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 = $2,000 per unit; variable costs = $400 per unit; fixed costs = $2.8 million; quantity = 86,000 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

Scenario Units Sales (A) Unit Price (B) Unit Fixed Costs(d) Variable cost(c) Contribution E = (B-C) Profit (E*A)-D   Base 86000 2000 400 2800000 1600 134800000   Best 94600 2200 360 2520000 1840 171544000   Worst 77400 1800 440 3080000 1360 102184000

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