1. 3M produces flash memories. The selling price and the variable costs are $20 and $8 per unit, respectively. Fixed costs per month are $4,800. If the company sells 30 more units beyond breakeven, how much does profit increase as a result? a. $360 b. $600 c. $240 d. $1,200 The MLC, Inc. is considering purchasing equipment costing $60,000 with a 6-year useful life. The equipment will provide cost savings of $14,600 and will be depreciated over its useful life with no salvage value using straight-line method. MLC requires a 10% rate of return. Present Value of an Annuity of 1 3. 4. Period 6 8% 4.623 9% 4.486 10% 4.355 11% 4.231 12% 15% 4.111 3.784 What is the approximate net present value of this investment? a. $27,600 b. $3,583 c. $1,772 d. $5,496 Margin of safety in dollars is a. expected sales divided by break-even sales. b. expected sales less break-even sales. c. actual sales less expected sales. d. expected sales less actual sales. Rand Corporation produced 1,000 units of a special component part with the following costs: Direct Materials Direct Labor Variable Overhead Fixed Overhead $14.00 26.00 12.00 18.00 An international supplier offer to sell the 1,000 units for $6,500. If Rand Corporation purchases the component from the supplier, one-third of the fixed costs will be eliminated. Should Rand make or buy the components? a. Buy; savings $500. b. Make; savings = $700. c. Make; savings = $6,430. d. none of the above. 5. If Wizz Air cuts its fares by 15%, a. its fixed costs will decrease. b. profit will increase by 15%. c. a profit can only be earned by decreasing the number of flights. d. a profit can be earned either by increasing the number of passengers or by decreasing variable costs. 6. At the break-even point, a. sales equal total variable costs. b. contribution margin equals total variable costs. c. contribution margin equals total fixed costs. d. sales equal total fixed costs