The Weigh-ho Tow-em-Away Towing Service (WTTS) tows vehicles. The company has contracts with various auto clubs. Employees tow for individuals, restaurants, and bars, and they prowl the parking lots of banks on football weekends looking for opportunities to tow away vehicles parked in marked private parking spaces. Price and cost data projected for a one-year period are as follows. These data do not include any payments to the owner for services rendered. (Note: If rounding is required, round up to the nearest integer.) Weighted average price per tow $80 Weighted average variable costs per tow Labor $15 Other variable costs (fuel, etc.) $ 5 Annual fixed costs Equipment maintenance and depreciation $24,000 Selling and administrative costs $24,000

Use these data to answer the next three questions.

1.) How many vehicles does WTTS need to tow in a year to break even? (Note: If rounding is required, round up to the nearest integer

2.) The owner of WTTS is involved in running the business and securing contracts. She would like to take $60,000 from the business in after-tax dollars to compensate herself for services rendered and provide herself with a risk-adjusted return on her investment. Her tax rate is 25%. How many vehicles does WTTS need to tow in a year to achieve the after-tax $60,000 target? (Note: If rounding is required, round up to the nearest integer.)

3.) The owner is also considering the possibility of providing towing services for another company as a subcontractor. If she accepts this work, she will negotiate a guaranteed minimum number of tows in return for accepting a lower fee of $60. She estimates that one in four tows will be as a subcontractor for the lower fee of $60, and the remaining three in four tows will come through her own business at the weighted average price per tow of $80. She believes that variable costs per unit and total fixed costs will be unchanged by the decision to accept the work as a subcontractor. How many tows will she need to perform in a year as a subcontractor to attain the break-even point (i.e., do not include any additional payment to the owner)? (Note: If rounding is required, round up to the nearest integer.)

Continuing the previous problem (with capacity 300 at plant 2), suppose you want to see how much extra capacity and extra demand you can add to plant 1 and region 2 (the same amount to each) before the total shipping cost stops decreasing and starts increasing. Use Solver Table appropriately to find out. (You will probably need to use some trial and error on the range of input values.) Can you explain intuitively what causes the total cost to stop decreasing and start increasing?

When James Largo died, he owned $10 million in various securities, real estate, and personal effects. Under his will Largo gave $1 million to the local art museum and gave $2 million to his surviving wife Lorna. Discuss the tax implications here.

The Hardware Shoppe sold $222,500 of goods during September. It collected $75,000 from these sales plus $165,000 from sales of prior months. Complete the followingtable: