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# ST Business Decisions,Capital Investments, CVP Analysis

1. The long distance company that you use charges \$5.00 per month and \$0.10 per minute per call. If your current bill is \$25.00, how many minutes did you use?
a. 250 minutes
b.100 minutes
c.200 minutes
d.150 minutes

2. Jenny was reviewing the water bill for her doggy day spa and determined that her highest bill, \$3,000, occurred in July when she washed 2,000 dogs and her lowest bill, \$2,000, occurred in November when she washed 1,000 dogs. What was the fixed cost associated with Jenny's water bill?

a.\$1,500
b.\$3,000
c.\$1,000
d.\$2,000

3. Jenny was reviewing the water bill for her doggy day spa and determined that her highest bill, \$3,000, occurred in July when she washed 2,000 dogs and her lowest bill, \$2,000, occurred in November when she washed 1,000 dogs. What was the variable cost per dog wash associated with Jenny's water bill?
a.\$.67
b.\$1.00
c.\$0.50
d.\$2.00

4. Dakota Company provides the following information about its single product:
Targeted operating income \$40,000
Selling price per unit \$3.50
Variable cost per unit \$1.05
Total fixed costs \$90,000

What is the contribution margin ratio?

a.0.70
b.0.44
c.0.56
d.0.30

5. Marino Company's average manufacturing cost was \$5.40 when 50,000 units were manufactured and was \$5.25 when 80,000 units were manufactured. How much was Marino's variable cost per unit?

a.\$5.25
b.\$5.00
c.\$5.40
d.\$5.32

6. Sullivan Company is considering the purchase of a new machine costing \$80,000. Sullivan's management is estimating that the new machine will generate additional cash flows of \$12,000 a year for ten years and have a salvage value of \$3,000 at the end of ten years. What is the machine's payback period?

a.7 years
b.6.7 years
c.6 years
d.5.33 years

7.. An investment opportunity costing \$750,000 has a net present value of \$112,500. Which of the following statements is correct?

a.The profitability index is .15.
b.The present value of the net future cash flows is \$862,500.
c.The internal rate of return is less than the discount rate.
d.A decrease in the discount rate would decrease the net present value.

8. Wasson Corporation is considering an investment project costing \$520,000. The project is estimated to have an eight-year life, generate annual operating income of \$120,000, and have a salvage value of \$40,000 after eight years. What is the project's payback period?

a.2.89 years
b.4.33 years
c.4 years
d.6.5 years

9.If sales are \$500,000, variable expenses are \$200,000, and fixed expenses are \$240,000, what is the break-even point? (HINT: utilize the contribution margin ratio to calculate the BE Point)

a.\$200,000
b.\$400,000
c.\$60,000
d.\$240,000

#### Solution Preview

1 - 200 minutes (25 - 5)/0.10

2 - Using high low method, we have variable cost equals to
(3000-2000)/(2000-1000) = 1000/1000 = \$1
Fixed Cost = 3000 - 2000*1 = 3000-2000 = ...

#### Solution Summary

The solution answer 8 Problems related to Short term business decisions, capital investments, cost-volume profit analysis.

\$2.19