The Franklin Co. is analyzing a proposed project. The company expects to sell 3,500 units, give or take 15 percent. The expected variable cost per unit is $6 and the expected fixed costs are $15,500. Cost estimates are considered accurate within a plus or minus 5 percent range. The depreciation expense is $6,000. The sales price is estimated at $21 a unit, give or take 3 percent. The company bases their sensitivity analysis on the base case scenario

What is the contribution margin under the base case scenario?
A) $14.55
B) $14.82
C) $15.00
D) $15.45
E) $15.63

Question

The Franklin Co. is analyzing a proposed project. The company expects to sell 3,500 units, give or take 15 percent. The expected variable cost per unit is $6 and the expected fixed costs are $15,500. Cost estimates are considered accurate within a plus or minus 5 percent range. The depreciation expense is $6,000. The sales price is estimated at $21 a unit, give or take 3 percent. The company bases their sensitivity analysis on the base case scenario

What is the contribution margin under the base case scenario?

What is the contribution margin under the base case scenario?
A) $14.55
B) $14.82
C) $15.00
D) $15.45
E) $15.63

Quizplus · Accepted Answer

The contribution margin is calculated as the sales price per unit minus the variable cost per unit. In the base case scenario, the sales price is $21 and the variable cost is $6. Therefore, the contribution margin is $21 - $6 = $15.00.