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 = $1,600 per unit; variable costs = $320 per unit; fixed costs = $2.7 million; quantity = 78,000 units. Suppose the company believes all of its estimates are accurate only to within ±10 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

Unit sales Unit Price$ Unit Variable cost $ Fixed cost $ Scenario Base              78,000                1,600                      320          2,700,000 Best              85,800                1,760                      288          2,430,000 Assumptions for best scenario =+10% =+10% =-10% =-10% Worst              70,200                1,440                      352          2,970,000 Assumptions for worst scenario =-10% =-10% =+10% =+10%

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