1. The Retread Tire Company recaps tires. The fixed annual costof the recapping operation is $55000.The variable cost ofrecapping a tire is $8.The company charges $21 to recap a tire. a.For an annual volume of 10000 tires determine the total costtotal revenue and profit. b. Determine the annual break-evenvolume for the Retread Tire Company operation. 2. EvergreenFertilizer Company produces fertilizer. The companys fixed monthlycost is $30000 and its variable cost per pound of fertilizer is$0.16. Evergreen sells the fertilizer for $0.40 per pound.Determine the monthly break-even volume for the company. 3. IfEvergreen Fertilizer Company in Problem 2 changes the price of itsfertilizer from $0.40 per pound to $0.60 per pound what effectwill the change have on the break-even volume? 4. If EvergreenFertilizer Company increases its advertising expenditures by$14000 per year what effect will the increase have on thebreak-even volume computed in Problem 2? 5. Annie McCoy a studentat Tech plans to open a hot dog stand inside Techs footballstadium during home games. There are seven home games scheduled forthe upcoming season. She must pay the Tech athletic department avendors fee of $2500 for the season. Her stand and otherequipment will cost her $3100 for the season. She estimates thateach hot dog she sells will cost her $0.35. She has talked tofriends at other universities who sell hot dogs at games. Based ontheir information and the athletic departments forecast that eachgame will sell out she anticipates that she will sellapproximately 2000 hot dogs during each game. a. What price shouldshe charge for a hot dog in order to break even? b. What factorsmight occur during the season that would alter the volume sold andthus the break-even price Annie might charge? 6. The College ofBusiness at Kerouac University is planning to begin an online MBAprogram. The initial start-up cost for computing equipmentfacilities course development and staff recruitment anddevelopment is $360000.The college plans to charge tuition of$17000 per student per year. However the universityadministration will charge the college $12000 per student for thefirst 100 students enrolled each year for administrative costs andits share of the tuition payments. a. How many students does thecollege need to enroll in the first year to break even? b. If thecollege can enroll 75 students the first year how much profit willit make? c. The college believes it can increase tuition to$22000 but doing so would reduce enrollment to MAT540 HomeworkWeek 1 Page 2 of 3 35. Should the college consider doing this?Chapter 11 7. The following probabilities for grades in managementscience have been determined based on past records: GradeProbability A 0.15 B 0..25 C 0..38 D 0..12 F 0.10 1.00 The gradesare assigned on a 4.0 scale where an A is a 4.0 a B a 3.0 and soon. Determine the expected grade and variance for the course. 8. Aninvestment firm is considering two alternative investments A andB under two possible future sets of economic conditions good andpoor. There is a .60 probability of good economic conditionsoccurring and a .40 probability of poor economic conditionsoccurring. The expected gains and losses under each economic typeof conditions are shown in the following table: Economic ConditionsInvestment Good Poor A $350000 -$350000 B 120000 70000 Usingthe expected value of each investment alternative determine whichshould be selected.
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