# Finance Chapter 7 Sample Problems Answers

Submitted By taj1985
Words 274
Pages 2
1. Wilson's Meats has computed its fixed costs to be \$.60 for every pound of meat it sells given an average daily sales level of 500 pounds. It charges \$3.89 per pound of top-grade ground beef. The variable cost per pound is \$2.99. What is the contribution margin per pound of ground beef sold?
A. \$0.30
B. \$0.60
C. \$0.90
D. \$2.99
E. \$3.89
Contribution margin = \$3.89 - \$2.99 = \$.90
2. A project has an accounting break-even point of 2,000 units. The fixed costs are \$4,200 and the depreciation expense is \$400. The projected variable cost per unit is \$23.10. What is the projected sales price?
A. \$20.80
B. \$21.00
C. \$21.20
D. \$25.40
E. \$25.60
Accounting break-even Q = 2,000 = (\$4,200 + \$400) (P - \$23.10); P = \$25.40
3. The Mini-Max Company has the following cost information on its new prospective project. Calculate the present value break-even point.
Initial investment: \$700
Fixed costs are \$200 per year
Variable costs: \$3 per unit
Depreciation: \$140 per year
Price: \$8 per unit
Discount rate: 12%
Project life: 3 years
Tax rate: 34%
A. 68 units per year
B. 75 units per year
C. 84 units per year
D. 114 units per year
E. None of the above
EAC = \$700/A.12,3 = \$700/2.4018 = \$291.45 or
N=3
I/Y=12
PV=700
CPT PMT=291.45

PV BEP = [EAC + FC(1 - Tc) - Dep(Tc)]/(CM(1 - Tc)) = [\$291.45 + \$200(.66) - \$140(.34)]/5(.66) = 113.89 units = 114

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