Miller Mfg. is analyzing a proposed project. The company expects to sell 12,000
ID: 2675256 • Letter: M
Question
Miller Mfg. is analyzing a proposed project. The company expects to sell 12,000 units, plus or minus 3 percent. The expected variable cost per unit is $7.00 and the expected fixed cost is $35,000. The fixed and variable cost estimates are considered accurate within a plus or minus 4 percent range. The depreciation expense is $31,000. The tax rate is 34 percent. The sale price is estimated at $16.00 a unit, give or take 5 percent.What is the net income under the worst case scenario?
$16,360.61
$34,213.50
$34,545.67
$24,788.80
$33,216.99
Explanation / Answer
Under worst condition, No of units = 12,000*97% variable cost per unit = $7.00*104% fixed cost = $35,000*1.04 Price = $16.00*0.95 Net income = (12,000*97%*($16.00*0.95-$7.00*104%) -$31,000 - $35,000*1.04)*(1-.34) = $16360.608 Answer : $16,360.61