Question

Michael’s is considering a project that has projected sales of 4,200 units ± 5 percent, a sales price per unit of $50 ± 4 percent, variable costs per unit of $25 ± 5 percent, and fixed costs per year of $45,000 ± 3 percent. The depreciation expense is $11,000 per year and the tax rate is 33 percent. What is the annual net income under the best case scenario?

Answer 1

annual net income is $23077.25

Step-by-step explanation:

Given data:

sales volume = 4200 units

selling price/units $50

variable cost/units $25

fixed cost is $45000

Total sales
`unit = 4200 + 5\% * 4200 = 4410 units`

selling price/unit
`= $50 + 4\%* $50 = $52`

variable cost/unit
`= $25- 5\%* 25 = $23.75`

fixed cost
`= 45000 - 3\%* 45000 = $43650`

sales
`=4410 * 52 = $229320.00`

variable cost
`= 4410 * 23.75 = 104737.5`

difference = 229320 - 104737 = 124583

fixed cost = $43650

depreciation exchange = $11000

so total income prior to tax = 124583 - (43650 + 11000) =$ 69932.5

tax rate is 33%

so total income after tax is
`= 69932.5 * .33 = $23077.725`