The Borstal Company has to choose between two machines that do the same job but have different lives. The two machines have the following costs: Year Machine A 0 1 2 3 4 $46,000 11, 200 11,200 11,200 replace Machine A Machine B Machine B $56,000 These costs are expressed in real terms. a. Suppose you are Borstal's financial manager. If you had to buy one or the other machine and rent it to the production manager for that machine's economic life, what annual rental payment would you have to charge? Assume a 8% real discount rate and ignore taxes. (Do not round intermediate calculations. Enter your answers as a positive value rounded to 2 decimal places.) $ 29,029.46 x $ 27,318.43 x 10,400 10,400 > Answer is complete but not entirely correct. Annual Rental Payment 10,400 10,400 replace O Machine A Machine B b. Which machine should Borstal buy? c. If there is steady 4% per year inflation, what will be the annual rental payment for machine B for the second year? (Enter your answer as a positive value rounded to 2 decimal places.) > Answer is complete but not entirely correct. Year 2 rental payment $ 29,547.61

You own a firewood business that involves chopping down trees, sawing them into lumber and transporting to the market. You can cut the trees into 2X4s where they are cut down or after being transported to the market. Cutting down trees Sawing trees into lumber Transporting trees to $65 per ton the market $38 per ton $110 per ton Transporting 2X4s to $45 per ton the market a. Where should you locate the sawmill to minimize costs? Why? b. Where should you locate the sawmill if the price of lumber is $190 per ton? $215?

An operations manager is deciding on the level of automation for a new process.  The fixed cost for automation includes the equipment purchase price, installation, and initial spare parts.  The variable costs per unit for each level of automation are primarily labor related.  Each unit can be sold for $81.  As in many cases, you have the default alternative of doing nothing ($0 fixed cost, $0 variable costs). Hint: For these questions, also consider the “Do Nothing” option as a viable option when making your decision. Alternative Fixed Costs Variable Costs per Unit A $100,000 $54 B $272,000 $31 C $560,000 $20 Recommended: graph each alternative with units on the x-axis and $ on the y-axis.  Also, include revenue on the chart.  Identify the break-even points and points of indifference.

A firm has fixed costs of $25,000 associated with the manufacture of lawn mowers that cost $480 per mower to produce. The firm sells all the mowers it produces at $580 each. Find the cost, revenue and profit equations. Find the break-even quantity. (Let x be the number of mowers.)C(x) =        R(x) =        P(x) =        break even quantity=   ?   mowers

The Borstal Company has to choose between two machines that do the same job but have different lives. The two machines have the following costs: Year Machine A 0 OLN3+ 1 2 4 $48,000 11,600 11,600 11,600 + replace Machine A Machine B These costs are expressed in real terms. a. Suppose you are Borstal's financial manager. If you had to buy one or the other machine and rent it to the production manager for that machine's economic life, what annual rental payment would you have to charge? Assume a 12% real discount rate and ignore taxes. (Do not round intermediate calculations. Enter your answers as a positive value rounded to 2 decimal places.) Machine B $58,000 11,200 11, 200 11,200 11,200 + replace Annual Rental Payment

Olsen Company produces two products. Product A has a contribution margin of $30 and requires 10 machine hours. Product B has a contribution margin of $24 and requires 4 machine hours. Determine the more profitable product assuming the machine hours are the constraint. Unit contribution margin per bottleneck hour:Product A  $_____Product B  $_____ Product ____ is most profitable.

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Pina Colada Racers makes bicycles. It has always purchased its bicycle tires from the Ivanhoe Tires at $25 each but is currently considering making the tires in its own factory. The estimated costs per unit of making the tires are as follows: Direct materials Direct labor Variable manufacturing overhead Total relevant cost $8 $4 The company's fixed expenses would increase by $63,000 per year if managers decided to make the tire. (a1) Calculate total relevant cost to make or buy if the company needs 10,300 tires a year. Make $7 $ Buy

Himalayan Engineering Works currently takes four days to convert the raw material and components to finished goods. The firm is considering in buying a set of new machines which will reduce the conversion time to 1.5 days. If the firm decides to buy the machines, how does this decision affect the working capital requirement? Working Capital requirement will increase Working Capital requirement will decrease No change in working capital requirement Change in conversion time has no relationship with working capital requirement