Olin Transmissions, Inc., has the following estimates for its new gear assembly project: price = $3,000 per unit; variable costs = $600 per unit; fixed costs = $1.8 million; quantity = 90,000 units. Suppose the company believes all of its estimates are accurate only to within ±20 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 _________ _________ _________ ________
This solution illustrates how to compute best and worst case scenario estimates.