(a) A project undertaking by BP Sdn. Bhd. has base-case earnings before interest and taxes of...

 

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(a) A project undertaking by BP Sdn. Bhd. has base-case earnings before interest and taxes of RM29,500, fixed costs of RM35,600, a selling price of RM26 a unit, and a sales quantity of 19,500 units. All estimates are accurate within ±4 percent. The depreciation of this project is RM17,600. As an initial screening, the company estimates accounting break-even of this project. The accounting break-even production quantity for this project is 17,500 units. The fixed costs are RM35,600 and the contribution margin per unit is RM14. The fixed assets required for the project will be depreciated on straight- line basis to zero over the project's 4-year life. (i) What is the base-case variable cost per unit? (ii) What is the amount of fixed assets required for this project? (7 Marks) (a) A project undertaking by BP Sdn. Bhd. has base-case earnings before interest and taxes of RM29,500, fixed costs of RM35,600, a selling price of RM26 a unit, and a sales quantity of 19,500 units. All estimates are accurate within ±4 percent. The depreciation of this project is RM17,600. As an initial screening, the company estimates accounting break-even of this project. The accounting break-even production quantity for this project is 17,500 units. The fixed costs are RM35,600 and the contribution margin per unit is RM14. The fixed assets required for the project will be depreciated on straight- line basis to zero over the project's 4-year life. (i) What is the base-case variable cost per unit? (ii) What is the amount of fixed assets required for this project? (7 Marks)

Answer rating: 100% (QA)

Variable Cost per Unit can be calculated as Selling price Contribution Margin per Uni... View the full answer