Reference no: EM132500987

Minnesota Financial is a subsidiary of Mayberry Enterprises. Processing loan applications is the main task of the corporation. They charge a $500 fee for every loan application processed. Next year's fixed costs have been projected as follows: sales and advertising $40,000; building rental, $18,000; Depreciation of computers and office equipment $27,000; and other fixed costs, $5,000. The projected variable costs include: loan officer's wages, $27 per hour (a loan application takes 5 hours to process); supplies $16.40 per application; and other variable costs, $8.60 per application. (Round all answers to the closest full number)

Questions:

Question 1. Determine the number of loan applications the company must process to (a) break even and (b) earn a profit of $50,000 (round to the closest full number).

Question 2. Determine the number of loan applications the company must process to earn a target profit of $50,000 if fixed costs increase by $10,000.

Question 3. Assuming the original fixed cost information and assuming that 500 loan applications are processed, compute the loan application fee the company must charge if the target profit is $75,000.

Question 4. If 750 loan applications is the maximum number her staff can handle. How much more (less) can be spent on promotional costs if the highest fee tolerable to the customer is $600, if variable costs cannot be reduced, and if the target net income for such an application load is $100,000?