Answer:
- Values the company should use for the four variables when it performs its best-case scenario analysis:
+ Price = 3,080 per unit;
+ Variable costs = $504 per unit;
+ Fixed cost = $2.7 million;
+ Quantity = 94,600 units.
- Values the company should use for the four variables when it performs its worst-case scenario analysis:
+ Price = 2,520 per unit;
+ Variable costs = $616 per unit;
+ Fixed cost = $3.3 million;
+ Quantity = 77,400 units.
Explanation:
- Under the best-case scenario analysis, price and quantity should be given the highest ( thus the best) estimates while variable costs and fixed costs should be given the lowest ( thus the best) estimates. So, we have:
+ Price = 2,800 x 1.1 = 3,080 per unit;
+ Variable costs = 560 x 0.9 = $504 per unit;
+ Fixed cost = 3 million x 0.9 = $2.7 million;
+ Quantity = 86,000 x 1.1 = 94,600 units.
- Under the worst-case scenario analysis, price and quantity should be given the lowest ( thus the worse) estimates while variable costs and fixed costs should be given the highest ( thus the worst) estimates. So, we have:
+ Price = 2,800 x 0.9 = 2,520 per unit;
+ Variable costs = 560 x 1.1 = $616 per unit;
+ Fixed cost = 3 million x 1.1 = $3.3 million;
+ Quantity = 86,000 x 0.9 = 77,400 units.
