Stellar Plastics Is Analyzing a Proposed Project

question 53

Multiple Choice

Stellar Plastics is analyzing a proposed project. The company expects to sell 12,000 units, plus or minus 3 percent. The expected variable cost per unit is $3.20 and the expected fixed costs are $30,000. The fixed and variable cost estimates are considered accurate within a plus or minus 5 percent range. The depreciation expense is $26,000. The tax rate is 34 percent. The sales price is estimated at $7.50 a unit, plus or minus 4 percent. What is the operating cash flow for a sensitivity analysis using total fixed costs of $31,000?

• A)$19,580
• B)$22,436
• C)$27,210
• D)$31,460
• E)$37,540

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Definitions:

Total Revenue

The complete sum of funds a company acquires from selling goods or offering services over a specified time period.

Operating Profit

The profit earned from a firm's core business operations, excluding deductions of interest and taxes.

Weekly Total Revenue

The total amount of money earned or received by a company, organization, or individual from all sources within a week.

Fixed Costs

Fixed costs are business expenses that remain constant regardless of the level of production or sales, such as rent, salaries, and insurance.