The variable cost per unit for a proposed project is $8.48 and the annual fixed costs are $27,400.These costs can vary by ± 5 percent.Annual depreciation is $13,290 and the tax rate is 21 percent.The sale price is $13.29 a unit,± 2 percent.If the firm bases its sensitivity analysis on the expected outcome,what will be the operating cash flow for a sensitivity analysis of 9,200 units?
A)$14,066.02
B)$16,103.98
C)$22,078.40
D)$11,554.50
E)$18,385.60

Question

Quizplus · Accepted Answer

To calculate the operating cash flow (OCF) for the sensitivity analysis of 9,200 units, we use the formula: OCF = (Sales - Variable Costs - Fixed Costs + Depreciation) * (1 - Tax Rate) + Depreciation. Sales = 9,200 units * $13.29 = $122,268. Variable Costs = 9,200 units * $8.48 = $77,984. Fixed Costs = $27,400. Depreciation = $13,290. Tax Rate = 21%. OCF = ($122,268 - $77,984 - $27,400 + $13,290) * (1 - 0.21) + $13,290 = $16,103.98.

The Variable Cost Per Unit for a Proposed Project Is