The document contains exercises and questions related to business topics such as contribution margin calculation, sensitivity analysis, profit vs cash flow, cost of capital calculation, economic order quantity, break-even analysis, and accruals as a source of financing. Specifically, it asks the reader to calculate cost of capital for a mortgage, economic order quantity and number of orders per month given sales figures and costs, and profit, break-even points, and cash break-even point using financial data for a company.

1. Assignment 2
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Q12. How can the contribution margin be calculated?
Q15. What is the usefulness of sensitivity analysis?
Exercise.3
Using the information contained in exercise 1 (above), if rent were increased by $25,000 and
variable costs and unit selling price remained unchanged, what would be the new PV ratio and
break-even point in the units and in revenue?
Exercise.5
With the information outlined below, calculate the following:
1. Profit
2. Break-even point in revenue
3. Cash break-even point
Depreciation $30,000
Plant direct wages 100,000
Plant supervision 60,000
Advertising 30,000
Plant insurance 20,000
Sales commission 100,000
Ofice supplies 3,000
Revenue 550,000
Overtime 30,000
Rent 35,000
Property taxes 10,000
Raw Materials 100,000
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Q4. What is the meaning of the EVA? What does it measure? Why is it important?

2. Q13. What do we mean by marginal cost of capital?
Exercise.3
Daniel and Evelyn are considering buying a house valued at $250,000. They have combined
savings of $20,000, and the bank approved a $200,000 second mortgage. Also, Daniel has just
won $10,000 from a lottery. If Daniel and Evelyn invested their money in guaranteed certicates,
they would be able to earn 4%. The interest rates offered by the bank are 6% for the first
mortgage and 7% for the second.
Question
On the basis of the information, calculate Daniel and Evelyn’s cost of capital.
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Q6. With an example, differentiate between cash flow and profite.
Q19. How can accruals be a source of financing?
Exercise.5
A company has decided to market its products more aggressively. Current sales are 30,000 units
per year, and they are expected to increase by 50% next year. Carrying costs are estimated at
$0.20 per unit, and order costs are estimated at $7.00.
The firm wants to minimize its inventory costs.
Questions
1. What is the economic ordering quantity?
2. What is the optimal number of orders per month once the new sales level is reached?

3. Exercise.3
Daniel and Evelyn are considering buying a house valued at $250,000. They have combined
savings of $20,000, and the bank approved a $200,000 second mortgage. Also, Daniel has just
won $10,000 from a lottery. If Daniel and Evelyn invested their money in guaranteed certicates,
they would be able to earn 4%. The interest rates offered by the bank are 6% for the first
mortgage and 7% for the second.
Question
On the basis of the information, calculate Daniel and Evelyn’s cost of capital.?
Exercise.5
A company has decided to market its products more aggressively. Current sales are 30,000 units
per year, and they are expected to increase by 50% next year. Carrying costs are estimated at
$0.20 per unit, and order costs are estimated at $7.00.
The firm wants to minimize its inventory costs.
Questions
1. What is the economic ordering quantity?
2. What is the optimal number of orders per month once the new sales level is reached?
Exercise.5
With the information outlined below, calculate the following:
1. Profit
2. Break-even point in revenue
3. Cash break-even point
Depreciation $30,000
Plant direct wages 100,000
Plant supervision 60,000

4. Advertising 30,000
Plant insurance 20,000
Sales commission 100,000
Ofice supplies 3,000
Revenue 550,000
Overtime 30,000
Rent 35,000
Property taxes 10,000
Raw Materials 100,000