Question # 1

A manufacturer produces three types of humidifiers. The retail price of Humidifier Regular (HR) is $60 with variable costs of $20. Humidifier Advanced (HA) sells for $200 for its advanced features. This model's variable costs are $80. Humidifier Simple (HS) is a simplified version and only sells for $25 with variable costs of $15. The manufacturer has machines and facilities worth $320,000 annually. The sales data show that 1000 units of HR, 2000 units of HA, and 10,000 units of HS was sold last year. Calculate the break-even point of the firm. The firm has some idle capacity at these volumes, and chooses to cut the selling price of HR from $60 to $45, believing that its sales volume will rise from 1000 units to 2500 units. What is the revised break-even point?

Question # 2

Leonard's company purchases a window hardware from William's Hardware Co and sells to the market. Leonard is also considering manufacturing the product internally. William's Hardware Co. charges $4 per unit, with a minimum order of 3,000 units. If Leonard manufactures the product in-home, the process setup fee could be $15,000 and then $1.82 per unit for labor and materials.

a) Draw a graph illustrating the crossover (or indifference) point.

b) Determine the number of units where either choice has the same cost.

1. Question # 3
2. A retailer is considering building a large store. If the local economy experiences expansion, the firm expects the store to earn a $2,000,000 profit next year. If the local economy experiences a contraction, the firm expects the store to lose $400,000 next year. Analysts estimate a 20% chance for the local economy to experience an expansion next year (hence an 80% chance for contraction). What is the expected monetary value (EMV) of building the large store?

Question # 4

A restaurant has tracked the number of meals served at lunch over the last four weeks. The data show little in terms of trends, but do display substantial variation by day of the week. Use the following information to determine the seasonal (daily) indices for this restaurant. Round all numbers in your calculations to four decimal places.

	Week
Day	1	2	3	4
Sunday	40	35	39	43
Monday	54	55	54	59
Tuesday	61	60	65	64
Wednesday	72	77	78	74
Thursday	89	80	81	79
Friday	91	90	99	95
Saturday	80	82	84	83