Question

ABC Co. expects to sell 2,200 units, give or take 10 percent. The expected variable cost per unit is $8.43 and the expected fixed costs are $9,500. Cost estimates are considered accurate within a plus or minus 5 percent range. The depreciation expense is $4,000. The sale price is estimated at $16 a unit, give or take 2 percent. The company bases its sensitivity analysis on the expected case scenario. If the company conducts a sensitivity analysis on the sales price using a price estimate of $16.25, what will be the earnings before interest and taxes

Answer 1

Earning Before Interest and Taxes $3,704

Step-by-step explanation:

Sales (2,200 * 16.25) 35,750

Less: Variable Costs (2,200 * 8.43) (18,546)

Contribution Margin 17,204

Less: Fixed Cost (9,500)

Depreciation Expense (4,000)

Earning Before Interest and Taxes $3,704