The Franklin Co

question 17

Multiple Choice

The Franklin Co. is analyzing a proposed project. The company expects to sell 3,500 units, give or take 15 percent. The expected variable cost per unit is $6 and the expected fixed costs are
$15,500. Cost estimates are considered accurate within a plus or minus 5 percent range. The
Depreciation expense is $6,000. The sales price is estimated at $21 a unit, give or take 3 percent.
The company bases their sensitivity analysis on the base case scenario
What is the sales revenue under the worst case scenario?

• A) $60,600.75
• B) $62,474.00
• C) $73,500.00
• D) $84,525.00
• E) $87,060.75

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Definitions:

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate overhead costs to products or job orders based on a certain activity base.

Automated Bandsaw

A machine equipped with a continuously looped, serrated blade for cutting materials, operated through computer or programmable logic controls.

Capacity

The maximum amount that something can contain or produce.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead to individual units of output.