Question

Johnson, Schaub and Shiffler, Inc., has the following estimates for its electric car roadster project: price = $140,000 per unit; variable costs = $75,000 per unit; fixed costs = $62,000,000; quantity = 2,700 units. Suppose the company believes all of its estimates are accurate only to within ±15 percent. Enter the values the company should use for the four variables given here when it performs its base-, best-, and worst-case scenario analysis

Answer 1

Fixed costs are those costs incurred by a company which are unrelated to fluctuations in productivity or sales. Since fixed cost does not fluctuate more, it means they remain same in different scenarios.

PARTICULARS	BASE	BEST	WORST
(A) Price per unit	140,000.00	161,000.00	119,000.00
(B) VC per unit	75,000.00	86,250.00	63,750.00
(C) Contribution per unit (A) -(B)	65,000.00	74,750.00	55,250.00
(D) Units	2,700.00	3,105.00	2,295.00
(E ) Total contribution    (C) X (D)	175,500,000.00	232,098,750.00	126,798,750.00
(F) Fixed Cost	62,000,000.00	62,000,000.00	62,000,000.00
(G)   Profit (E ) - (F)	113,500,000.00	170,098,750.00	64,798,750.00