The Meldrum Co

question 69

Multiple Choice

The Meldrum Co. is analyzing a proposed project. The company expects to sell 3,000 units,give or take 15%. 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 $18 a unit,give or take 2%. The company bases its sensitivity analysis on the expected case scenario. What is the amount of the fixed cost per unit under the pessimistic case scenario?

• A) $4.17
• B) $4.66
• C) $5.15
• D) $5.35
• E) $6.02

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Definitions:

Legally Insolvent

The condition of being unable to pay debts as they fall due or having liabilities that exceed the value of assets.

Fiduciary Duty

A legal obligation to act in the best interest of another party, usually in a financial context.

Operation of Law

Changes in rights or obligations that occur automatically due to established legal rules, without the need for action or agreement by individuals.

Goodwill Compensation

Financial compensation for intangible assets such as brand reputation, customer loyalty, and other non-physical assets that contribute to a business's value.