Question

Michael’s is considering a project that has projected sales of 4,200 units ± 5 percent, a sales price per unit of $50 ± 4 percent, variable costs per unit of $25 ± 5 percent, and fixed costs per year of $45,000 ± 3 percent. The depreciation expense is $11,000 per year and the tax rate is 33 percent. What is the annual net income under the best case scenario?

Answer 1

Answer:

annual net income is $23077.25

Explanation:

Given data:

sales volume = 4200 units

selling price/units $50

variable cost/units $25

fixed cost is $45000

Total sales $unit = 4200 + 5\% \times 4200 = 4410 units$

selling price/unit $= 50 + 4\%\times 50 = 52$

variable cost/unit $= 25- 5\%\times 25 = 23.75$

fixed cost  $= 45000 - 3\%\times 45000 = 43650$

sales  $=4410 \times 52 = 229320.00$

variable cost  $= 4410 \times 23.75 = 104737.5$

difference = 229320 - 104737 = 124583

fixed cost = $43650

depreciation exchange = $11000

so total income prior to tax = 124583 - (43650 + 11000) =$ 69932.5

tax rate is 33%

so total income after tax is $= 69932.5 \times .33 = 23077.725$