Question

Olin Transmissions, Inc., has the following estimates for its new gear assembly project: price = $1,400 per unit; variable costs = $220 per unit, fixed costs = $3.9 million, quantity = 85,000 units. Suppose the company believes all of its estimates are accurate only to within +15 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? 15% Price accuracy Variable cost accuracy Fixed cost accuracy Quantity accuracy 15% 15% 15% Complete the following analysis. Do not hard code values in your calculations. Unit sales 85,000 $ Unit price Unit variable cost 1,400 $ 220 $ F ixed costs 3,900,000 Scenario Base case Best case Worst case

Answer 1

Scenario	Unit Sales	Unit price	Unit variable cost	Fixed costs
Base case	85000	1400	220	3900000
Best case	97750	1610	253	4485000
Worst case	112412.5	1190	187	3315000