Automatic Transmissions, Inc., has the following estimates for its new gear asse
ID: 2452071 • Letter: A
Question
Automatic Transmissions, Inc., has the following estimates for its new gear assembly project: price = $1,220 per unit; variable cost = $440 per unit; fixed costs = $4.95 million; quantity = 85,000 units. Suppose the company believes all of its estimates are accurate only to within ± 19 percent.
What values should the company use for the four variables given here when it performs its best-case and worst-case scenario analysis? (Do not round intermediate calculations. Enter your answers in dollars, not millions of dollars. Round your answers to the nearest whole dollar amount (e.g.,1,234,567).)
Best case
Worst case
Automatic Transmissions, Inc., has the following estimates for its new gear assembly project: price = $1,220 per unit; variable cost = $440 per unit; fixed costs = $4.95 million; quantity = 85,000 units. Suppose the company believes all of its estimates are accurate only to within ± 19 percent.
Explanation / Answer
Solution :
Best case
unit sales , sale price increase by 19% and variable and fixed cost reduced by 19%
Worst case
unit sales , sale price reduced by 19% and variable and fixed cost increase by 19%
Scenario
Unit Sales
Unit Price
Unit Variable Cost
Fixed Costs
Base case
85,000
1,220
440
4,950,000
Best case
101,150
1,452
356
4,009,500
(85000 + 19%)
(1220 + 19%)
(440 - 19%)
(4950000 - 19%)
Worst case
68,850
988
524
5,890,500
(85000 - 19%)
(1220 - 19%)
(440 + 19%)
(4950000 + 19%)
Best case
unit sales , sale price increase by 19% and variable and fixed cost reduced by 19%
Worst case
unit sales , sale price reduced by 19% and variable and fixed cost increase by 19%
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.