Precise Machinery is analyzing a proposed project. The company expects to sell 2

Question

Precise Machinery is analyzing a proposed project. The company expects to sell 2,340 units, give or take 5 percent. The expected variable cost per unit is $260 and the expected fixed costs are $589,000. Cost estimates are considered accurate within a plus or minus 4 percent range. The depreciation expense is $129,000. The sales price is estimated at $750 per unit, give or take 2 percent. What is the amount of the total costs per unit under the worst case scenario?

A. $548.58

B. $551.62

C. $604.16

D. $638.23

E. $545.96

Explanation / Answer

(Precise Machinery)
c) What is the amount of the total costs per unit under the worst case scenario?

$577.45
Total costs per unit; worst case =
[($2340 * 0.95) (260 * 1.04) + ($589,000 * 1.04)]/(2,340 * 0.95) = $545.96

Option E is correct

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