Question

Question 6 (of 19) 10.00 points Problem 11-3 Scenario Analysis [LO2 Sloan Transmissions, Inc., has the following estimates for its new gear assembly project price # $3,000 per unit variable costs $800 per unit, fixed costs $1.8 million; quantity 90,000 units. Suppose the company believes all of its estimates are accurate only to within 120 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? Unit Variable cost Units Sales Unit Price Fixed Costs References eBook& Resources Difficulty: Basic Section: 11.2 Scenario a Problem 11-3 Scenario Analysis LO2 Learning Objective: 11-02 How to perform and interpret a scenario analysis for a proposed investment MacBook Sc F7 2 4

Answer 1

Scenario	Unit Sales	Unit Price	Unit Variable Cost	Fixed Costs
Base	90000	3000	600	1800000
Best	108000	3600	480	1440000
Worst	72000	2400	720	2160000

Base case = values given in the question

Best case = Sales and Price are adjusted upwards by 20% and the costs are adjusted downwards by 20%

Worst case = Sales and Price adjusted downwards by 20% and costs adjusted upwards by 20%