Problem set/Assignment #2 1. In connection with surfacing a new highway, a contractor has a choice of two sites on which to set up the asphalt missing plant equipment. The contractor estimates that it will cost $1.15 per cubic yard per mile (yd3 mile) to haul the asphalt paving material from the mixing plant to the job location. Factors relating to the two mixing sites are as follows (production costs at each site are the same): Cost Factor Site A Site B Average hauling distance 6 miles 4.3 miles Monthly rental of site $1,000 $5,000 Cost to set up and remove equipment $15,000 $25,000 Hauling expense $1.15/yd3-mile $1.15/yd3-mile Flagperson Not required $96/day The job requires 50,000 cubic yards of missed-asphalt-paving material. It is estimated that four months (17 weeks of five working days per week) will be required for the job. Compare the two sites in terms of their fixed, variable, and total costs (show all necessary works). 2. Estimate the cost of the wedding of a rich man's daughter to be held in a historical location in Washington, D.C from the information furnished below. Two hundred guests are being invited. Items Cost Invitations $1,000 Rent for site $15,000 Wedding gown $16,000 Dresses for brides maids ( 5 dresses) $20,000 Dress for flower girl $500 Tuxedo rentals for the groom and ushers $2,000 Flowers $5,000 Reception: Dinner $40,000 Cocktails Soda $1.50/glass or can Mixed drinks $5.00/drink Beer $4.00/bottle or can Misc. $20,000 It is estimated that 25%of the guests will have an average of one soda, 50% of the guests will have on an average two mixed drinks, and the remaining 25% of the guests will have on an average two beers. Estimate the wedding cost and also compute the cost per guest (show all your works). 3. One of your firms suppliers discounts prices for large quantities. The first 1000 parts are $13 each. The next 2000 are $12 each. All parts in excess of 3000 cost $11 each. What are the average cost and marginal cost per part for the quantities: (i) 1500 (ii) (iii) (iv) 3500 1000 500 Show all works. 4. Define each of the costs below as either sunk, opportunity, cash or book: a. Monthly electricity expense. b. Value of floor space in a warehouse facility left empty the past 6 quarters. c. Amount you could have sold a piece of equipment for last month. d. Salary you could have earned while you were on non-paid leave. e. Low price of a stock that you chose not to invest in. f. Price paid to a consultant for a feasibility study on a prospective project. 5. Draw a cash flow diagram on EXCEL using the data below. Year Cash flow 0$10,000 1 $ 2,000 2 $ 3,000 3 $ 4,000 4 $ 5,000 5$ 1,000