BU385 Midterm 2
Tutors: Dylan Cowley Greg Krikorian Coordinator: Jason Liou
Some images used from course and textbook slides.
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• • • • • Come to an information session: Tuesday, November 5th at 10pm…show more content… – Breakeven, payback period, NPV
Franklin & Bash are looking to calculate the number of cases they will have to take this month to break even. Their fixed costs are $45000, their labour costs are $5/case, research materials cost $2/case and they charge $1000 per case. How many should they take to breakeven? = FC/(R-VC) = $45000/[1000-(5+2)] = 45.32
Make or Buy?
Oceanic airlines is trying to decide whether they should make or buy their airplanes. They could make them for $500 000 with cost for labour at $20 000 per week. A supplier’s price is $6 700 000 for 10 planes. Cost is then reduced to $7 500 per week. Make or buy?
Make: v = 500 000 F = 20 000 Buy: v = 6 700 000/10 = 670 000 F = 7 500
X = point of indifference
500000x + 20 000 = 670000x + 7500 12500 = 170000x X = 0.0735
If demand is variable cost
• Cash flow
– (cash received) – (cash outflow for labour, material, etc.)
• Present Value
– Sum (current value) of all