AUG 2

Accept
10 olympic bikes
Materials (540) AC
DL (930) AC
OH NR
Add'l mat (350) AC
Add'l DL (120) AC
Mat not used 40 CS
price 6,800 AI

12 mountain racers
Materials 648 CS
DL 1,116 CS
OH NR
price (6,480) LI
184 better of

Reliable Laundromat must either make extensive repairs to its current dry-cleaning system or
replace it with a new system. The following information compares the alternatives:

Current New
System System
Purchase cost $ 40,000 $ 60,000
Repair cost $ 17,000
Annual cash operating cost $ 35,000 $ 20,000
Can be sold for today $ 8,000 $ 40,000
Can be sold for in 1 year $ 2,500 $ 10,000

If Reliable keeps the current system, the repairs have to be make immediately. The repairs
Will cause the company to be shut down for 4 days. If the new system is purchased, Reliable
will be shut down for 2 days for the changeover. Average daily profit for Reliable is $1,200.
Select and move this circle to choose "better" or "worse".
The owner of Reliable plans to sell the business at the end of one year for $84,000.

If Reliable replaces the system, it will be $_____________________ better or worse off

(circle one)

REPLACE
Purchase cost of present system NR
Purchase cost of new system (60,000) AC
Repair cost 17,000 CS
Operating cost of present system 35,000 CS
Operating cost of new system (20,000) AC
Selling price of present system today 8,000 AI
Selling price of new system today NR
Selling price of present system in one year NR
Selling price of new system in one year NR
Lost net income to repair old system - 4 days 4,800 AI
Lost net income to switch to new system - 2 days (2,400) LI
Selling price of business NR
(17,600) worse of

Slow Shop, a small convenience store, has food and beverage sales, and also sales of books and newspapers.
An income statement for a recent month is shown below:

Food and Books and

Beverage Newspapers TOTAL
Sales $ 140,000 $ 22,000 $ 162,000
Variable cost 65.00% 91,000 16,500 $ 107,500
Fixed cost 34,000 10,000 $ 44,000
Net income $ 15,000 $ (4,500) $ 10,500

Management is considering eliminating the books and newspapers sales to increase profits. The fixed cost is monthly
rent for the building which is allocated to the two departments based on square feet of floor space. If books and newspapers
are eliminated, the space could be used to add more food and beverage products. This is expected to increase sales of
food and beverage products by $25,000.

Eliminate
Lost sales BN (22,000) LI
Var cost BN 16,500 CS
Add'l Sales FB 25,000 AI
Add'l VC FB (16,250) AC
3,250

You want to be able to withdraw from your savings account $3,000 per year for three years starting on December 31, 2008.
If your account pays 4% interest, what is the minimum amount that you need to have on deposit on December 31, 2006?

12/31/2006 12/31/2007 12/31/2008 12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013

----------|--------------------|--------------------|--------------------|--------------------|--------------------|--------------------|--------------------|----------
2,774 3,000
2,667 3,000
2,564 3,000
8,005

withdrawal interest balance

12/31/2006 8,005.07
12/31/2007 -0- 320.20 8,325.27
12/31/2008 3,000.00 333.01 5,658.28
12/31/2009 3,000.00 226.33 2,884.62
12/31/2010 3,000.00 115.38 -0-
 12/31/2005 12/31/2006 12/31/2007 12/31/2008 12/31/2009 12/31/2010 6 7
----------|--------------------|--------------------|--------------------|--------------------|--------------------|--------------------|--------------------|----------
4,000 7,049 5
4,000 6,294 4
4,000 5,620 3
4,000 5,018 2
21,411 23,981

Deposits int bal

12/31/2005 4,000 4,000
12/31/2006 4,000 480 8,480
12/31/2007 4,000 1,018 13,498
12/31/2008 4,000 1,620 19,117
12/31/2009 2,294 21,411
12/31/2010 2,569 23,981

12/31/2006 12/31/2007 12/31/2008 12/31/2009 12/31/2010

----------|--------------------|--------------------|--------------------|--------------------|----------
0.925 2,775 3,000
0.889 2,667 3,000
0.855 2,565 3,000
8,007

Annuity: A series of payments that are equally spaced and equal in amount.

12/31/2006 12/31/2007 12/31/2008 12/31/2009 12/31/2010

----------|--------------------|--------------------|--------------------|--------------------|----------
8,005 8,325 3,000
3,000
3,000

12/31/2005 12/31/2006 12/31/2007 12/31/2008 12/31/2009 12/31/2010

----------|--------------------|--------------------|--------------------|--------------------|--------------------|----------
4,000
4,000
4,000
4,000

12/31/2005 12/31/2006 12/31/2007 12/31/2008 12/31/2009 12/31/2010

----------|--------------------|--------------------|--------------------|--------------------|--------------------|----------
12,148 4,000 4,000 4,000 4,000

23,978

(50,470) AC
70,000 CS
19,530

0 1 2 3 4 5
----------|--------------------|--------------------|--------------------|--------------------|--------------------|----------
(50,470) 36,470 22,470 8,470
3.791 53,074 14,000 14,000 14,000 14,000 14,000
2,604

3.6050

AUG 07

Sue is considering replacing her current truck with a new one. The current truck is used in her business and cost $35,000 two
years ago. It should last three more years. It can be sold for $13,000 now or in three years for $6,000. the new truck will cost
$38,000 and Sue expects to use it for three years after which time it can be sold for $16,500. The new truck is more efficient and
will use $450 per year less gasoline. Sue's business requires a 10% return on all investments of this type.