The Creamery Is Analyzing a Project with Expected Sales of 5,700

question 16

Multiple Choice

The Creamery is analyzing a project with expected sales of 5,700 units, ±5 percent. The expected variable cost per unit is $168 and the expected fixed costs are $424,000. Cost estimates are considered accurate within a ±3 percent range. The depreciation expense is $156,000. The sales price is estimated at $339 per unit, ±5 percent. The tax rate is 21 percent. The company is conducting a sensitivity analysis with fixed costs of $425,000. What is the OCF given this analysis?

• A) $416,511
• B) $385,350
• C) $467,023
• D) $394,874
• E) $421,300

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Definitions:

Amniotes

Terrestrial vertebrates: reptiles, birds, and mammals; animals whose embryos are enclosed by an amnion.

Lungfish

A type of freshwater fish with the unique ability to breathe air using lungs, allowing them to survive in habitats with low oxygen levels.

Lobe-Finned Fishes

A class of fish known for their fleshy, lobed, paired fins, which are precursors to the limbs of land-dwelling vertebrates.

Amphibians

A class of cold-blooded vertebrates that includes frogs, toads, salamanders, and newts, which typically have a lifecycle divided between aquatic larval stages and terrestrial adult stages.