled the following cost data, and wants your help in determining the The manner in which a cost changes in relation to its activity base (driver).cost behavior. After reviewing the data, complete requirements (1) and (2) that follow.

   Units Produced	Total Lumber Cost	Total Utilities Cost	Total Machine Depreciation Cost
   3,000 shelves	$36,000	$4,950	$145,000
   6,000 shelves	72,000	8,400	145,000
   12,000 shelves	144,000	15,300	145,000
   15,000 shelves	180,000	18,750	145,000

   1. Determine whether the costs in the table are Costs that vary in proportion to changes in the activity base.variable, Costs that tend to remain the same in amount, regardless of variations in the level of activity.fixed, Costs with both variable and fixed characteristics, sometimes called semivariable or semifixed costs.mixed, or none of these.

   Lumber	Variable Cost Fixed Cost Mixed Cost None of these
   Utilities	Variable Cost Fixed Cost Mixed Cost None of these
   Depreciation	Variable Cost Fixed Cost Mixed Cost None of these

   2. For each cost, determine the fixed portion of the cost, and the per-unit variable cost. If there is no amount or an amount is zero, enter "0". Recall that, for N = Number of Units Produced, Total Costs = (Variable Cost Per Unit x N) + Fixed Cost. Complete the following table with your answers. Round variable portion of cost (per unit) answers to two decimal places.

   Cost	Fixed Portion of Cost	Variable Portion of Cost (per Unit)
   Lumber	$	$
   Utilities
   Depreciation

   High-Low

   Biblio Files Company is the chief competitor of Cover-to-Cover Company in the bookshelf business. Biblio Files is analyzing its manufacturing costs, and has compiled the following data for the first six months of the year. After reviewing the data, answer questions (1) through (3) that follow.

   	Units Produced		Total Cost
   January	4,360	units	$65,600
   February	275		6,250
   March	1,000		15,000
   April	8,775		133,750
   May	1,750		32,500
   June	3,015		48,000

   1. From the data previously provided, help Biblio Files Company estimate the fixed and variable portions of its total costs using the high-low method. Recall that Total Costs = (Variable Cost Per Unit x Number of Units Produced) + Fixed Cost. Complete the following table.

   Total Fixed Cost	Variable Cost per Unit
   $	$

   2. With your Total Fixed Cost and Variable Cost per Unit from the high-low method, compute the total cost for the following values of N (Number of Units Produced).

   Number of Units Produced	Total Cost
   3,500	$
   4,360
   8,775

   3. Why does the total cost computed for 4,360 units not match the data for January?

   a. The high-low method is accurate only for months in which production is at full capacity.

   b. The high-low method only gives accurate data when fixed costs are zero.

   c. The high-low method gives a formula for the estimated total cost and may not match levels of production other than the highest and lowest.

   d. The high-low method gives accurate data only for levels of production outside the The range of activity over which changes in cost are of interest to management.relevant range.

   • a
   • b
   • c
   • d

   Contribution Margin

   Review the The excess of sales over variable costs.contribution margin income statements for Cover-to-Cover Company and Biblio Files Company on their respective Income Statements. Complete the following table from the data provided on the income statements. Each company sold 75,800 units during the year.

   	Cover-to-Cover Company	Biblio Files Company
   The percentage of each sales dollar that is available to cover the fixed costs and provide an operating income. Also called profit-volume ratio.Contribution margin ratio (percent)	%	%
   The dollars available from each unit of sales to cover fixed costs and provide operating profits.Unit contribution margin	$	$
   Break-even sales (units)
   Break-even sales (dollars)	$	$

   Income Statement - Cover-to-Cover

   Cover-to-Cover Company Contribution Margin Income Statement For the Year Ended December 31, 20Y8
   Sales		$379,000
   Variable costs:
   Manufacturing expense	$227,400
   Selling expense	18,950
   Administrative expense	56,850	(303,200)
   Contribution margin		$75,800
   Fixed costs:
   Manufacturing expense	$5,000
   Selling expense	4,000
   Administrative expense	9,950	(18,950)
   Operating income		$56,850

   Income Statement - Biblio Files

   Biblio Files Company Contribution Margin Income Statement For the Year Ended December 31, 20Y8
   Sales		$379,000
   Variable costs:
   Manufacturing expense	$151,600
   Selling expense	15,160
   Administrative expense	60,640	(227,400)
   Contribution margin		$151,600
   Fixed costs:
   Manufacturing expense	$76,750
   Selling expense	8,000
   Administrative expense	10,000	(94,750)
   Operating income		$56,850

   Sales Mix

   Biblio Files Company is making plans for its next fiscal year, and decides to sell two new types of bookshelves, Basic and Deluxe. The company has compiled the following estimates for the new product offerings.

   Type of Bookshelf	Sales Price per Unit	Variable Cost per Unit
   Basic	$5.00	$1.75
   Deluxe	9.00	8.10

   The company is interested in determining how many of each type of bookshelf would have to be sold in order to break even. If we think of the Basic and Deluxe products as components of one overall enterprise product called “Combined,” the unit contribution margin for the Combined product would be $2.31. Fixed costs for the upcoming year are estimated at $341,880. Recall that the totals of all the The relative distribution of sales among the various products sold by a company.sales mix percents must be 100%. Determine the amounts to complete the following table.

   Type of Bookshelf	Percent of Sales Mix	Break-Even Sales in Units	Break-Even Sales in Dollars
   Basic	%		$
   Deluxe	%		$

   Target Profit

   Refer again to the income statements for Cover-to-Cover Company and Biblio Files Company on their respective Income Statement. Note that both companies have the same sales and net income. Answer questions (1) - (3) that follow, assuming that all data for the coming year is the same as the current year, except for the amount of sales.

   1. If Cover-to-Cover Company wants to increase its profit by $30,000 in the coming year, what must their amount of sales be?
   $

   2. If Biblio Files Company wants to increase its profit by $30,000 in the coming year, what must their amount of sales be?
   $

   3. What would explain the difference between your answers for (1) and (2)?

   a. Biblio Files Company has a higher contribution margin ratio, and so more of each sales dollar is available to cover fixed costs and provide operating income.

   b. Cover-to-Cover Company’s contribution margin ratio is lower, meaning that it’s more efficient in its operations.

   c. The companies have goals that are not in the relevant range.

   d. The answers are not different; each company has the same required sales amount for the coming year to achieve the desired target profit.

1) Which of the following statements are true regarding the event horizon of a black hole? (Select all that apply.)

1. The event horizon is the location that marks the "point of no return" for a black hole. Anything that crosses the event horizon can never escape.

2. The Schwarzschild radius specifies the location of the event horizon.

3. The event horizon is the location where the escape velocity is equal to the speed of light.

4. Inside the event horizon, the escape velocity is less than the speed of light.

5. The event horizon specifies the maximum mass that a star can have before collapsing into a black hole.

2) Which of the following statements are true regarding how black holes are formed? (Select all that apply.)

1. All stars eventually produce black holes at the end of their lives, because white dwarfs are unstable and will collapse into black holes.

2. Stars with masses that are eight times as large as our sun's or more will produce a black hole when they collapse and explode in a supernova.

3. Two white dwarfs or neutron stars can produce a black hole if they collide.

4. If a white dwarf accretes material from a companion star in a binary system, it will eventually collapse into a black hole.

3) Which of the following answers is the best response to the statement: "everything near a black hole will be sucked in."

1. True, the gravity of a black hole is so strong that it is impossible to escape no matter where you are.

2. False, the presence of accretion disks shows us that nothing that falls near a black hole is absorbed.

3. True, black holes are large, and it is unlikely that an object will not fall into a black hole once the black hole's gravity begins to pull on it.

4. False, black holes are relatively tiny compared to other objects with similar mass, so material that falls near a black hole will orbit it rather than fall directly in.

4) Calculate the Schwarzschild radius that Jupiter would have if it were to turn into a black hole.

Hint: Jupiter's mass is 1.9 x 10²⁷ kg.

Hint: the gravitational constant is 6.67 x 10^-11.

5) As a black hole gains mass via accretion, its radius will...

1. Remain the same

2. Increase

3. Decrease

Activity-Based Costing and Product Cost Distortion

Handbrain Inc. is considering a change to activity-based product costing. The company produces two products, cell phones and tablet PCs, in a single production department. The production department is estimated to require 4,000 direct labor hours. The total indirect labor is budgeted to be $462,400.

Time records from indirect labor employees revealed that they spent 40% of their time setting up production runs and 60% of their time supporting actual production.

The following information about cell phones and tablet PCs was determined from the corporate records:

Number of
SetupsDirect Labor
HoursUnits

Cell phones500 2,000 68,000

Tablet PCs1,100 2,000 68,000

Total1,600 4,000 136,000

If required, round your answers to the nearest cent.

a. Determine the indirect labor cost per unit allocated to cell phones and tablet PCs under a single plantwide factory overhead rate system using the direct labor hours as the allocation base.

Cell phones$ per unit

Tablet PCs$ per unit

b. Determine the budgeted activity costs and activity rates for the indirect labor under activity-based costing. Assume two activities—one for setup and the other for production support.

Budgeted Activity CostActivity Rate

Setup$$per setup

Production support$$per direct labor hour

c. Determine the activity cost per unit for indirect labor allocated to each product under activity-based costing.

Cell phones$ per unit

Tablet PCs$ per unit

d. Why are the per-unit allocated costs in (a) different from the per-unit activity cost assigned to the products in (c)?

The per-unit indirect labor costs in (a) are distorted because setup activity  is consumed by the products in a different ratio from the direct labor. The activity-based  costing method results in the product with the larger  number of setups receiving a larger portion of the setup activity cost. The single-rate system  allocates overhead only on the basis of direct labor hours. Since the direct labor hours are  equal for each product, the allocated indirect labor will also be  equal.

Feedback

a. Calculate:

Total Indirect Labor Costs ÷ Total Direct Labor Hours = Overhead Rate

Overhead Rate x Direct Labor Hours per Product = Indirect Labor Cost per Product; Indirect Labor Cost per Product ÷ Units = Indirect Labor Cost per Unit

b. Percentage of Time on Activity x Total Indirect Labor = Budgeted Activity Cost per Activity; Divide the Budgeted activity cost by activity base to obtain the activity rate.

c. Calculate for each product:

Activity-Base Usage for each Activity x Activity Rate from (b) = Activity Cost; Add both activity costs per product to obtain the total costs; Divide the total cost per product by the number of units to obtain activity cost per unit.

Activity-Based Costing and Product Cost Distortion

Handbrain Inc. is considering a change to activity-based product costing. The company produces two products, cell phones and tablet PCs, in a single production department. The production department is estimated to require 4,000 direct labor hours. The total indirect labor is budgeted to be $462,400.

Time records from indirect labor employees revealed that they spent 40% of their time setting up production runs and 60% of their time supporting actual production.

The following information about cell phones and tablet PCs was determined from the corporate records:

Number of
SetupsDirect Labor
HoursUnits

Cell phones500 2,000 68,000

Tablet PCs1,100 2,000 68,000

Total1,600 4,000 136,000

If required, round your answers to the nearest cent.

a. Determine the indirect labor cost per unit allocated to cell phones and tablet PCs under a single plantwide factory overhead rate system using the direct labor hours as the allocation base.

Cell phones$ per unit

Tablet PCs$ per unit

b. Determine the budgeted activity costs and activity rates for the indirect labor under activity-based costing. Assume two activities—one for setup and the other for production support.

Budgeted Activity CostActivity Rate

Setup$$per setup

Production support$$per direct labor hour

c. Determine the activity cost per unit for indirect labor allocated to each product under activity-based costing.

Cell phones$ per unit

Tablet PCs$ per unit

d. Why are the per-unit allocated costs in (a) different from the per-unit activity cost assigned to the products in (c)?

The per-unit indirect labor costs in (a) are distorted because setup activity  is consumed by the products in a different ratio from the direct labor. The activity-based  costing method results in the product with the larger  number of setups receiving a larger portion of the setup activity cost. The single-rate system  allocates overhead only on the basis of direct labor hours. Since the direct labor hours are  equal for each product, the allocated indirect labor will also be  equal.

Feedback

a. Calculate:

Total Indirect Labor Costs ÷ Total Direct Labor Hours = Overhead Rate

Overhead Rate x Direct Labor Hours per Product = Indirect Labor Cost per Product; Indirect Labor Cost per Product ÷ Units = Indirect Labor Cost per Unit

b. Percentage of Time on Activity x Total Indirect Labor = Budgeted Activity Cost per Activity; Divide the Budgeted activity cost by activity base to obtain the activity rate.

c. Calculate for each product:

Activity-Base Usage for each Activity x Activity Rate from (b) = Activity Cost; Add both activity costs per product to obtain the total costs; Divide the total cost per product by the number of units to obtain activity cost per unit.

Charlene is the owner of Charlene’s Computer Care (3C) and has been in the business of servicing computers and computer systems at affordable prices for just over five years. 3C‘s primary clients are local businesses but include some residential customers. Their advertised approach is to analyze the problem, develop a range of IT options, explain their specific recommendation to the customer, and finally estimate the time and costs associated with the service prior to commencing work.

Their approach has proven successful, but competition is getting much stiffer, and Charlene is concerned that her approach to determining costs and prices for any particular job is not correctly incorporating all of the company's costs. She has heard about the concept of cost allocation and asks her accountant to create an allocation system for the business.

Her accountant decides to implement a single-driver allocation system and needs to develop a reliable cost function to estimate total indirect costs. She will use this estimate for the numerator of the single driver "overhead" rate, and she will use service hours as the cost driver and denominator in the "overhead" rate.

To estimate the parameters of this cost function, the accountant first studied the behavior of last month's costs, when the company spent 286 service hours repairing 41 computer systems. Here are the results of her analysis:

Concerned that last month may not have been a typical month and her breakdown of fixed and variable costs not completely correct, the accountant decided to use the high-low method to create another cost function. She gathered individual cost and service hour data from the last six months; the following were for the two months when costs and service hours were the lowest and the highest:

Next month, Charlene expects the company to spend 450 hours solving clients' computer system problems.

REQUIRED [ROUND ALL PER-UNIT COSTS TO TWO DECIMAL PLACES AND TOTAL COSTS TO THE NEAREST DOLLAR.]

Part A (6 tries; 5 points)
What is the accountant's estimate of total "overhead" next month if she uses the cost function based on her analysis of last month's cost data?  

Part B (6 tries; 5 points)
What is the accountant's estimate of total "overhead" next month if she uses the cost function based on the high-low method?   

Mastery Problem: Target Income and Margin of Safety

Target Income and Margin of Safety

At the break-even point, sales and costs are exactly equal. However, the goal of most companies is to make a profit. When a company decides that it wants to earn more than the break-even point of income, it must define the amount it thinks it will realistically make. By modifying the break-even equation, the sales required to earn a target or desired amount of profit may be computed.

Complete the following:
If a company makes $5 off of each unit it sells and has a target operating income of $5,000, then it must sell  units. Similarly, if a company has a target operating income of $50,000 and knows that total expenses for the period will be $50,000, how much revenue must it earn to reach its target operating income? $

Units sold or revenue earned above and beyond the break-even point contributes to the margin of safety for a company. Margin of safety is a crude measure of risk, in that it serves as the padding between profit and the break-even point.

Complete the following:
Expressed in terms of units, if a company hits its break-even point in units (say, 300 units) and actually sells 500 units, then the margin of safety is  units. Similarly, if the break-even point in sales revenue is $80,000, and it actually has sales revenue of $250,000, then its margin of safety is $.

APPLY THE CONCEPTS: Target income (number of units sold)

Suppose a business has pricing and cost information as follows::

For the upcoming period, the company wishes to generate operating income of $900. Given the cost and pricing structure for the company’s product, how many units must the company sell to attain its target income?

Remember that the basic equation for calculating operating income is as follows:

Step 1: Replace the operating income in the equation with your company’s target income, and insert your cost and pricing information into the equation, as well:

Step 2: Rearrange the equation to isolate units to one side of the equation:

Number of Units to Earn Target Income =  units

Step 3: Create a contribution margin income statement to check your previous work. Enter all amounts as positive numbers.

APPLY THE CONCEPTS: Target income (sales revenue)

Another useful method for figuring out the type of performance your company will need to reach a target income is by using sales revenue. Rather than using the number of units, this method uses total sales revenue. In companies for which the total set of goods produced and sold is more varied, this would be the preferred method, as opposed to a business in which only one product is sold. Assume a company has pricing and cost information as follows:

For the upcoming period, the company wishes to generate operating income of $75,000. Given the cost and pricing structure for the company’s product, how much sales revenue must it generate to attain its target income?

Step 1: Calculate the contribution margin ratio:

The contribution margin ratio is the contribution margin in proportion to the selling price on a per-unit basis.

Note: The contribution margin ratio is calculated to one decimal place.)

Step 2: Calculate the sales revenue required to attain the target income:

Step 3: Create a contribution margin income statement, to check your previous work. Enter all amounts as positive numbers.

APPLY THE CONCEPTS: Margin of Safety
Margin of safety can allow you to see how much padding there is for your company between profit and loss. If this number is great, it may indicate that your company is performing very well. If this number is small, it may be worth looking into possible remediation. Consider the following pricing and cost information:

For the upcoming period, the company projects that it will sell 1,000 units. Considering that the company has a unit break-even point of 600 units, what is the margin of safety in terms of both units and sales revenue? Round your answers to two decimal places, if necessary.

Mastery Problem: Target Income and Margin of Safety

Target Income and Margin of Safety

At the break-even point, sales and costs are exactly equal. However, the goal of most companies is to make a profit. When a company decides that it wants to earn more than the break-even point of income, it must define the amount it thinks it will realistically make. By modifying the break-even equation, the sales required to earn a target or desired amount of profit may be computed.

Complete the following:
If a company makes $3 off of each unit it sells and has a target operating income of $1,200, then it must sell  units. Similarly, if a company has a target operating income of $75,000 and knows that total expenses for the period will be $75,000, how much revenue must it earn to reach its target operating income? $

Units sold or revenue earned above and beyond the break-even point contributes to the margin of safety for a company. Margin of safety is a crude measure of risk, in that it serves as the padding between profit and the break-even point.

Complete the following:
Expressed in terms of units, if a company hits its break-even point in units (say, 100 units) and actually sells 400 units, then the margin of safety is  units. Similarly, if the break-even point in sales revenue is $200,000, and it actually has sales revenue of $400,000, then its margin of safety is $.

Feedback

APPLY THE CONCEPTS: Target income (number of units sold)

Suppose a business has pricing and cost information as follows::

For the upcoming period, the company wishes to generate operating income of $900. Given the cost and pricing structure for the company’s product, how many units must the company sell to attain its target income?

Remember that the basic equation for calculating operating income is as follows:

Step 1: Replace the operating income in the equation with your company’s target income, and insert your cost and pricing information into the equation, as well:

Step 2: Rearrange the equation to isolate units to one side of the equation:

Number of Units to Earn Target Income =  units

Step 3: Create a contribution margin income statement to check your previous work. Enter all amounts as positive numbers.

Feedback

APPLY THE CONCEPTS: Target income (sales revenue)

Another useful method for figuring out the type of performance your company will need to reach a target income is by using sales revenue. Rather than using the number of units, this method uses total sales revenue. In companies for which the total set of goods produced and sold is more varied, this would be the preferred method, as opposed to a business in which only one product is sold. Assume a company has pricing and cost information as follows:

For the upcoming period, the company wishes to generate operating income of $75,000. Given the cost and pricing structure for the company’s product, how much sales revenue must it generate to attain its target income?

Step 1: Calculate the contribution margin ratio:

The contribution margin ratio is the contribution margin in proportion to the selling price on a per-unit basis.

Note: The contribution margin ratio is calculated to one decimal place.)

Step 2: Calculate the sales revenue required to attain the target income:

Step 3: Create a contribution margin income statement, to check your previous work. Enter all amounts as positive numbers.

Feedback

APPLY THE CONCEPTS: Margin of Safety
Margin of safety can allow you to see how much padding there is for your company between profit and loss. If this number is great, it may indicate that your company is performing very well. If this number is small, it may be worth looking into possible remediation. Consider the following pricing and cost information:

For the upcoming period, the company projects that it will sell 2,000 units. Considering that the company has a unit break-even point of 1,400 units, what is the margin of safety in terms of both units and sales revenue? Round your answers to two decimal places, if necessary.

Suppose a production function is given by f(K,L) = KL1/3 and that the price of capital is $10 and the price of labor is $16. The capital is fixed at the level K ̅ = 4. What is the quantity of labor that minimizes the cost of producing any given output? What is the minimum cost of producing y units of output? What are the marginal cost of production and the average total cost, average variable cost and the average fixed cost?

Caterpillar, Inc., headquartered in Peoria, Illinois, is an American corporation with a worldwide dealer network which sells machinery, engines, financial products and insurance. Caterpillar is the world's leading manufacturer of construction and mining equipments, -diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. Although providing financial services through its Financial Products segment, Caterpillar primarily operates through its three product segments of Construction Industries, Resource Industries, and Energy & Transportation. Founded in 1925, the company presently has sales and revenues of $55.2 billion, total assets of $78.5 billion, and 114,000 employees. Caterpillar machinery are commonly recognized by its trademark “Caterpillar Yellow” and it's “CAT” logo. Some of its manufactured construction products include: mini excavators, small-wheel loaders, backhoe loaders, multi-terrain loaders, and compact-wheel loaders. Other products include: machinery in mining and quarrying applications, reciprocating engines and turbines in power systems, the remanufacturing of CAT engines and components, and a wide range of financial alternatives to customers and dealers for Caterpillar machinery and engines.

Caterpillar tractors have undertaken and completed many difficult tasks since the company's beginning. In the late 1920s, the Soviet Grain Trust purchased 2,050 Caterpillar machines for use on its large farm cooperatives. This sale helped to keep Caterpillar's factories busy during the Great Depression. In the 1930s, Caterpillar track-type tractors helped construct the Hoover Dam, worked on the Mississippi Levee construction project, helped construct the Golden Gate Bridge, and were used in the construction of the Chesapeake & Delaware Canal. During this time period, CATs were also used in construction projects around the world in countries such as Palestine, Iraq, India, Canada, the Netherlands, Belgium and the building of the Pan American Highway. In World War II, Caterpillar built 51,000 track-type tractors for the U.S. military.

In the 1940s, Caterpillar tractors were used in the construction of the Alaskan highway; and between 1944 and 1956, they were used to help construct 70,000 miles of highway in the United States. In the 1950s and 60s, usage of Caterpillar tractors around the world exploded and were used in such countries as Australia, Austria, Ceylon, France, Germany, Italy, Nigeria, Philippines, Rhodesia, Russia, Sweden, Switzerland, Uganda, and Venezuela, in a wide variety of projects. In addition, Caterpillar products were used to help construct the St. Lawrence Seaway between Canada and the United States. In the 1970s and 80s, Caterpillar equipment were used in numerous dam, power, and pipeline projects. Since then, Caterpillars have been used in the construction of several projects such as Japan's Kansai International Airport as a marine airport approximately three miles offshore in Osaka Bay, the Chunnel between France and England, the “Big Dig” in Boston, Panama Canal expansion, and several Olympic Games sites.

Discussion

1. The United States Department of Agriculture (USDA), in conjunction with the Forest Service, publishes information to assist companies in estimating the cost of building a temporary road for such activities as a timber sale. Such roads are generally built for one or two seasons of use for limited traffic and are designed with the goal of reestablishing vegetative cover on the roadway and adjacent disturbed area within ten years after the termination of the contract, permit, or lease. The timber sale contract requires out sloping, removal of culverts and ditches, and building water bars or cross ditches after the road is no longer needed. As part of this estimation process, the company needs to estimate haul costs. The USDA publishes variable costs in dollars per cubic-yard-mile of hauling dirt according to the speed with which the vehicle can drive. Speeds are mainly determined by the road width, the sight distance, the grade, the curves and the turnouts. Thus, on a steep, narrow, winding road, the speed is slow; and on a flat, straight, wide road, the speed is faster. Shown below are data on speed, cost per cubic yard for a 12 cubic yard end-dump vehicle, and cost per cubic yard for a 20 cubic yard bottom-dump vehicle. Use these data and simple regression analysis to develop models for predicting the haul cost by speed for each of these two vehicles. Discuss the strength of the models. Based on the models, predict the haul cost for 35 mph and for 45 mph for each of these vehicles.