Southern Goods Is Analyzing a Proposed Project Using Standard Sensitivity

question 62

Multiple Choice

Southern Goods is analyzing a proposed project using standard sensitivity analysis.The company expects to sell 4,500 units,±11 percent.The expected variable cost per unit is $13 and the expected fixed costs are $12,000.Cost estimates are considered accurate within a ± 5 percent range.The depreciation expense is $5,000.The sale price is estimated at $22 a unit,±2 percent.
What is management's best guess of the contribution margin value?

• A)$2.67
• B)$10.33
• C)$9.00
• D)$7.00
• E)$8.72

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Definitions:

Alternative Hypothesis

A statement that contradicts the null hypothesis and proposes there is indeed a significant effect or relationship between variables.

Sample Sizes

The number of observations or subjects included in a study from which conclusions are drawn.

Test Statistic

A calculated value from sample data, used in statistical hypothesis testing to determine whether to reject the null hypothesis.

Random Samples

A subset of individuals chosen from a larger set, where each individual has an equal chance of being selected.