What is the sensitivity of ocf to changes in quantity sold

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Reference no: EM13260412

Dr. Neil deGrasse Tyson has recommended to the Hayden Planetarium that they sell stuffed animals, such as Disney's loveable Pluto character, to help fund their research efforts on finding planetoids in our outer solar system.

The proposal involves a 4-year project with the following information: initial fixed asset investment = $432,218; straight-line depreciation to zero over the 4-year life; zero salvage value; price = $37, variable costs = $18; fixed costs = $192,403; quantity sold = 86,850 units; tax rate = 35 percent. What is the sensitivity of OCF to changes in quantity sold? That is, how much does OCF change for a one-unit increase in quantity sold? Enter the dollar amount to two decimal places (ex. -$5,000.45 as -5000.45 or +$3,450.70 as 3450.70).

Hint: To avoid rounding error problems, consider the impact of a change of 1,000 units upon the per unit change in OCF. Compare your result to a one-unit increase in quantity sold.

Reference no: EM13260412

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