Problem:
Automatic Transmissions, Inc., has the following estimates for its new gear assembly project: price = $1,100 per unit; variable cost = $320 per unit; fixed costs = $4.83 million; quantity = 73,000 units. Suppose the company believes all of its estimates are accurate only to within ± 14 percent.
Required:
What values should the company use for the four variables given here when it performs its best-case and worst-case scenario analysis?
Note: Provide support for your rationale.