Precise Machinery is analyzing a proposed project. The company expects to sell 2

Question

Precise Machinery is analyzing a proposed project. The company expects to sell 2,100 units, give or take 5 percent. The expected variable cost per unit is $260 and the expected fixed costs are $589,000. Cost estimates are considered accurate within a plus or minus 4 percent range. The depreciation expense is $129,000. The sales price is estimated at $750 per unit, give or take 2 percent. What is the amount of the total costs per unit under the worst case scenario?
A. $548.58
B. $577.45
C. $604.16
D. $638.23
E. $640.25

Explanation / Answer

variable cost=260+4%=270.4 per unit fixed cost=589000+4%+612560 no. of units sold=2100-5%=1995 total variable cost=270.4*1995=539448 fixed cost=612560 total cost=539448+612560=1152008 per unit cost=1152008/1995=$577.45

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