The Can-Do Co

question 16

Multiple Choice

The Can-Do Co. is analyzing a proposed project. The company expects to sell 12,000 units, give or take 4%. The expected variable cost per unit is $7 and the expected fixed cost is $36,000. The fixed and variable cost estimates are considered accurate within a plus or minus 6% range. The depreciation expense is $30,000. The tax rate is 34%. The sale price is estimated at $14 a unit, give or take 5%. The company bases its sensitivity analysis on the expected case scenario.
-What is the operating cash flow for a sensitivity analysis using total fixed costs of $32,000?

• A)$14,520
• B)$16,520
• C)$22,000
• D)$44,520
• E)$52,000

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Definitions:

Chi-Squared Distribution

A probability distribution that arises in statistics when a normal distribution is squared, commonly used in significance testing.

Degrees of Freedom

The count of distinct values or measures that can be allocated to a statistical distribution while adhering to all restrictions.

Chi-Squared Distribution

A probability distribution that is commonly used in hypothesis testing and models the distribution of sum of squares of independent standard normal random variables.

Chi-Square Distribution

A probability distribution that is used in statistical significance tests, especially for categorical data.