The Quick Producers Co

question 257

Multiple Choice

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 earnings before interest and taxes under the base case scenario?

• A) $10,560
• B) $16,000
• C) $22,440
• D) $41,000
• E) $66,000

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Definitions:

Direct Labour

Rephrased: The workforce directly involved in manufacturing products or providing services, whose costs directly affect the cost of goods sold.

Variable Manuf. Overhead

Variable Manufacturing Overhead includes those manufacturing overhead costs that vary directly with the level of production, such as utilities for the production facility.

Actual Variable Manuf. Overhead

The actual amount incurred in variable overhead costs during manufacturing, contrasting with the budgeted or standard costs.

Direct Materials

Materials in their basic form that are specifically identifiable with the manufacturing of certain products or services.