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Stella sold 2,600 units at a price of $18 each last month. The total direct material cost per unit produced is $4. Fixed manufacturing overhead

  1. Stella sold 2,600 units at a price of $18 each last month. The total direct material cost per unit produced is $4. Fixed manufacturing overhead cost totaled $18,000. Commission to the salesperson was 10% of the sales revenue. What is the contribution margin for Stella?
  2. Assume that a club charges a membership fee of $50 per month for unlimited use of the exercise equipment plus an additional fee of $5 for every instructor-led exercise class you attend. What is your expected cost for a month in which you attend TEN instructor-led classes?
  3. Sarah runs her own burger shop. The monthly cost of the cart rental and business permit is $200. Sarah's contribution margin per unit is $2 and contribution margin ratio is 80%...a) How many burgers does Sarah need to sell each month to breakeven? b) How much sales revenue does Sarah need to generate each month to breakeven? .c) How many burgers does Sarah need to sell each month to earn a target profit of $500 a month? .d) How much sales revenue does Sarah need to generate each month to earn a target profit of $500 per month?
  4. Assume Tucson Tortilla's sales budget shows projected sales of 30,000 cases in April and 42,000 cases in May. The company's manager would like to maintain ending safety stock equal to 10% of the next month's projected sales. How many units should be produced in April?
  5. A company is considering two projects that require the same initial investment. Project A has an NPV of $333,000 and a 3-year payback period. Project B has an NPV of $339,000 and a payback period of 4.5 years. Which project would you choose?
  6. A company is considering investing in a wind turbine to generate its own power. Any unused power will be sold back to the local utility company. Between cost savings and new revenues, the company expects to generate $200,000 per year in net cash inflows from the turbine. The turbine would cost $2 million and is expected to have a 20-year useful life with no residual value. Calculate the payback period.

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