Question

CC’s is analyzing a proposed project with anticipated sales of 3,620 units, give or take 5 percent at a sales price of $24, plus or minus 2 percent.. The variable cost per unit is $14.60, plus or minus 4 percent, and the fixed costs are $12,900, plus or minus 1 percent. The depreciation expense is $8,100. If the company conducts a sensitivity analysis using a variable cost of $16, the total variable cost estimate will be:

Answer 1

Answer:

The total variable cost will be $ 16 * 3620= $ 57920

Explanation:

CC

Analyzing Proposed Project

                                          Given                1                     2                3

Variable Increase            ----                   10%                 9.125%      9.125%

Fixed Decreased                                                                                6.97%              

Sales price per unit        $24           $24                    $24             $24

Variable price per unit    $ 14.6       $16.06               $ 16             $ 16

Fixed Costs                    $ 12900      12900               $ 12900      $ 12000

Sales Volume               3620            3620                   3620          3620

We have taken the sale prices constant and changed the variable costs and fixed costs.

CC

Sensitivity Analysis Report

                              Given              1                       2                   3

Sales                   86880             86880         86880        86880    

Variable Costs    52852            58137.2      57920          57920

Contribution Margin 34028      28742.8      28960          28960

Fixed Costs              12900        12900         12900            12000  

Operating Profit       21128          15482.8      16060          16960

Dollar Change in

Variable Expenses                        5645.2       5068         5068    

The total variable cost will be $ 16 * 3620= $ 57920