CanDo SA Is Analyzing a Proposed Project

question 58

Multiple Choice

CanDo SA is analyzing a proposed project.The company expects to sell 12,000 units, give or take 4%.The expected variable cost per unit is €7 and the expected fixed cost is €36,000.The fixed and
Variable cost estimates are considered accurate within a plus or minus 6% range.The depreciation
Expense is €30,000.The tax rate is 34%.The sale price is estimated at €14 a unit, give or take 5%.
The company bases its sensitivity analysis on the expected case scenario.What is the contribution
Margin per unit for a sensitivity analysis using a variable cost per unit of €8?

• A)€3
• B)€4
• C)€5
• D)€6
• E)€7

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Definitions:

Allowance

An amount set aside or deducted to account for possible adjustments or for diminution in value, notably in the contexts of accounts receivable and inventory.

Service Charge

A fee collected for the provision of a service, often added to the base cost of the service.

Credit Card

A payment card issued to users as a method of payment allowing the cardholder to pay for goods and services based on the holder's promise to pay for them.

Journal Entry

A record in the books of accounts that shows a business transaction and its effect on the company's finances.