Exam 11: Project Analysis and Evaluation

A firm is considering a project with a cash break-even point of 8,100 units. The selling price is $12.50 a unit and the variable cost per unit is $6.25. What is the amount of the total fixed costs?

Ralph and Emma's is considering a project with total sales of $17,500, total variable costs of $9,800, total fixed costs of $3,500, and estimated production of 400 units. The depreciation expense is $2,400 a year. What is the contribution margin per unit?

Ted's Sleds produces sleds at an average variable cost per unit of $39.18 when production quantity is 1,250 units. When production increases to 1,251 units the average variable cost declines to $39)16. What is the minimal price that Ted's Sleds can charge for the 1,251st sled without affecting Net profits?

Which of the following would most likely be considered a fixed cost for a given time period?

The Alfonso Company is analyzing a project with expected sales of 4,000 units, give or take 5 percent. The expected variable cost per unit is $9 and the expected total fixed costs are $17,000. Cost estimates are considered accurate within a plus or minus 2 percent range. The depreciation Expense is $3,000. The sale price is estimated at $18 a unit, give or take 5 percent. Sensitivity Analysis is based on the most likely scenario. What is the contribution margin under the best case scenario?

Initial investment is generally least subject to forecasting risk.

Marginal costs _____________________.

Soft rationing affects divisions within a firm while hard rationing affects the firm as a whole.

Which of the following statements is NOT accurate regarding scenario analysis?

When firms do not have sufficient available financing to invest in all of the positive net present value projects they have identified, _____ is (are) said to exist.

The financial break-even point is defined as the point where the quantity is equal to:

At a production level of 11,200 units a project has total costs of $138,000. The variable cost per unit is $9.84. What is the amount of the total fixed costs if the production level is increased to 14,000 Units? The firm currently has sufficient fixed assets to reach this level of production.

As additional equipment is purchased, the level of fixed costs tends to _____ and the degree of operating leverage tends to _____

Magellen Industries is analyzing a new project. The data they have gathered to date is as follows: Initial requirement for equipment: $120,000 Depreciation: Straight-line to zero over the four-year life of the project with no salvage value. Required rate of return: 15% Marginal tax rate: 35% The project is operating at the ________ under the base-case scenario.

The sales level that results in a project operating cash flow exactly equal to zero is called:

Costs that can be considered sunk costs over a fixed period of time are called ____ costs.

Donald and Sons manage a product with a 3.0 degree of operating leverage. Sales of the product are expected to increase by 10 percent next year. What is the expected change in the operating Cash flow for this product for next year?

Describe how the inclusion of a strategic option can affect the setting of a bid price.

TD, Inc. is analyzing a new project. The data they have gathered to date is as follows: What are the annual sales under the best-case scenario?

The higher the degree of operating leverage, the greater is the risk of forecasting error.