A Proposed Project Has Fixed Costs of $9,800, Depreciation Expense

question 15

Multiple Choice

A proposed project has fixed costs of $9,800, depreciation expense of $2,700, and a sales quantity of 2,100 units. The total variable costs are $5,607. What is the contribution margin per unit if the projected level of sales is the accounting break-even point?

• A)$3.28
• B)$4.07
• C)$5.95
• D)$6.16
• E)$7.11

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Definitions:

Green Shoe Option

A clause in an IPO that allows underwriters to buy and sell additional shares than originally planned, stabilizing the stock price.

Underpricing Effect

The phenomenon where new stock offerings are priced below their market value, often leading to an immediate increase in their price upon trading.

Market Price

The prevailing transaction price for an asset or service.

Securities

Securities are financial instruments that represent an ownership position in a publicly-traded corporation (stock), a creditor relationship with a governmental body or a corporation (bond), or rights to ownership as represented by an option.