Automatic Transmissions, Inc., has the following estimates for its new gear asse

Question

Automatic Transmissions, Inc., has the following estimates for its new gear assembly project: price = $1,230 per unit; variable cost = $450 per unit; fixed costs = $4.96 million; quantity = 86,000 units. Suppose the company believes all of its estimates are accurate only to within ± 20 percent.

Required: 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).)

Scenario Unit Sales Unit Price Unit Variable Cost Fixed Costs   Base case 86,000    $ 1,230    $ 450      $ 4,960,000      Best case                 Worst case              

Explanation / Answer

Scenario Unit Sales Unit Price Unit Variable Cost Fixed Costs   Base case 86000 $ 1230 $ 450 $ 4,960,000      Best case 103200 1476 540 4,960,000      Worst case 68800 984 360 4,960,000    Best Case sales 103200 1476 152323200 variable cost 103200 540 55728000 contribution 96595200 Fixed cost 4960000 EBIT 91635200 Worst Case sales 68800 984 67699200 variable cost 68800 360 24768000 contribution 42931200 Fixed cost 4960000 EBIT 37971200

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