Total fixed costs are $60,000. Marketing data indicate that the company can sell up to 8000 units of the Bedford Lamp and up to 4000 units of the Lowell Lamp. Machine hour capacity is 25,000 hours per year. Which product mix will deliver the optimum operating income? 8000 Bedford Lamps and 4000 Lowell Lamps 4000 Bedford Lamps and zero Lowell Lamps 8000 Bedford Lamps and 2250 Lowell Lamps 4000 Bedford Lamps and 1000 Lowell Lamps You must show your work for your selection for credit.

Shrieves casting company is considering adding a new line to its product mix, and the capital budgeting analysis is being conducted by sidney johnson, a recently graduated mba. the production line would be set up in unused space in the main plant. the machinery’s invoice price would be approximately $200,000, another $10,000 in shipping charges would be required, and it would cost an additional $30,000 to install the equipment. the machinery has an economic life of 4 years, and shrieves has obtained a special tax ruling that places the equipment in the macrs 3-year class. the machinery is expected to have a salvage value of $25,000 after 4 years of use. the new line would generate incremental sales of 1,250 units per year for 4 years at an incremental cost of $100 per unit in the first year, excluding depreciation. each unit can be sold for $200 in the first year. the sales price and cost are both expected to increase by 3% per year due to inflation. further, to handle the new line, the firm’s net working capital would have to increase by an amount equal to 12% of sales revenues. the firm’s tax rate is 40%, and its overall weighted average cost of capital, which is the risk-adjusted cost of capital for an average project (r), is 10%. define “incremental cash flow.” (1) should you subtract interest expense or dividends when calculating project cash flow?