The data below represent the cost in dollars that each of 40 cafeteria customers paid for their salad, as observed by statistics students in Fall 2018.

• Compute the summary stats: mean, median, standard deviation, IQR, & range.
  • What can you say about the general shape of the distribution of salad costs? How do you know that?
  • Does this data set appear to contain any outliers? Explain.
• Omit the highest and lowest costs, and recompute the summary stats.
  • Why does the median remain unchanged?
  • Why do all the measures of variability decrease?
  • Why does the mean increase slightly?

2. Pick one of the cost flow assumptions and a product that would utilize that flow. Describe why it is the best of the four methods or LMC for that product.

You are asked to check the feasibility of software development project. The initial development cost is $10M and the project will require an annual maintenance by the team of engineers and product managers. The annual salary of the team member is $150K. In year 1, the project will require 5 team members and in years 2-4 it will require 10 team members. The subscription revenues start in year 2 and end in year 4 (3 years). The average client pays $2,000 per year and the company is expected to have 3,000 clients for each year. Assume that the cost of capital is 10%.

Determine the cash flow from the project in each year (0-4).

Calculate the project’s NPV and IRR. Will you undertake the project?

Calculate the project’s NPV if the cost of capital declines to 7%. Will you still undertake the project?

Assume there is a badly polluting steel plant in town. Marginal pollution cost is growing and given by MC=10X where X stands for the quantity of pollution and is measured in percent (0% pristinely clean, 100% deadly pollution). In contrast, marginal reduction cost (MCR) is constant and given by MCR=10. Refer to the Coase Theorem and assume that the government grants citizens the exclusive property right to clean air. After trade, what is the "optimal" air pollution (in %)? What is the resulting welfare gain or loss compared to the initial pristine air scenario (before trade).

- the optimal pollution equals 5, and there is a welfare gain of 5

- the optimal pollution equals 10, and there is a welfare loss of 5

- none of the listed options

- the optimal pollution equals 1, and there is a welfare gain of 5

- the optimal pollution equals 1, and there is a welfare loss of 5 ]

- there is no optimal pollution, the optimal pollution. is always zero

What is the relationship between opportunity cost and the slope of the production possibilities frontier. What does it mean for the PPF to be bowed-in, bowed-out, or linear? What does it mean to be above, on, or below the PPF?

Compute the NPV for Project K if the appropriate cost of capital is 7 percent. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places.)

Should the project be accepted or rejected?

• rejected

• accepted

Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company’s normal activity level of 103,200 units per year is:

The normal selling price is $22.00 per unit. The company’s capacity is 139,200 units per year. An order has been received from a mail-order house for 3,000 units at a special price of $19.00 per unit. This order would not affect regular sales or the company’s total fixed costs.

Required:

1. What is the financial advantage (disadvantage) of accepting the special order?

2. As a separate matter from the special order, assume the company’s inventory includes 1,000 units of this product that were produced last year and that are inferior to the current model. The units must be sold through regular channels at reduced prices. What unit cost is relevant for establishing a minimum selling price for these units?

Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company’s normal activity level of 104,400 units per year is:

The normal selling price is $23.00 per unit. The company’s capacity is 136,800 units per year. An order has been received from a mail-order house for 2,700 units at a special price of $20.00 per unit. This order would not affect regular sales or the company’s total fixed costs.

Required:

1. What is the financial advantage (disadvantage) of accepting the special order?

2. As a separate matter from the special order, assume the company’s inventory includes 1,000 units of this product that were produced last year and that are inferior to the current model. The units must be sold through regular channels at reduced prices. What unit cost is relevant for establishing a minimum selling price for these units?

1. List the 3 main types of costs and describe their cost behavior in terms of (a) Total Cost, and (b) Unit Cost.
2. When do you use the high-low method? What is the formula for the high-low method?
3. Describe in your own words the concept of contribution margin.
4. What is the formula to calculate Break Even Point in Units?
5. What is the formula to calculate Break Even Point in Dollars?
6. If a company’s goal is to make a profit, why do we calculate break even point first? What is the importance of break even point?
7. What is sensitivity analysis?
8. What are 3 ways in that CVP analysis can be used by managers to make decisions?
9. How does variable costing differ from absorption costing?
10. If units produced = units sold, is the net income under variable costing or absorption costing greater?
11. If units produced> units sold, is the net income under variable costing or absorption costing greater?
12. If units produced< units sold, is the net income under variable costing or absorption costing greater?

XYZ Industries purchased a new asset on March 31, 2020. The cost of the asset was 140,000, with an estimated useful life of 8 years, and a salvage value of $15,000. XYZ uses the sum-of-the-years-digits method to depreciate the asset.

What is the book value of the asset on December 31, 2022?