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Wickham Limited is considering the purchase of a warehouse directly across the street from its manufacturing plant. Wickham currently warehouses its inventory in a public

Wickham Limited is considering the purchase of a warehouse directly across the street from its manufacturing plant. Wickham currently warehouses its inventory in a public warehouse across town. Rent on the warehouse and delivering and picking up inventory cost Wickham $48,000 per year. The building will cost Wickham $450,000. Wickham will depreciate the building for 20 years. At the end of 20 years, the building will have a $125,000 salvage value. Wickhams required rate of return is 10%. Using the interest tables, the buildings net present value is

a.

$427,228.

b.

$960,000.

c.

($22,772).

d.

($41,347).

Metin Limited produces tents and sleeping bags. The companys products are in high demand due to the quality and durability of the products. Metin estimates it could sell 600 tents per month and 600 sleeping bags per month. Following is information for each of these products:

Tent

Sleeping Bag

Selling price per item

$68.00

$43.00

Variable cost per item

49.50

29.00

Contribution margin per item

$18.50

$14.00

Machine hours per item

1.1

0.8

Metin has 800 machine hours available each month. If Metin allocates its production capacity between the tents and sleeping bags so that it maximizes the companys contribution margin, what will the contribution margin be?

a.

$13,550

b.

$13,765

c.

$14,000

d.

$19,500

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