Precise Machinery is analyzing a proposed project that is expected to sell 1,450 units, ±3 percent. The expected variable cost per unit is $139 and the expected fixed costs are $123,000. Cost estimates are considered accurate within a ±1 percent range. The depreciation expense is $39,000. The sales price is estimated at $349 per unit, ±3 percent. What is the contribution margin per unit under the best-case scenario?
A) $137.03
B) $194.33
C) $148.13
D) $187.42
E) $221.86

Question

Quizplus · Accepted Answer

In the best-case scenario, both sales price and variable costs are at their most favorable estimates. The sales price per unit is $349 + 3% = $359.47. The variable cost per unit is $139 - 1% = $137.61. The contribution margin per unit is $359.47 - $137.61 = $221.86.

Precise Machinery Is Analyzing a Proposed Project That Is Expected