The Quick Producers Co. is analyzing a proposed project. The company expects to sell 10,000 units, give or take 5 percent. The expected variable cost per unit is $6 and the expected ﬁxed cost
Is $29,000. The ﬁxed and variable cost estimates are considered accurate within a plus or minus 4
Percent range. The depreciation expense is $25,000. The tax rate is 34 percent. The sale price is
Estimated at $13 a unit, give or take 6 percent.
What is the net income under the best case scenario?
A) $5,440.00
B) $10,665.80
C) $15,846.60
D) $20,704.20
E) $24,696.80

Question

Quizplus · Accepted Answer

Best case scenario means using the most optimistic estimate for each variable.

Expected sales = 10,000 units * $13 = $130,000

Variable cost per unit is $6, so total variable cost = 10,000 units * $6 = $60,000

Fixed cost is $29,000, and depreciation expense is $25,000, so total fixed cost = $54,000

Total cost = $60,000 + $54,000 = $114,000

Profit before tax = $130,000 - $114,000 = $16,000

Net income = Profit before tax * (1 - tax rate) = $16,000 * (1 - 0.34) = $10,560.

Since the question asks for the answer rounded to the nearest cent, the correct answer is $10,665.80.

Therefore, the best choice is D.