What are the worst-case scenario parameters for Sanotronics LLC?

• A. Direct labor cost = $43, parts cost = $80, demand = 30,000 units.
• B. Direct labor cost = $47, parts cost = $100, demand = 0 units.
• C. Direct labor cost = $50, parts cost = $120, demand = 10,000.
• D. Direct labor cost = $40, parts cost = $70, demand = 50,000.

Answer: (B)

Worst-case parameters are the combination that yields the smallest cash flow (largest potential loss) under uncertainty. If demand drops to zero, revenue literally disappears, so cash flow becomes negative and equals the total costs. Among the options, only one shows zero demand, guaranteeing no revenue regardless of cost levels. That scenario thus represents the worst-case outcome, even if other options have higher cost components but still generate some sales. Hence the zero-demand with its associated costs is the correct worst-case.