Miller Mfg. is analyzing a proposed project. The company expects to sell 13,000
ID: 2675255 • Letter: M
Question
Miller Mfg. is analyzing a proposed project. The company expects to sell 13,000 units, give or take 3 percent. The expected variable cost per unit is $7.00 and the expected fixed cost is $36,000. The fixed and variable cost estimates are considered accurate within a plus or minus 5 percent range. The depreciation expense is $30,000. The tax rate is 34 percent. The sale price is estimated at $13.00 a unit, give or take 4 percent.What is the earnings before interest and taxes under the base case scenario?
$48,000
$12,000
$27,789
$18,000
$42,000
Explanation / Answer
sales=13000*13=169000
less-variable cost=13000*7=91000
less-depreciation expenses=30000
Earnings before interest and taxes =169000-91000-30000=48000
total fixed cost is 36000.out of this depreciation expenses are 30000.so 6000 is interest
$48,000
$12,000
$27,789
$18,000
$42,000