Can you explain the correct approach to solve this general accounting question? A proposed project by Galaxy Foods Inc. has estimated sale units of3,200, give or take 2 percent. The expected variable cost per unit is $5.60and the expected fixed costs are $21,000. Cost estimates are consideredaccurate within a ±3% range. The depreciation expense is $3,200. Thesale price is estimated at $12.80 per unit, give or take 3%. The companybases its sensitivity analysis on the expected case scenario. If asensitivity analysis is conducted using a variable cost estimate of $6.25per unit, what will be the total annual variable costs?a. $20,000b. $19,600c. $22,000d. $18,750e. $23,200

Step 1: Definition of Variable CostsVariable costs are expenses that change in direct proportion to…

Answered: A proposed project by Galaxy Foods Inc.…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A proposed project has estimated sale units of 2,500, give or take 2 percent. The expected variable cost per unit is $12.79 and the expected fixed costs are $17,500. Cost estimates are considered accurate within a plus or minus 3 percent range. The depreciation expense is $2,850. The sale price is estimated at $15.40 a unit, give or take 3 percent. The company bases its sensitivity analysis on the expected case scenario. If a sensitivity analysis is conducted using a variable cost estimate of $13, what will be the total annual variable costs? Show me answer
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. If the company conducts a sensitivity analysis using a variable cost of $12, what will the total variable cost estimate be? $53,625 $53,500 $54,000 $48,060 $59,940
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Stinnett Transmissions, Incorporated, has the following estimates for its new gear assembly project: Price = $ 1,250 per unit; variable cost = $470 per unit; fixed costs $4.98 million; quantity = 88,000 units. Suppose the company believes all of its estimates are accurate only to within \pm 21 percent. What values should the company use for the four variables given here when it performs its best-case and worst-case scenario analysis? Note: Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234, 567.

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