Question

Your company is reviewing a project with estimated labor costs of $14.68 per unit, estimated raw material costs of $43.18 a unit, and estimated fixed costs of $18,000 a month. Sales are projected at 15,500 units, ±5 percent, over the one-year life of the project. Cost estimates are accurate within a range of ±3 percent. What are the total variable costs for the best-case scenario?

Answer 1

Answer:

Variable cost= 56,12

Unitary fixed cost=1,073

Total unitary cost= 57,193

Explanation:

The best-case scenario is one that maximizes sales and minimizes cost. We will calculate sales in the higher percentile and variable and fix costs in the lower one.

Higher Sales=15500 *1,05=16275 units

Lower Sales= 15500*0,95=14725 units

Higher labor cost= 14,68*1,03=$15,1204

Lower labor cost=14,68*0,97=$14,24

Higher direct material= 43,18*1,03=$44,48

Lower direct material= 43,18*0,97= $41,88

Higher fixed cost=$18000*1,03= $18540

Lower fixed cost=$18000*0,97= $17460

Total cost best-case scenario:

Variable cost= (14,24+41,88)=56,12

Unitary fixed cost=(17460/16275)=1,073

Total unitary cost= 57,193