Olin Transmissions, Inc., has the following estimates for its new gear assembly
ID: 2749547 • Letter: O
Question
Olin Transmissions, Inc., has the following estimates for its new gear assembly project: price = $1,900 per unit; variable costs = $160 per unit; fixed costs = $6,800,000; quantity = 95,000 units. Suppose the company believes all of its estimates are accurate only to within ±10 percent. Enter the values the company should use for the four variables given here when it performs its base-, best-, and worst-case scenario analysis. (Input the fixed costs in dollars, not in millions, e.g., $1,234,567. Do not include the dollar signs ($). Round your answers to 2 decimal places. (e.g., 32.16))
Olin Transmissions, Inc., has the following estimates for its new gear assembly project: price = $1,900 per unit; variable costs = $160 per unit; fixed costs = $6,800,000; quantity = 95,000 units. Suppose the company believes all of its estimates are accurate only to within ±10 percent. Enter the values the company should use for the four variables given here when it performs its base-, best-, and worst-case scenario analysis. (Input the fixed costs in dollars, not in millions, e.g., $1,234,567. Do not include the dollar signs ($). Round your answers to 2 decimal places. (e.g., 32.16))
Explanation / Answer
Values for the Base Case are given in the question itself.
For Best Case,
Unit Sales will increase by 10% = 95000 * 1.1 = 104,500
Unit Price will increase by 10% = 1900 * 1.1 = $2090
Variable Cost will decrease by 10% = 160 * 0.9 = $144
Fixed Cost will decrease by 10% = 6800000 * 0.9 = $6,120,000
For Worst Case
Unit Sales will decrease by 10% = 95000 * 0.9 = 85,500
Unit Price will decrease by 10% = 1900 * 0.9 = $1710
Variable Cost will increase by 10% = 160 * 1.1 = $176
Fixed Cost will increase by 10% = 6800000 * 1.1 = $7,480,000
Unit Scenario Unit Sales Unit Price Variable Cost Fixed Costs Base case 95000 1900 160 6800000 Best case 104500 2090 144 6120000 Worst case 85500 1710 176 7480000