# Question: Last Mortgage Inc s primary business is processing mortgage loan applications

Last Mortgage Inc.’s primary business is processing mortgage loan applications. Last year, the manager of the mortgage application department established a policy of charging a \$500 fee for every loan application processed. Next year’s variable costs have been projected as follows: mortgage processor wages, \$30 per hour (a mortgage application takes 3 hours to process); supplies, \$10 per application; and other variable costs, \$15 per application. Annual fixed costs include depreciation of equipment, \$4,950; building rental, \$34,000; promotional costs, \$45,000; and other fixed costs, \$20,000.

Required
1. Using the contribution margin approach, compute the number of loan applications the company must process to
(a) Break even
(b) Earn a profit of \$50,050.
2. Using the same approach and assuming promotional costs increase by \$5,450, compute the number of applications the company must process to earn a profit of \$60,000.
3. Assuming the original information and the processing of 500 applications, compute the loan application fee the company must charge if the targeted profit is \$40,050.
4. The mortgage department can handle a maximum of 750 loan applications. How much more can be spent on promotional costs if the highest fee tolerable to the customer is \$400, if variable costs cannot be reduced, and if the targeted profit for the loan applications is \$50,000?

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