1) Last year you sold 30,000 units for $10/unit and encountered a fixed cost of $150,000, and a variable cost of $3/unit. Next year you expect sales to drop to 25,000 with the same Fixed and Variable costs.

a. What is your cost/unit next year?__________________

b. What is your total profit likely to be next year?_______

2) You currently spend $7/unit in variable costs to produce your product. You are anticipating on hiring a new engineering that will cost $65,000 a year in salary, If you plan to make 300,000 units next year, how much of a reduction in product cost/unit would the engineer need to achieve to justify her salary?

_________/unit cost reduction.

3) Compute the annual allowable BOOK depreciation for a machine that costs $35,000 to purchase, and $4,000 to train your staff on the machine and it has a 5 year life and a $5,000 salvage value. Use the SL method.

Answer?________________

4) Compute the allowable BOOK depreciation amounts for each year of a machine that costs $55,000 to purchase, and $4,000 to install with a 5 year life. Use the DDB method (factor=2) switching to straight line. Yr1?________________ Yr2?________________ Yr3?________________ Yr4?________________ Yr5?________________