The Adept Co

question 54

Multiple Choice

The Adept Co. 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. The company is conducting a sensitivity analysis on the sales price using a sales price estimate of $17. Using this value,the earnings before interest and taxes will be:

• A) $4,000
• B) $6,000
• C) $8,500
• D) $10,000
• E) $18,500

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Definitions:

First-In First-Out

An inventory valuation method where goods first purchased or produced are the first to be sold or used.

Current Rate Method

A technique for converting foreign currency in which all items on the financial statements are translated using the prevailing exchange rate.

Inventory Balance

The total value of all the goods and materials held by a company for resale or production purposes at the end of an accounting period.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against a fixed asset since it was acquired, reflecting its loss of value over time.