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New Town Instruments is analyzing a proposed project. The company expects to sell 1,600 units, ±3 percent. The expected variable cost per unit is $220 and the expected fixed costs are $438,000. Cost estimates are considered accurate within a ±2 percent range. The depreciation expense is $64,000. The sales price is estimated at $647 per unit, ±2 percent. What is the sales revenue under the worst-case scenario?

Respuesta :

mltn1980

Answer:

  • What is the sales revenue under the worst-case scenario?

$ 125,032

Explanation:

Initial Escenario

TOTAL     Income Statement Unit   Quantity

$ 1,035,200 Total Net Sales       $ 647  1.600  

-$ 352,000 Variable Cost          $ 220  

-$ 64,000 Depreciation Expenses  

$ 619,200 Contributing Margin  

-$ 438,000 Anual Fixed Costs  

$ 181,200 Segment Margin  

Worst Case Escenario

Quantity fall 3% from 1,600 to 1,552

Price Fall 2% from $647 to $634

Variable Cost Increase 2% from $220 to $224

Anual Fixed Cost Increase 2% from $438,000 to $446,760

Depreciation Expenses maintained at the same level.

TOTAL Income Statement Unit Quantity

$ 984,061 Total Net Sales $ 634  1.552  

-$ 348,269 Variable Cost         $ 224  

-$ 64,000 Depreciation Expenses  

$ 571,792 Contributing Margin  

-$ 446,760 Anual Fixed Costs  

$ 125,032 Segment Margin  

anthougo

The sales revenue under the worst-case scenario is $985,520.

What is a worst-case scenario?

The worst-case scenario describes the worst possible event that could happen in a particular situation.

The worst-case scenario is the most feared in scenario planning, and every effort is directed towards its avoidance or minimization.

Data and Calculations:

Estimated sales units = 1,600 ±3%

Expected variable cost per unit = $220 ±2%

Expected fixed costs = $438,000 ±2%

Sales price per unit = $647 ±2

Depreciation expense = $64,000

Scenarios                             Worst           Normal              Best    

Sales units                           1,552              1,600              1,648

Selling price per unit          $634               $647              $660

Sales revenue                $985,520        $1,035,200   $1,087,600

Variable costs                     334,611              352,000          369,811

Fixed Costs                       429,240              438,000        446,760

Thus, the sales revenue under the worst-case scenario is $985,520.

Learn more about scenario planning at https://brainly.com/question/4817049

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