The Adept Co

question 79

Multiple Choice

The Adept Co. is analyzing a proposed project. The company expects to sell 2,500 units,give or take 10%. 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 $16 a unit,give or take 2%. The company bases its sensitivity analysis on the expected case scenario. The company conducts a sensitivity analysis using a variable cost of $9. The total variable cost estimate will be:

• A) $21,375
• B) $22,500
• C) $23,625
• D) $24,125
• E) $24,750

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Definitions:

Restrictive Covenant

A clause in a contract which restricts the actions of parties to the contract for the benefit of other parties to the contract or to protect the value of a related asset.

Inventory Loan

A secured short-term loan to purchase inventory.

Cash Disbursement

The payment of money from a fund or account, typically involving the transfer of cash to individuals or companies for services rendered or goods purchased.

Operating Cycle

The period from purchasing inventory to collecting cash from the sale of that inventory.