Adept NV is analyzing a proposed project.The company expects to sell 2,500 units,give or take 10%.The expected variable cost per unit is €8 and the expected fixed costs are €12,500.Cost estimates are considered accurate within a plus or minus 5% range.The depreciation expense is €4,000.The sale price is estimated at €16 a unit,give or take 2%.The company bases its sensitivity analysis on the expected case scenario.What is the amount of the fixed cost per unit under the pessimistic case scenario?

Question

Quizplus · Accepted Answer

To find the fixed cost per unit under the pessimistic case scenario, we need to use the following formula:

Fixed Cost per Unit = (Total Fixed Cost - Depreciation) / Expected Units Sold

Under the pessimistic case scenario, the expected units sold will be 2,250 (2,500 units - 10%).

Using the given information:

Total Fixed Cost = €12,500 (expected)
Depreciation = €4,000 (given)
Expected Units Sold = 2,250 (pessimistic)

Fixed Cost per Unit = (12,500 - 4,000) / 2,250 = €5.83

Therefore, the answer is C. €5.83.

Adept NV Is Analyzing a Proposed Project