Question

New Town Instruments is analyzing a proposed project. The company expects to sell 2,100 units, ±4 percent. The expected variable cost per unit is $270 and the expected fixed costs are $548,000. Cost estimates are considered accurate within a plus or minus 3 percent range. The depreciation expense is $118,000. The sales price is estimated at $789 per unit, plus or minus 5 percent. What is the sales revenue under the worst case scenario?

Answer 1

Answer:

sales revenue under the worst case is $1511092.8

Explanation:

Given data

sell =  2,100 units, ±4 percent

cost per unit = $270  

fixed costs = $548,000

Cost estimates = ±3 percent

depreciation expense = $118,000

sales price = $789 per unit  ±5 percent

to find out

sales revenue under the worst case

solution

we know that sale revenue = sale price × number of unit

so we have find sale in worst case that is sales price × 95%

sale price in worst case = 789 × 95%

sale price in worst case = $749.55

and

number of unit  = sell × 96%

number of unit  = 2100 × 96%

number of unit  = 2016

so that in worst condition

sale revenue = sale price × number of unit

sale revenue = 749.55 × 2016

sale revenue = 1511092.8

so sales revenue under the worst case is $1511092.8