Sloan Transmissions inc.,has the following estimates for its new gear assembly project: price=$2,200 per unit., variable cost= $440 per unit., fixed costs = $1.6 million., quantity = 90,000 units. suppose the company believes all of its estimates are accurate only to

Best case

Price 2,640

Variable cost per unit 352

Fixed cost 1.28 million

Quantity 108,000 units

Worst case

Price 1,760

Variable cost per unit 528

Fixed cost 1.92 million

Quantity 72,000 units

Explanation:

Based on the information given in the best case expenses would be 20% lower while the incomes will be 20% higher.

Calculation for the price

Price = 2,200 ×(1+0.20)

Price=2,200×1.2

Price = 2,640

Calculation for Variable cost per unit

Variable cost per unit = 440× (1-0.20)

Variable cost per unit=440×0.80

Variable cost per unit= 352

Calculation for fixed cost

Fixed cost = 1.60 million ×(1-0.20)

Fixed cost=1.60 million× 0.80

Fixed cost= 1.28 million

Calculation for the Quantity

Quantity = 90,000 × (1+0.20)

Quantity =90,000×1.2

Quantity=108,000units

Therefore, Best case will be:

Price 2,640

Variable cost per unit 352

Fixed cost 1.28 million

Quantity 108,000units

Based on the information given in the worst case expenses would be 20% higher while incomes would be 20% lower.

Calculation for the price

Price = 2,200 × (1-0.20) = 1080

Price=2,200 ×0.8

Price=1,760

Calculation for the Variable cost per unit

Variable cost per unit = 440 × (1+0.20)

Variable cost per unit=440× 1.2

Variable cost per unit= 528

Calculation for Fixed cost

Fixed cost = 1.60 million × (1+0.20)

Fixed cost=1.60 million×1.2

Fixed cost= 1.92 million

Calculation for the Quatity

Quantity = 90,000 ×(1-0.20)

Quantity=90,000×0.8

Quantity= 72,000 units

Therefore Worst case will be:

Price 1,760

Variable cost per unit 528

Fixed cost 1.92 million

Quantity 72,000 units

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