Windows and More is reviewing a project with sales of 6,200 units, ±2 percent, at a sales price of $29, ±1 percent, per unit. The expected variable cost per unit is $11, ±3 percent, and the expected fixed costs are $87,000, ±1 percent. The depreciation expense is $68,000 and the tax rate is 21 percent. What is the net income under the worst-case scenario?

Net income - $39,713

Explanation:

The computation of the net income is shown below:

Sales $174,442 {6,200 * (1 - 2%) * $29 * (1 - 1%) }

Less:

Variable cost $68,841 {6,200 * (1 - 2%) * $11 * (1 + 3%) }

Fixed cost $87,870 {$87,000 * (1 + 1%) }

Depreciation expense $68,000

Earning before interest and taxes - $50,269

Less: Income tax expense at 21% - $10,557

Net income - $39,713

We simply deduct all the expenses from the sales revenue so that the net income could come