Angie's expects annual sales of 2,400 units,± 3 percent,of a new product at a price of $59 a unit,± 2 percent.The expected variable cost per unit is $27.20,± 2 percent,annual fixed costs are $32,500,and depreciation is $4,400 per year.What is the total annual expense per unit under the pessimistic scenario? Ignore taxes.

Question

Quizplus · Accepted Answer

Pessimistic scenario means considering the lower limit of sales and higher limit of costs.
Lower limit of sales = 2,400 - 72 (3% of 2,400) = 2,328 units
Higher limit of price = $59 + 1.18 (2% of $59) = $60.18
Higher limit of variable cost per unit = $27.20 + 0.544 (2% of $27.20) = $27.35
Higher limit of annual fixed costs = $32,500 + 0.03 (3% of $32,500) = $33,475
Total annual expenses per unit = (27.35*2,328 + 33,475 + 4,400) / 2,328 = $43.59 approximately.

Therefore, the best choice is (C).

Angie's Expects Annual Sales of 2,400 Units,± 3 Percent,of a New