MME 4272: Engineering Management II
ASSIGNMENT # 2
Factors, BEP and Depreciation (35+30+35)
Total Marks: 100
‘A diamond is a lump of coal that did well under pressure.’ Source unknown
Problem #1  What amount would you need to pay each January 1 into a savings account if at the end of 15 years (15 payments) you desire RM 30,000? Annual interest is 7%. (Note: The last payment will coincide with the time of RM 30,000 balance.)
Problem #2  A future amount, F, is equivalent to $1,500 now when six years separate the amounts and the annual interest rate is 12%. What is the value of F?
Problem #3  A present obligation of $20,000 is to be repaid in equal uniform annual ...view middle of the document...
Fixed costs are $12,000. Current volume is 50,000 units. The Grocery can substantially improve the product quality by adding a new piece of equipment at an additional fixed cost of $5,000. Variable cost would increase to $1.00, but their volume should increase to 70,000 units due to the higher quality product.
Should the company buy the new equipment?
What are the break-even points ($ and units) for the two processes?
Problem # 7 [5+6+7=18]
The J & J Company has three product lines of belts – A, B, and C – having contribution margins of $3, $2, and $1, respectively. The president foresees sales up to 200,000 units in the coming period, consisting of 20,000 units of A, 100,000 units of B, and 80,000 units of C. The company’s fixed costs for the period are $255,000.
a) What is the company’s break-even point in units, assuming that the given sales mix is maintained?
b) If the mix is maintained, what is the total contribution margin when 200,000 units are sold? What is the operating income?
c) What would be the operating income become if 20,000 units of A, 80,000 units of B, and 100,000 units of C were sold? What is the new break-even point in units if these relationships persist in the next period?
Problem #8 [2+2+2=8]
A diagnostic center has just purchased a MRI system for $325,000 with an additional $25,000 charge for installation onto a truck for mobility. The expected life is 8 years with a salvage value of 10% of the purchase price. Use classical straight line depreciation to determine (a) the first cost and salvage value, (c) annual depreciation amounts, and (d) book value after 5 years.
Problem #9 [2+4=7]
Upjohn Company has bought a new packaging machine with an estimated useful life of five years. The cost of the equipment was $55,000, and the salvage value was estimated to be $5,000 at the end of year 5. Compute the annual depreciation expenses over the five year life of the equipment under each of the following methods of depreciation:
Straight –line method
Double-declining balance method
Problem #10 [3+5+5+4+3=20]
A special-purpose computer workstation has B = $50,000 with a 4-year recovery period.
(a) Tabulate and plot the values for SL depreciation, accumulated depreciation, and book value for each year if there is no salvage value
(b) Tabulate and plot the values for SL depreciation, accumulated depreciation, and book value for each year if the salvage value, S=$16,000.
(c) Use a spreadsheet to solve this problem by using DDB method.
(d) Plot the book value for SL and DDB depreciation on a single XY scatter chart.
(e) Calculate the DDB annual depreciation rate for all years 1 through 4.
Tips for submission:
Solve the problems yourself for deeper understanding
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