Question

Whitewater Transmissions, Inc., has the following estimates for its new gear assembly project: price = $1,720 per unit; variable costs = $500 per unit; fixed costs = $4.2 million; quantity = 96,000 units. Suppose the company believes all of its estimates are accurate only to within ±15%. 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? (Enter the answers in dollars, not millions of dollars, i.e. 1,234,567. Omit $ sign in your response.)

Scenario	Units Sales	Unit Price	Variable Cost	Fixed Costs
Base		$	$	$
Best		$	$	$
Worst		$	$	$

Answer 1

Answer :

Scenario	Unit sales	Unit price	Variable cost	Fixed costs
Base	96,000	1,720	500	4,200,000
Best	110,400 [ 96,000 + 15% ]	1,978 [ 1,720 + 15% ]	425 [ 500 - 15% ]	3,570,000 [ 4,200,000 - 15% ]
Worst	81,600 [ 96,000 - 15% ]	1,462 [ 1,720 - 15% ]	575 [ 500 + 15% ]	4,830,000 [ 4,200,000 + 15% ]

In the best - case scenario, sales and price increases, while costs decrease.

In the worst - case scenario, sales and price decreases, while costs increase.