1. Almond Treats manufactures various types of cereals that feature almonds. Acme Cereal Company has approached Almond Treats with a proposal to sell the company its top selling cereal at a price of $21,800 for 20,000 pounds. The costs shown are associated with production of 20,000 pounds of almond cereal:

Direct material	$12,900
Direct labor	5,000
Manufacturing overhead	7,000
Total	$24,900

The manufacturing overhead consists of $1,900 of variable costs with the balance being allocated to fixed costs.

A. Calculate the differential cost of Acme?

$___

B. Should Almond Treats make or buy the almond cereal?

(Make, Buy)

2. Pompeii's Pizza has a delivery car that it uses for pizza deliveries. The transmission needs to be replaced and there are several other repairs that need to be done. The car is nearing the end of its life, so the options are to either overhaul the car or replace it with a new car. Pompeii's has put together the following budgetary items:

	Present Car	New Car
Purchase cost new		$31,000
Transmission and other repairs	$9,000
Annual cash operating cost	12,500	11,000
Fair market value now	6,000
Fair market value in five years	1,000	6,000

If Pompeiis replaces the transmission of the pizza delivery vehicle, they expect to be able to use the vehicle for another 5 years. If they sell the old vehicle and purchase a new vehicle, they will use that vehicle for 5 years and then trade it in for another new pizza delivery vehicle. If they trade for the new delivery vehicle, their operating expenses will decrease because the new vehicle is more gas efficient and the maintenance on a new car is less. This project is analyzed using a discount rate of 15%.

A. Calculate the NPV on both Cars. Round your present value factor to three decimal places and the rest to nearest dollar.

Present Car	$___
New Car	$___

B. What should Pompeiis do?

Pompeiis should (retain the present car, purchase the new car).