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Solutions to Chapter 2 Problems
A Note To Instructors: Because of volatile energy prices in today's world, the instructor is encouraged to vary energy prices in affected problems (e.g. the price of a gallon of gasoline) plus and minus 50 percent and ask students to determine whether this range of prices changes the recommendation in the problem. This should make for stimulating inclass discussion of the results.

2-1

The total mileage driven would have to be specified (assumed) in addition to the variable cost of fuel per unit (e.g. $ per gallon). Also, the fixed cost of both engine blocks would need to be assumed. The efficiency of the traditional engine and the composite engine would also need to be specified

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2-2

Fixed
Raw Materials
Direct Labor
Supplies
Utilities*
Property Taxes
Administrative Salaries
Payroll Taxes
Insurance-Building and Equipment
Clerical Salaries
Sales Commissions
Rent
Interest on Borrowed Money
*

X
X
X
X
X
X

Variable
X
X
X
X

X

X
X
X

Classification is situation dependent

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