Question

3. Scenario Analysis (LO2) Whitewater Transmissions Inc. has the following estimates for its new gear assembly project: price $1,700 per unit, variable costs $480 per unit; fixed costs = $4.1 million; quantity 95,000 units. Suppose the company believes all of its estimates are accurate only to within +15 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?

Answer 1

Under best case scenario, all variables are assumed to be most favorable
Under worst case scenario, all variable are assumed to be most unfavorable
	Best Case	Worst Case
Price per Unit	1955	1445
Variable cost per Unit	408	552
Fixed costs	3485000	4715000
Quantity	109250	80750

A Under best case scenario, all variables are ass 1 Under worst case scenario, all variable are as 2 Worst Case Best Case 4 Price per Unit 5 Variable cost per Unit - 1700*1.15 - 1700*0.85 480*0.85 480*1.15 4100000*0.85 -95000*1.15 -4100000*1.15 6 Fixed costs 7 Quantity 95000*0.85