Sloan Transmissions, Inc., has the following estimates for its new gear assembly

Question

Sloan Transmissions, Inc., has the following estimates for its new gear assembly project: price = $1,800 per unit; variable costs = $360 per unit; fixed costs = $1.5 million; quantity = 82,000 units. Suppose the company believes all of its estimates are accurate only to within ±20 percent. What values should the company use for the four variables given here when it performs its best-case scenario analysis? What about the worst-case scenario? Scenario Units Sales Unit Price Unit Variable cost Fixed Costs Base $ $ $ Best Worst

Explanation / Answer

Base lower upper Unit Sales 82000 65600 98400 Price per unit $1800 $1440 $2160 Variable Costs $360 $288 $432 Fixed cost $1500000 $1200000 $1800000 Scenario Unit sales Unit price Unit Variable Cost Fixed Cost Base Case 82000 $1800 $360 $1500000 Best Case 98400 $2160 $432 $1800000 Worst Case 65600 $1440 $288 $1200000

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