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1. In a slow year, Deutsche Burgers will produce 2.8 million hamburgers at a total cost of $3.4 million. In a good year, it can produce 4.8 million hamburgers at a total cost of $4.6 million. a. What are the fixed costs of hamburger production? (Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place.) b. What is the variable cost per hamburger? (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. What is the average cost per burger when the firm produces 2 million hamburgers? (Do not round intermediate calculations. Round your answer to 2 decimal places.) d. What is the average cost per burger when the firm produces 3 million hamburgers? (Do not round intermediate calculations. Round your answer to 2 decimal places.) e. Why is the average cost lower when more burgers are produced? The fixed costs are spread across more burgers. Variable costs are lower per burger. Fixed costs are constant per burger. 2. A project currently generates sales of $3 million, variable costs equal 30% of sales, and fixed costs are $0.6 million. The firm's tax rate is 40%. Assume all sales and expenses are cash items. a. What are the effects on cash flow, if sales increase from $3 million to $3.3 million? (Input the amount as positive value. Enter your answer in dollars not in millions.) b. What are the effects on cash flow, if variable costs increase to 35% of sales? (Input the amount as positive value. Enter your answer in dollars not in millions.) 3. Blooper's analysts have come up with the following revised estimates for its magnoosium mine: Range Pessimistic Optimistic Initial investment + 25 % - 15 % Revenues - 20 % + 25 % Variable costs + 15 % - 20 % Fixed cost + 40 % - 45 % Working capital + 50 % - 20 % Conduct a sensitivity analysis for each variable and range and compute the NPV for each. Use Spreadsheet 10.1. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Enter your answers in thousands rounded to the nearest whole dollar.) 4. Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $140. The materials cost for a standard diamond is $60. The fixed costs incurred each year for factory upkeep and administrative expenses are $214,000. The machinery costs $2.1 million and is depreciated straight-line over 10 years to a salvage value of zero. a. What is the accounting break-even level of sales in terms of number of diamonds sold? (Do not round intermediate calculations.) Break-even sales diamonds per year b. What is the NPV break-even level of diamonds sold per year assuming a tax rate of 35%, a 10-year project life, and a discount rate of 12%? (Do not round intermediate calculations. Round your answer to the nearest whole number.) Break-even sales diamonds per year 5. Modern Artifacts can produce keepsakes that will be sold for $120 each. Nondepreciation fixed costs are $1,600 per year, and variable costs are $100 per unit. The initial investment of $4,800 will be depreciated straight-line over its useful life of 6 years to a final value of zero, and the discount rate is 20%. a. What is the degree of operating leverage of Modern Artifacts when sales are $15,000? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Degree of operating leverage = b. What is the degree of operating leverage when sales are $28,080? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Degree of operating leverage = c. Why is operating leverage different at these two levels of sales? Degree of operating leverage = When profits are A silver mine can yield 12,000 ounces of silver at a variable cost of $30 per ounce. The fixed costs of operating the mine are $54,000 per year. In half the years, silver can be sold for $46 per ounce; in the other years, silver can be sold for only $23 per ounce. Ignore taxes. a. What is the average cash flow you will receive from the mine if it is always kept in operation and the silver always is sold in the year it is mined? (Do not round intermediate calculations.) Average cash flow = b. Now suppose you can costlessly shut down the mine in years of low silver prices. What happens to the average cash flow from the mine? (Do not round intermediate calculations.) Average cash flow