Sunset United is analyzing a proposed project. The company expects to sell 15,000 units, plus or minus 4 percent. The expected variable cost per unit is $120 and the expected fixed costs are $311,000. The fixed and variable cost estimates are considered accurate within a plus or minus 3 percent range. The depreciation expense is $74,000. The tax rate is 35 percent. The sales price is estimated at $170 a unit, plus or minus 2 percent. What is the contribution margin per unit for a sensitivity analysis using a variable cost per unit of $125?
Contribution margin = $170 - $125 = $45
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69.
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Your company is reviewing a project with estimated labor costs of $21.20 per unit, estimated raw material costs of $37.18 a unit, and estimated fixed costs of $20,000 a month. Sales are projected at 42,000 units over the one-year life of the project. All estimates are accurate within a range of plus or minus 4 percent. What are the total variable costs for the worst-case scenario?
Total variable costs = [($21.20 + $37.18) × 1.04][42,000 × 0.96] = $2,448,037
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70.
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A project has earnings before interest and taxes of $14,600, fixed costs of $52,000, a selling price of $29 a unit, and a sales quantity of 16,000 units. All estimates are accurate within a plus/minus range of 3 percent. Depreciation is $12,000. What is the base case variable cost per unit?
[16,000 × ($29 - v)] - $52,000 - $12,000 = $14,600; v = $24.09
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