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fgiga [73]
3 years ago
9

The Tree Top Airline​ (TTA) is a small​ feeder-freight line started with very limited capital to serve the independent petroleum

operators in the arid Southwest. All of its planes are​ identical, although they are painted different colors. TTA has been contracting its overhaul work to Alamo Airmotive for ​$35,000 per plane per year. TTA estimates​ that, by building a ​$450,000 maintenance facility with a life of 15 years and a residual​ (market) value of ​$100,000 at the end of its​ life, they could handle their own overhaul at a cost of only ​$25, 000 per plane per year. What is the minimum number of planes they must operate to make it economically feasible to build this​ facility? The MARR is 12​% per year.
Business
1 answer:
nikitadnepr [17]3 years ago
3 0

Answer:

To make it feasible it will need to operate 7 or more planes.

Explanation:

450,000 maintenance facility

useful life of 15 year

salvage value of 100,000

<u>saving cost per plane:</u>

third party cost - own facility cost = cost savings

           35,000  -          25,000      =    10,000

present value of the salvage value: (present value of a lump sum)

\frac{salvage }{(1 + rate)^{time} } = PV  

salvage $ 100,000

time  15 years

Minimum accepter rate of return: 0.12000

\frac{100000}{(1 + 0.12)^{15} } = PV  

PV   18,269.6261

present worth of the facility:

450,000- 18,268.63 = 431,731.37

Now we determinate the PMT over a 15 years period to know the cost savings per year to justify the facility:

PV \div \frac{1-(1+r)^{-time} }{rate} = C\\

PV 431,731

time 15

rate 0.12

431731.37 \div \frac{1-(1+0.12)^{-15} }{0.12} = C\\

C  $ 63,388.630

As each plane cost savings are 10,000

63,388.62  / 10,000 = 6.39

the company will need to operate 7 or more planes.

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Travka [436]

Answer:

Q        Fixed       Variable    Total    Marginal    Aver.     Aver.     Aver.

<u>           Costs        Costs         Cost    Cost           FC         VC         TC      </u>

0          100             0              100         -               -             -             -

1           100           50               150       150           100         50         150

2          100           70               170         20            50         35          85

3          100           90               190        20           33.33      30        63.33

4          100          140               240       50            25          35          60

5          100         200               300       60            20          40          60

6          100         360              460      160           16.67       60        76.67

The firm's profit in this case is <u>-$360</u>.

True or False: This was a wise decision. ⇒ <u>False</u>

Depends on the situation and which costs are avoidable if the company shuts down operations. If it produces 4 cases, the losses reduce from -$100 to -$40, but the contribution margin is positive since revenues exceed variable costs by $60. But under the current price level, the company will not be able to generate profits unless it increases its sales price or decreases its fixed costs.

Vaguely remembering his introductory economics course, the company's chief financial officer tells the CEO it is better to produce 1 case of ball bearings, because marginal revenue equals marginal cost at that quantity.

At this level of production, the firm's profit is <u>-$100</u>.

True or False: This is the best decision the firm can make. ⇒ <u>False</u>

Accounting profit is maximized at 4 cases since marginal cost ($50) = sales price ($50). At this point the total profit is -$40.

3 0
3 years ago
what is the difference between procedures and rules? can some rules be eliminated when solid procedures are in place? discuss.
iragen [17]

Rules are made so that people behave in a particular manner whereas, procedures are meant to guide about how to do something.

Procedures are the standard steps used to carry out tasks in an organization. They were created for repetitive tasks. They offer instructions regarding how to carry out a task. In speaking, procedures are inflexible and provide no room for inventiveness. It eliminates ambiguity from the work and provides it a clear structure.

Rules are specific instructions that define what must be done and what shouldn't be done. They were created in order to preserve, govern, and manage the workplace. They were inflexible and lack adaptability. Strict disciplinary measures are applied when rules are broken. It reflects decisions about what needs to be done and what cannot be done.

No, rules cannot be eliminated when solid procedures are in place because they determine the behavior or manner in which things should be done.

Learn more about rules and procedures here:

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8 0
11 months ago
Governments that centralize their risk financing activities should account for this activity in which type of fund?
kari74 [83]

Answer:

The correct answer is letter "D": Either the General Fund or Internal Service Fund is acceptable.

Explanation:

The General Fund is used by the government to record all the inflows and outflows of the transactions related to daily use expenditures and long-term operations. The agency that provides the resources is the Department of Treasury through loans receivable.  

The Internal Service Fund record all transactions derived from the expenditures in the use of goods or services among government departments and agencies on a cost-reimbursement basis.

Thus, when reporting governmental financial activities, the can be recorded in the General Fund or the Internal Service Fund.

7 0
3 years ago
Use the following information to prepare the September cash budget for PTO Manufacturing Co. The following informaition relates
Keith_Richards [23]

Answer and Explanation:

The preparation of the cash budget is shown below:

Beginning Cash Balance        $40,000

Budgeted Cash Receipts        $225,000

Total Cash Available                $265,000

Less

Payment of Raw Mat purchases in Aug ( $80,000 × 35%)          $28,000.00

Payment of Raw Mat purchases in Sep ($110,000 × 65%)           $71,500

Direct Labor Payment            $40,000

Other Cash Expenses            $60,000

Income Tax Paid                    $10,000

Bank Loan Interest Paid    $1,000

Total Cash Disbursements   $210,500

Closing Cash Balance           $54,500

We simply deduct the all cash expenses from the total cash available so that the closing cash balance could come

6 0
3 years ago
If a potential Latin American customer insists on giving you a tour of the architectural highlights of his city prior to discuss
timama [110]

Answer: The answer is HIGH CONTEXT Culture.

Explanation: High context culture refers to an implicit communication and nonverbal clues. It is a situation whereby a lot of unspoken communication is implicitly transferred during a communication.

In a high context culture, communication that has underlying context and meaning in the message is used. It goes beyond the spoken words but relies on the tone of the message.

A tour round a potential customers high class environment gives a clue of a high context culture as the customer is not verbal stating he is wealthy but implying it non verbally.

5 0
3 years ago
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