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Question

JCB Transmissions, Inc., has the following estimates for its new gear assembly project: Price = $1,440 per unit;

variable costs = $460 per unit; fixed costs = $3.9 million; quantity = 85,000 units. Suppose the company believes all of its estimates are accurate only to within ±15 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?

Suppose management is most concerned about the impact of its price estimate on the project's profitability. How could you address this concern? Describe how you would calculate your answer. What values would you use for the other forecast variables?

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Best case scenario: Price, quantity increase by 15%. All... View the full answer

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