Consider a four-year project with the following information: initial fixed asset investment = $480,000; straight-line depreciati
on to zero over the four-year life; zero salvage value; price = $32; variable costs = $22; fixed costs = $170,000; quantity sold = 78,000 units; tax rate = 32 percent. How sensitive is OCF to changes in quantity sold? (Round your answer to 2 decimal places. (e.g., 32.16)) ΔOCF/ΔQ $
1 answer:
Answer:
Explanation:
This is a question under Sensitivity analysis <u><em>(which is a technique for forecasting the result of a decision if a condition turns out to be different compared to the key forecasts. It assists in evaluating the risk level of a strategy. It is also used in identifying how reliant the output is on a specific input value.)</em></u> and the diagram explaning the step by step solution can be seen in the attached image below.
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Answer:
Part a
Ultimate Audio Company
<u>Sales Budget </u>
<u>For the Month Ending June 30</u>
Product and Area Unit Sales Volume Unit Selling Price Total Sales
Model U500 :
Northeast Region 140,000 $45 $6,300,000
Southwest Region 160,000 $45 $7,200,000
Total $13,500,000
Model U500 :
Northeast Region 100,000 $80 $8,000,000
Southwest Region 125,000 $80 $10,000,000
Total $18,000,000
Total Revenue from Sales $31,500,000
Part b
Ultimate Audio Company
<u>Production Budget </u>
<u>For the Month Ending June 30</u>
Model U500 Model S1000
Expected Units to be Sold 300,000 225,000
Add Desired Closing Inventory 30,000 15,000
Total 330,000 240,000
Less Desired Opening Inventory (25,000) (10,000)
Total Production 305,000 230,000
Explanation:
<em>Note : I have attached the complete question as images below !</em>
A Sales Budget shows the Total Expected Revenue from sale of budgeted units.
Total Revenue = Total Expected Units Sales x Selling Price Per Unit
A Production Budget shows the number of units to be produced to meet the Sales and Inventory targets
Total Production = Expected Sales + Desired Closing Inventory - Desired Opening Inventory
