Your company is reviewing a project with estimated labor costs of $14.68 per unit, estimated raw material costs of $43.18 a unit, and estimated fixed costs of $18,000 a month. Sales are projected at 15,500 units, ±5 percent, over the one-year life of the project. Cost estimates are accurate within a range of ±3 percent. What are the total variable costs for the best-case scenario?

Variable cost = 56,12

Unitary fixed cost=1,073

Total unitary cost = 57,193

Explanation:

The best-case scenario is one that maximizes sales and minimizes cost. We will calculate sales in the higher percentile and variable and fix costs in the lower one.

Higher Sales=15500 * 1,05=16275 units

Lower Sales = 15500*0,95=14725 units

Higher labor cost = 14,68*1,03=$15,1204

Lower labor cost=14,68*0,97=$14,24

Higher direct material = 43,18*1,03=$44,48

Lower direct material = 43,18*0,97 = $41,88

Higher fixed cost=$18000*1,03 = $18540

Lower fixed cost=$18000*0,97 = $17460

Total cost best-case scenario:

Variable cost = (14,24+41,88) = 56,12

Unitary fixed cost = (17460/16275) = 1,073

Total unitary cost = 57,193