1. You wish to endow a scholarship to be awarded to a student attending the college you remember so fondly. If you want the amount to be $2,000 next year, with a 3% increase each year to cover rising costs, how much do you need to donate today to ensure that the scholarship will last forever? The college will invest the funds you donate at 8.00% per year.

A. $22,222

B. $40,000

C. $50,000

D. $60,000

E. $66,667

2. Variable costs:

A. are subtracted from fixed costs to compute contribution margin.

B. change in direct relationship to the quantity of output produced.

C. reflect the change in a variable when one or units of output are produced.

D. are constant in the short-run regardless of the quantity of output produced.

E. form the basis that is used to determine the degree of operating leverage employed by a firm.