1.

Markson Company had the following results of operations for the past year:

Sales (8,000 units at $19.70)				$	157,600
Variable manufacturing costs	$	84,800
Fixed manufacturing costs		14,700
Variable administrative expenses		10,800
Fixed selling and administrative expenses		19,700			(130,000	)
Operating income				$	27,600

A foreign company offers to buy 2,000 units at $13.55 per unit. In addition to variable manufacturing and administrative costs, selling these units would increase fixed overhead by $1,570 for the purchase of special tools. Marksons annual productive capacity is 12,000 units. If Markson accepts this additional business, its profits will:

2.Dragoo Building Inc. has a crane with a book value of $248,000 and a 4-year remaining life. A new crane is available at a cost of $623,000. Dragoo can also receive $48,800 for trading in the old pump. The new crane will reduce variable costs by $146,100 per year over its four-year life. The total impact to Dragoo over the cranes four-year life is:

3.

The following relates to a proposed equipment purchase:

Cost	$	146,000
Salvage value	$	5,000
Estimated useful life		4	years
Annual net cash flows	$	47,100
Depreciation method	Straight-line

Ignoring income taxes, the annual net income amount used to calculate the accounting rate of return is:

4.

Poe Company is considering the purchase of new equipment costing $80,500. The projected annual cash inflows are $30,700, to be received at the end of each year. The machine has a useful life of 4 years and no salvage value. Poe requires a 10% return on its investments. The present value of $1 and present value of an annuity of $1 for different periods is presented below. Compute the net present value of the machine.

Periods	Present Value of $1 at 10%			Present Value of an Annuity of $1 at 10%
1		0.9091			0.9091
2		0.8264			1.7355
3		0.7513			2.4869
4		0.6830			3.1699