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52) A project has a projected sales price of $99 a unit, variable costs per unit of $58, annual fixed
costs of $238,000, and annual depreciation of $139,000. The tax rate is 22 percent. What is the
contribution margin for an analysis using sales units of 12,800?
A) $27.06
B) $38.97
C) $22.41
D) $41.00
E) $42.64
53) The Meldrum Co. expects to sell 3,000 units, ± 15 percent, of a new product. The variable
cost per unit is $8, ± 5 percent, and the annual fixed costs are $12,500, ± 5 percent. The annual
depreciation expense is $4,000 and the sale price is $18 a unit, ± 2 percent. The project requires
$24,000 of fixed assets which will be worthless when the project ends in six years. Also required
is $6,500 of net working capital for the life of the project. The tax rate is 21 percent and the
required rate of return is 12 percent. What is the net present value of the pessimistic scenario?
A) $12,979.40
B) $14,008.16
C) $13,810.29
D) $10,146.18
E) $8,308.15
54) A new 5-year project has expected sales of 3,400 units, ± 8 percent; variable costs per unit of
$22, ± 2%; annual fixed costs of $47,500, ± 2 percent; annual depreciation of $33,000; and a sale
price of $45 a unit, ± 3 percent. The project initially requires $165,000 of fixed assets and
$42,000 of net working capital. At the end of the project, the net working capital will be
recouped and the fixed assets will produce an aftertax cash inflow of $35,000. The tax rate is 21
percent and the discount rate is 14 percent. What is the net present value of the optimistic
scenario?
A) −$28,026.15
B) −$28,799.24
C) −$22,584.66
D) $21,202.98
E) $18,566.01
55) The Meldrum Co. expects to sell 3,000 units, ± 15 percent, of a new product. The variable
cost per unit is $8, ± 5 percent; annual fixed costs are $12,500, ± 5 percent; annual depreciation
is $4,000; and the sale price is $18 a unit, ± 2 percent. What is the amount of the fixed cost per
unit under the pessimistic scenario?
A) $4.17
B) $4.66
C) $5.15
D) $5.35
E) $6.02
56) A project has these estimated values: sales quantity of 4,600 units ± 2 percent; variable cost
per unit of $17, ± 3 percent; annual fixed costs of $46,900, ± 1 percent; annual depreciation of
$17,300; and a sales price of $39 a unit, ± 10 percent. The company bases its sensitivity analysis
on the expected scenario. What will be the operating cash flow for a sensitivity analysis based on
a sales price of $35 a unit and a tax rate of 21 percent?
A) $27,319
B) $32,400
C) $31,994
D) $26,700
E) $23,508
57) CC's is analyzing a project with anticipated annual sales of 3,620 units, ± 5 percent; a sales
price of $24, ± 2 percent; variable costs per unit of $14.60, ± 4 percent; and annual fixed costs of
$12,900, ± 1 percent. What will be the annual total variable costs given a sensitivity analysis
using a variable cost of $16 a unit?
A) $53,470
B) $54,900
C) $55,500
D) $57,920
E) $61,050
58) A firm is reviewing a project with a labor cost of $18.90 per unit, raw materials cost of
$21.63 a unit, and fixed costs of $8,000 a month. Sales are projected at 7,200 units total for the
3-year life of the project. What are the total variable costs per year?
A) $106,300
B) $99,300
C) $97,272
D) $103,300
E) $109,300
59) A project with a life of one year has earnings before interest and taxes of $5,750, fixed costs
of $50,000, a selling price of $13 a unit, and a sales quantity of 11,500 units. Depreciation is
$7,500. What is the variable cost per unit?
A) $6.75
B) $7.00
C) $7.25
D) $7.50
E) $7.75
60) At a production level of 5,600 units, a project has total costs of $89,000 and a variable cost
per unit of $11.20. What is the amount of the total fixed costs?
A) $24,126
B) $26,280
C) $27,090
D) $27,820
E) $28,626
61) A project has a contribution margin of $2.16 per unit. If the sales price per unit is $11 and the
fixed costs are $24,700, what is the amount of total costs at a production level of 6,000 units?
Ignore depreciation.
A) $65,165
B) $81,080
C) $57,460
D) $68,221
E) $77,740
62) Wilson's Meats has fixed costs of $.60 for every pound of meat it sells given a sales level of
32,500 pounds. It charges $3.89 per pound while the variable cost per pound is $2.99. If
depreciation is $16,400, what is the accounting profit break-even point?
A) 31,948 pounds
B) 32,467 pounds
C) 39,889 pounds
D) 42,650 pounds
E) 37,338 pounds
63) Southern Markets is considering a project with total sales of $17,500, total variable costs of
$9,800, total fixed costs of $3,500, and estimated production of 400 units. The depreciation
expense is $2,400 annually. What is the contribution margin per unit?
A) $4.50
B) $10.50
C) $14.14
D) $19.09
E) $19.25
64) Assume a project with a life of one year has projected depreciation of $720, fixed costs of
$6,000, and total sales of $11,760 at a sales quantity of 300 units. The variable cost per unit is
$17.40. What is the accounting break-even level of production?
A) 309 units
B) 301 units
C) 292 units
D) 298 units
E) 312 units
65) The accounting break-even production quantity for a project with a life of one year is 35,173
units. The fixed costs are $318,290 and the contribution margin is $13.27. What is the projected
depreciation expense?
A) $142,734
B) $148,456
C) $110,025
D) $113,053
E) $122,082
66) The accounting break-even production quantity for a project is 5,799 units. The fixed costs
are $92,640, the depreciation is $36,210, and the sales price per unit is $48.29. What is the
variable cost per unit?
A) $31.18
B) $27.04
C) $26.07
D) $32.81
E) $33.04
67) A project with a life of one year has an accounting break-even point of 2,962 units. The fixed
costs are $46,308 and the depreciation expense is $22,147. The projected variable cost per unit is
$23.10. What is the projected sales price?
A) $48.07
B) $42.96
C) $41.20
D) $46.21
E) $45.40
68) A proposed 12-month project has fixed costs of $3,600, depreciation expense of $1,500, and
a sales quantity of 1,300 units. What is the contribution margin if the projected level of sales is
the accounting break-even point?
A) $3.92
B) $4.14
C) $4.50
D) $4.80
E) $5.00
69) A proposed 1-year project has a contribution margin of $5, fixed costs of $12,000, variable
costs per unit of $12, depreciation of $30,000, an EAC of $41,185 and a tax rate of 21 percent.
What is the present value break-even point in units?
A) 12,458
B) 9,489
C) 11,232
D) 10,603
E) 9,617
70) The Mini-Max Company has a prospective 5-year project with an initial cost of $318,900,
annual fixed costs of $45,200, variable costs per unit of $16.78, and a sales price of $29.95. The
discount rate is 13 percent and the tax rate is 24 percent. The firm uses straight-line depreciation
over a project's life for all fixed assets. What is the accounting break-even point in units per
year?
A) 7,850
B) 8,275
C) 10,315
D) 11,304
E) 11,429
71) The Highlight Company is reviewing a proposed 7-year project with an initial cost of
$687,400. The annual fixed costs are $92,800, the variable cost per unit is $49.79, and the sales
price per unit is $89. The tax rate is 21 percent and the discount rate is 12 percent. All assets are
depreciated straight-line over the life of the project. What is the accounting break-even point in
units per year?
A) 6,518
B) 3,069
C) 5,475
D) 6,103
E) 4,872
72) A project requires an initial fixed asset investment of $148,000, has annual fixed costs of
$39,800, a contribution margin of $14.62, a tax rate of 21 percent, a discount rate of 15 percent,
and straight-line depreciation over the project's 3-year life. The assets will be worthless at the
end of the project. What is the present value break-even point in units per year?
A) 6,086
B) 7,613
C) 7,504
D) 7,438
E) 7,911
73) The Quorum Company has a prospective 6-year project that requires initial fixed assets
costing $962,000, annual fixed costs of $403,400, variable costs per unit of $123.60, a sales price
per unit of $249, a discount rate of 14 percent, and a tax rate of 21 percent. What is the present
value break-even point in units per year?
A) 6,081
B) 4,995
C) 5,375
D) 6,144
E) 5,852
74) Northern Woods is considering two methods of production for a new product. The first
method will require fixed assets costing $450,000 that will be depreciated straight-line to zero
over the product's 3-year life. Annual fixed costs are $316,000 and variable costs per unit are
$8.64. The second method will require fixed assets costing $790,000, annual fixed costs of
$211,000, and variable costs per unit of $6.57. The firm expects to sell 46,000 units per year at
$20 a unit. The discount rate is 16 percent and the tax rate is 21 percent. Should the product be
produced and if so, which method of production should be implemented and why?
A) Yes; Method A; because A has the lower initial cost
B) Yes; Method A; because it will break-even on a financial basis with fewer annual sales
C) Yes; Method B; because it has lower annual costs
D) Yes; Method B; because B has a financial break-even quantity that is less than the expected
sales units
E) No; Neither method of production will financially break-even within the expected life of the
project.
